SECURITIES AND EXCHANGE COMMISSION     
                           Washington, D.C. 20549 
                           ----------------------
     
                                 FORM 10-K 
             ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF 
                   THE SECURITIES EXCHANGE ACT OF 1934 
          For the fiscal year ended        Commission file number 
              December 31, 1996                    1-7801    
                           ----------------------
                         ORION CAPITAL CORPORATION 
           (Exact name of registrant as specified in its charter)

                Delaware                            95-6069054 
         (State or other jurisdiction of           (I.R.S. Employer 
           incorporation or organization)           Identification Number)
       
         600 Fifth Avenue, New York, NY               10020-2302 
         (Address of principal executive offices)      (Zip Code)

         Registrant's telephone number, including area code:  212-332-8080

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

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

                                                     Name of each exchange
  Title of each class                                 on which registered
  -------------------                                ---------------------
  Common Stock, $1 par value                         New York Stock Exchange

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

                9 1/8% Senior Notes due September 1, 2002
                7 1/4% Senior Notes due July 15, 2005
                             (Title of Class)
 
    Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
               Yes  x                            No 
                   ---                              ---

     Indicate by check mark if disclosure of delinquent filers pursuant to 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 amendments to
this Form 10-K. [x]

     The aggregate market value of the voting stock of the registrant held by
non-affiliates was $826,648,563 as of March 26, 1997.

     As of March 26, 1997, 13,762,499 Shares of Common Stock, $1.00 par value,
of registrant were outstanding exclusive of shares held by registrant and its
subsidiaries.
                      DOCUMENTS INCORPORATED BY REFERENCE

     The information required by Part III is incorporated by reference from
registrant's definitive proxy statement for its Annual Meeting to be held on
May 29, 1997.  Registrant intends to file the proxy material, which involves the
election of directors, not later than 120 days after the close of its fiscal
year.


<PAGE>
Table of Contents                                                        Page

Part I
Item 1:    Business                                                       3
              General                                                     3
              Regional Operations                                        10
              Special Programs                                           11
              Guaranty National Corporation                              16
              Insurance Industry Characteristics                         19
              Miscellaneous Operations                                   33

Item 2:    Properties                                                    33
Item 3:    Legal Proceedings                                             34
Item 4:    Submission of Matters to a Vote of Security Holders           34

           Information concerning Executive Officers of the Company      34

Part II
Item 5:    Market for Registrant's Common Equity and Related             36
             Stockholder Matters
Item 6:    Selected Financial Data                                       37
Item 7:    Management's Discussion and Analysis of Financial             38
             Condition and Results of Operations
Item 8:    Financial Statements and Supplementary Data                   50
Item 9:    Changes in and Disagreements with Accountants on              80
             Accounting and Financial Disclosure

Part III
Item 10:   Directors and Executive Officers of the Registrant            80
Item 11:   Executive Compensation                                        80
Item 12:   Security Ownership of Certain Beneficial Owners               80
             and Management
Item 13:   Certain Relationships and Related Transactions                80

Part IV
Item 14:   Exhibits, Financial Statement Schedules,                      80
             and Reports on Form 8-K

Signatures                                                               87
Exhibit Index                                                            90

Forward-Looking Statements

     All statements made in this Annual Report on Form 10-K that do not
reflect historical information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.  Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements
of Orion Capital Corporation and its consolidated subsidiaries to be
materially different from any future results, performance or achievements,
expressed or implied by the forward-looking statements.  Such risks, 

                                    -2-
<PAGE>
uncertainties and other factors include, among other things, (i) general
economic and business conditions; (ii) interest rate and financial market
changes; (iii) competition and the regulatory environment in which we operate
(iv) claims frequency; (v) claims severity; (vi) medical cost inflation; (vii)
increases in the cost of property repair; (viii) the number of new and renewal
policy applications submitted to us; and (ix) other factors over which we have
little or no control.   Orion Capital Corporation disclaims any obligation to
update or to publicly announce the impact of any such factors or revisions to
any forward-looking statements to reflect future events or developments.  Some
of these factors are discussed further in this report in Part I, Item 1:
Business, and Part II, Item 7: Managements' Discussion and Analysis of
Financial Condition and Results of Operations.

     
                                  PART I
ITEM 1.  BUSINESS

                                  GENERAL

Our Operations

     Orion Capital Corporation is an insurance holding company.  We have the
ability, through our subsidiaries and investments in other insurance
companies, to write almost all types of property and casualty insurance
nation-wide and throughout Canada.  However, we do not sell all types of
insurance.  Our operations are highly specialized.  We underwrite and sell the
following specialized insurance products and services:

     - workers compensation products and related services through EBI          
       Companies;

     - professional liability coverage for architects, engineers, 
       environmental consultants, lawyers and accountants through DPIC         
       Companies;

     - special property and casualty insurance programs tailored to
       the risks associated with selected types of businesses through          
       Connecticut Specialty;

     - nonstandard automobile insurance for individuals and businesses,
       as well as other property insurance through Guaranty National           
       Corporation and its subsidiaries (including Viking Insurance            
       Company of Wisconsin); and

     - underwriting management of insurance pools focusing on ocean cargo,     
       inland marine and commercial property coverages through Wm. H. McGee    
       & Co., Inc.

     We now own 81% of Guaranty National Corporation.  Guaranty National and
its subsidiaries sell specialty property and casualty insurance coverages
which are not readily available in traditional insurance markets.  Prior to 

                                    -3-

<PAGE>
July 1996, we owned slightly less than 50% of Guaranty National, but during
that month we bought 4,600,000 additional shares of Guaranty National at
$18.50 per share in a public tender offer.  Later in July we purchased 120,000
shares in the open market at $14.50 per share.  The total cost of the new
shares was $88,206,000 which was paid for in cash.  Our greater ownership of
Guaranty National allows us to become more involved in its strategic
management.  Also, we are now able to include Guaranty National in our
consolidated federal income tax return.  Guaranty National remains an
independent public company with its common stock  listed on the New York Stock
Exchange. Five of Guaranty National's eleven member board of directors also
serve on our board and one other Guaranty National board member is one of our
senior officers.

     In 1995, we purchased Wm. H. McGee & Co., Inc., an insurance underwriting
management firm.  McGee underwrites ocean cargo, inland marine and commercial
property insurance on behalf of the group of insurance companies it
represents, including two of our subsidiaries, Security Insurance Company of
Hartford and The Connecticut Indemnity Company.  McGee has been in business
for over 109 years, and has represented us for over 100 years.  McGee provides
practically all services related to the insurance business which it
underwrites.  For example, it issues policies on behalf of its pool members,
settles claims and places reinsurance.  McGee oversees an insurance pool in
the United States and one in Canada.  Our rate of participation in McGee's
U.S. pool in 1996 was 37% and that will increase to 52% in 1997.  Our
participation rate in McGee's Canadian pool in 1996 was approximately 49% and
that will increase to 60.5% in 1997.
     
     In November 1996, we exited the assumed reinsurance business when we sold
the ongoing operations of our subsidiary, Security Reinsurance Company.  The
purchaser was Hartford Fire Insurance Company acting for Hart Re, the Hartford
Insurance Group's reinsurance operation.  As a result of the sale, Security
Reinsurance Company discontinued writing business and became an inactive
company.  We kept the reserves of approximately $108 million with respect to
this operation's outstanding business.  We will manage the settlement of
claims arising out of that business.  

     We have also invested in a publicly traded insurance holding company
called Intercargo Corporation.  We purchased an additional 4.8% of its stock
during 1996 increasing our ownership to 24.8%.  Intercargo's subsidiaries are
insurance companies that specialize in international trade and transportation
coverages.  Intercargo operates as an independent company and we select one
member of its seven-member board of directors.  We have agreed with Intercargo
that, until December 31, 1998, we will not increase our ownership above 25%
without its approval.  

     We own insurance companies, brokerage companies and insurance management
and service companies.  Those companies have licenses to transact business
nationwide and in all Canadian provinces.  In general we do not sell our
insurance products directly to our policyholders.  We obtain substantially all
our business through independent insurance agents and brokers.  We have
approximately 3,250 employees, including 1,030 Guaranty National employees. 
Substantially all our employees work in our insurance or insurance-related
operations.  

                                     -4-

<PAGE>
     Orion Capital Corporation was incorporated in the State of Delaware in
1960, and all of its wholly-owned insurance subsidiaries are incorporated in
the State of Connecticut.  Other insurance subsidiaries are incorporated in
the states of California, Colorado, Oklahoma, Texas and Wisconsin.  Our
principal executive offices are located in New York City at 600 Fifth Avenue,
New York, New York 10020 and our telephone number is (212) 332-8080.  In
addition, we maintain executive offices at 9 Farm Springs Road, Farmington,
Connecticut 06032 and the telephone number is (860) 674-6600.

Orion Capital Corporation - Capital Structure

     We have simplified our debt and capital structure over the past five
years.  This simplified structure has permitted us to take advantage of lower
interest rates, reduce the cost of capital and eliminate sinking fund payments
until the maturity of our senior notes.  At year end, the only securities that
Orion Capital Corporation had outstanding were

          - 13,769,000 shares of Common Stock;

          - $110,000,000 face amount of 9 1/8% Senior Notes, due               
            September 1, 2002; and
 
          - $100,000,000 face amount of 7 1/4% Senior Notes, due July 15,      
            2005.

Except for Guaranty National Corporation's $100 million bank credit facility,
we currently have no outstanding bank debt.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
     
     On January 13, 1997, Orion Capital Corporation issued $125,000,000 of its
8.73% Junior Subordinated Deferrable Interest Debentures, due January 1, 2037
to Orion Capital Trust I, a Delaware business trust it sponsored.  The Trust
simultaneously sold, in a private placement, $125,000,000 of the Trust's 8.73%
Capital Securities which have substantially the same terms as the 8.73%
Debentures.  The proceeds from the sale of the securities will be used for
general corporate purposes.  The transaction has a complicated structure but
gives us all the advantages of preferred stock with the tax deductibility
feature of debt.  The securities provide a low after-tax cost of financing for
our business growth.  The securities were registered with the Securities and
Exchange Commission on March 25, 1997.  See Note Q to the Consolidated
Financial Statements, "Subsequent Events."

Segment Reporting

     The Securities and Exchange Commission requires registered companies to
report their results in segments by type of business, geographic distribution
or other meaningful breakdown.  Our insurance operations are divided into
three insurance segments.  In addition, the miscellaneous income and expenses
of our parent company are reported as a fourth segment.  The four segments are
as follows:



                                   -5-
<PAGE>
     I.   Regional Operations - this segment includes the workers              
          compensation insurance products and services sold by the EBI         
          Companies

     II.  Special Programs - this segment is composed of five parts

            1. DPIC Companies, which markets our professional liability        
               insurance;

            2. Connecticut Specialty, which writes our specialty insurance     
               programs;

            3. Wm. H. McGee & Co., Inc., our underwriting management           
               company that specializes in ocean marine, inland marine
               and commercial property insurance; 

            4. our 24.8% interest in Intercargo Corporation, which sells       
               insurance coverages for international trade; and

            5. SecurityRe - the run-off operations of our assumed              
               reinsurance business.     

     III.   Guaranty National Corporation - which specializes primarily in     
            non-standard automobile insurance and other property insurance. 

      IV.   Other - miscellaneous income and expenses of the parent            
            company.

Net Earnings

     Our net earnings for the past three years, in the aggregate and per
share, were as follows:
                               1996            1995            1994
                               ----            ----            ----

Net earnings               $86,631,000     $67,622,000     $55,245,000
Net earnings per share     $      6.24     $      4.77     $      3.85
 
The above per share figures were based on weighted average common shares
outstanding of 13,894,000 in 1996, 14,187,000 in 1995 and 14,348,000 in 
1994.  See "Management's Discussion and Analysis of Financial Conditions and
Results of Operations."

     In the following pages of this report Orion Capital Corporation is
referred to as "Orion" or the "parent corporation," while Orion and its
consolidated subsidiaries (including Guaranty National and its subsidiaries)
are referred to as the "Company."

     The following tables present condensed financial information showing
revenues, pre-tax earnings (loss) and other financial data and ratios of the
four segments for each of the three years in the period ended December 31,
1996.  Identifiable assets, by segment, are included in Note O to the
Consolidated Financial Statements, "Industry Segment Information."

                                   -6-
<PAGE>
<TABLE>
<CAPTION>
                                                  Year Ended December 31,
                                             --------------------------------
                                                 1996       1995       1994
                                                 ----       ----       ----
                                                       (000s omitted)
<S>                                          <C>          <C>        <C>
REVENUES:
  Regional Operations -
    Premiums earned .......................  $  356,809   $322,098   $278,040
    Net investment income .................      38,226     35,750     29,287 
    Realized investment gains .............       6,804      4,636      1,246
    Other income ..........................         176        188        239
                                             ----------   --------   --------
      Total Regional Operations ...........     402,015    362,672    308,812
                                             ----------   --------   --------

  Special Programs -
    Premiums earned .......................     462,295    426,905    413,183
    Net investment income .................      62,646     59,584     53,209
    Realized investment gains .............      11,066      7,781      2,191
    Other income ..........................      22,658     13,564        575
                                             ----------   --------   --------
      Total Special Programs ..............     558,665    507,834    469,158 
                                             ----------   --------   --------

  Guaranty National Corporation -
    Premiums earned .......................     481,648          -          - 
    Net investment income .................      39,439          -          -
    Realized investment gains .............       8,455          -          - 
    Other income ..........................           -          -          -  
                                             ----------   --------   --------
      Total Guaranty National Corporation..     529,542          -          -
                                             ----------   --------   --------
  Other ...................................       3,227      3,774      2,977
                                             ----------   --------   --------
                                             $1,493,449   $874,280   $780,947
                                             ==========   ========   ========

EARNINGS (LOSS):                                 
  Regional Operations .....................  $   68,371   $ 57,830   $ 42,514
  Special Programs ........................      44,052     43,241     34,117
  Guaranty National Corporation ...........      35,727      4,466     11,244
                                             ----------   --------   --------
    Total property and casualty operations.     148,150    105,537     87,875
  Other ...................................     (20,794)   (17,502)   (16,329) 
                                             ----------   --------   --------
                                                127,356     88,035     71,546 

  Federal income taxes ....................     (32,033)   (20,413)   (16,301)
  Minority interest expense ...............      (8,692)         -          -  
                                             ----------   --------   --------
    Net earnings ..........................  $   86,631   $ 67,622   $ 55,245 
                                             ==========   ========   ========



                                     -7-
<PAGE>
<CAPTION>
     The following table sets forth, on a consolidated basis, certain
insurance ratios for the Company:
                                                  Year Ended December 31,
                                             --------------------------------
                                               1996        1995        1994
                                               ----        ----        ----
  <S>                                         <C>         <C>         <C>
  Loss and loss adjustment expenses to        
    premiums earned .......................    67.9%       68.4%       72.1%  
  Policy acquisition and other insurance
    expenses to premiums earned ...........    30.1        29.0        27.0   
                                              -----       -----       -----
    Total before policyholders' dividends..    98.0        97.4        99.1   
  Policyholders' dividends to premiums
    earned ................................     1.8         2.9         2.1   
                                              -----       -----       ----- 
    Total after policyholders' dividends ..    99.8%      100.3%      101.2%  
                                              =====       =====       =====
</TABLE>
     One or more of Orion's insurance subsidiaries are licensed and transact
business in each of the 50 states of the United States, the District of
Columbia, Puerto Rico and all provinces of Canada.  In 1996, approximately
12.0% of the Company's consolidated direct premiums written was generated in
California, 9.1% in Pennsylvania, 7.4% in New York and 6.0% in Texas.  The
large increase in California premiums in 1996 is from private passenger
automobile coverages written by Guaranty National.  Also significant in
California is architects and engineers professional liability insurance.  The
primary line of business in Pennsylvania and Texas is workers compensation. 
New York's primary line is ocean and inland marine business written by McGee. 
The following table shows the geographical distribution of direct premiums
written by the Company in 1996, 1995 and 1994, including Guaranty National's
premiums for 1996:
<TABLE>
<CAPTION>
                       Geographical Distribution of Direct Premiums Written

                                      Year Ended December 31,
                      ------------------------------------------------------
State                     1996     Pct.     1995     Pct.     1994     Pct.   
-----                     ----     ----     ----     ----     ----     ----
                              (000s omitted - except for percentages)
<S>                   <C>         <C>     <C>       <C>     <C>       <C>
California .........  $  171,962   12.0%  $ 45,308    5.7%  $ 60,313    8.7% 
Pennsylvania .......     130,786    9.1    110,993   13.9     79,031   11.5   
New York ...........     106,090    7.4     37,667    4.7     26,755    3.9 
Texas ..............      84,939    6.0     62,426    7.8     53,439    7.7  
All others (1) .....     937,673   65.5    542,890   67.9    471,955   68.2 
                      ----------  -----   --------  -----   --------  -----
                      $1,431,450  100.0%  $799,284  100.0%  $691,493  100.0%
                      ==========  =====   ========  =====   ========  =====
<FN>
(1)   In 1996, no other single state or country accounts for more than 5% of
      total direct premiums written.
</TABLE>

                                     -8-
<PAGE>
     For 1996, 28.8% of the Company's net premiums written was derived from
workers compensation insurance written primarily in twenty-four states
(including all states listed in the preceding table except California); 34.0%
came from private passenger and commercial automobile insurance; 18.7% related
to liability insurance other than automobile, primarily professional liability
insurance; and 5.1% was from marine insurance coverages.  No other line of
business contributed in excess of 5% to 1996 net premiums written.  The
following table shows premiums written for the Company, including Guaranty
National for 1996, net of reinsurance, by major statutory lines of business:
<TABLE>
<CAPTION>
                                       Net Premiums Written

                                        Year Ended December 31,
                        -------------------------------------------------------
                           1996      Pct.      1995     Pct.      1994     Pct.
                           ----      ----      ----     ----      ----     ----
                                (000s omitted - except for percentages)
<S>                     <C>         <C>      <C>       <C>      <C>       <C>
Workers compensation .. $  383,615   28.8%   $355,691   47.0%   $305,157   42.9% 
Private passenger 
  automobile ..........    307,533   23.0      33,161    4.4      62,590    8.8
Liability other than
  automobile ..........    249,425   18.7     210,679   27.8     199,214   28.0
Commercial automobile .    147,287   11.0      64,874    8.6      73,596   10.3
Marine ................     67,587    5.1      49,152    6.5      30,323    4.3
Commercial multiple
  peril ...............     46,401    3.5       5,654     .7       8,701    1.2 
All others ............    132,273    9.9      38,225    5.0      32,474    4.5
                        ----------  -----    --------  -----    --------  -----
                        $1,334,121  100.0%   $757,436  100.0%   $712,055  100.0%   
                        ==========  =====    ========  =====    ========  =====
</TABLE> 





















                                       -9-
<PAGE>
                          REGIONAL OPERATIONS

     The Regional Operations segment is mainly comprised of the EBI Companies
("EBI"), which provides workers compensation insurance as well as alternative
workers compensation services and related products.  Through the addition of
alternative products and pricing approaches, entry into new states and
continued emphasis on its value-added services, EBI expects to extend the
length of its client relationships and further expand its presence in the
workers compensation market.  EBI operates through 45 branch offices located
in 24 states.  Its headquarters is in Milwaukee, Wisconsin.  Information about
EBI is available on the Internet at http://www.ebico.com.

     EBI's net premiums written is responsible for almost all of the premium
volume of the Regional Operations segment.  EBI devotes substantially all of
its resources to underwriting and selling workers compensation insurance
products and services through independent agents and brokers.  EBI's
competitive edge stems from its highly service oriented approach.  It ranks
among the 20 largest writers of workers compensation insurance in the United
States based on net premiums written.   

     EBI staffs its offices with underwriters, field production
representatives, claims and loss control representatives, lawyers, medical and
rehabilitation experts and other technical and administrative personnel. EBI's
specialized approach is founded upon a team concept under which loss control
and claims management personnel have significant direct involvement in account
selection and in underwriting each policy. Upon acceptance of each new
account, an EBI team begins to work with the insured and its employees to
identify the factors that influence their insurance costs.  

     EBI's approach to underwriting is not merely to evaluate the risk but to
attempt to reduce the likelihood of loss through loss control services. 
During the policy term, an EBI team continues to provide services designed to
reduce the frequency and severity of injuries.  EBI stresses the concept of
"Zero Accident Culture" (registered mark), which focuses insureds on creating
an accident free work environment.  With a desire to influence and impact the
workplace environment in order to reduce losses, EBI concentrates its effort
on an ever broadening array of businesses in selected industries who can most
benefit from its service-oriented approach, including manufacturers, nursing
homes, hospitals, hotels, restaurants and school districts.  EBI's expansion
in recent years has given it a much broader base of operations.  This permits
EBI to fully serve companies with multi-state locations which it previously
could only provide on a limited basis.
          
     Alternative workers compensation products and services are designed to
capitalize on EBI's expertise acquired from its service oriented and team
approach to traditional workers compensation.  EBI applies those skills to
writing workers compensation for large accounts and accounts with large
deductibles.  Among the alternative products EBI offers is a workers
compensation excess coverage and an accompanying self-insured administration
program.  In addition, during 1996, EBI tested a new product in Wisconsin
called Integrated Employee Benefits.  The Integrated Employee Benefits program
combines workers compensation, group health and group disability coverages. 
EBI believes it can contain group health costs by applying its distinctive
workers compensation perspective and active case management techniques to a
select group of clients.  The product will be selectively expanded to
additional states in 1997.  


                                   -10-

<PAGE>
     A workers compensation policy obligates an insurance company to pay all
compensation and other benefits for injured workers as may be required by
applicable state workers compensation laws.  Such benefits include, among
other things, payments for medical and hospital expenses and disability and
vocational rehabilitation expenses.  The insurance policies currently written
by EBI provide workers compensation coverage with limits of liability set by
the provisions of state workers compensation laws.  The benefits provided by
these laws vary with the nature and severity of the injury or disease, as well
as with the wage level, occupation and age of the  employee.  Employers
liability coverage is also provided to employers who may be subject to claims
for damages (not workers compensation benefits) because of an injury to a
worker.     

     The amount of workers compensation premiums earned is directly dependent
upon wage levels as well as the number of employees on the payroll of each
policyholder and the job classifications of those employees.  Accordingly,
premiums may be affected by the level of unemployment in general, and
particularly by the level of unemployment experienced in those industries and
geographic areas which represent a substantial portion of the Company's
workers compensation insurance business.  Premium rates are revised annually
in most states in which EBI does business.  EBI uses the rates and rating
plans filed in the states where it does business.  See "Industry
Characteristics - Rates."

     EBI has recorded profitable underwriting results for the past five years
which has led it to continue a plan of geographic expansion.  In 1996, it
added seven new branch offices and expanded into two new states.  It intends
to add an additional 4 to 5 offices in 1997.  Always selective about the
states in which it operates, EBI's expansion strategy is to anticipate reform
initiatives in various states and establish a foothold in such new markets
before reform benefits are realized.  EBI is thus able to gain a reputation
for service and effective control before such markets attract the more
traditional workers compensation companies.

     Approximately 850 independent agents and brokers produced substantially
all of the direct business written in 1996 by EBI.  All of such agents and
brokers receive commissions on the sale of insurance.  No single independent
agent or broker contributed more than 5% of this segment's net written
premiums.  The agents and brokers provide a broad range of insurance services
to the public within their local areas, operate as independent contractors and
generally represent other insurers as well.                       
                 
                              SPECIAL PROGRAMS

     The Company's Special Programs segment is comprised of five components,
all of which are concentrated in highly specialized lines of business in the
property and casualty insurance field. The components are

             - DPIC Companies 
             - Connecticut Specialty 
             - Wm. H. McGee & Co., Inc. 
             - the Company's 24.8% interest in Intercargo Corporation, and
             - the run-off operations of SecurityRe

                                    -11-

<PAGE>

DPIC
----
     DPIC Companies ("DPIC") writes professional liability insurance for
architects, engineers, environmental consultants, accountants and lawyers.  It
is the second largest underwriter of architect and engineer liability
insurance in North America.  DPIC operates in thirteen offices throughout the
United States and Canada.  It has its headquarters in Monterey, California. 
Information about DPIC can be found on the Internet at http://www.dpic.com.

     DPIC's operations are organized to be directly aligned with its various
clients.  The architects and engineers underwriting unit is currently divided
into three divisions:  Architects, Engineers and Special (large accounts)
Risks.  As of July 1997, the operations will be consolidated and reorganized
along geographical regions to better and more efficiently serve its clients. 
Each geographical unit will be staffed with underwriters and other
professionals who focus on a specific discipline in their area thus enabling
them to develop programs to address the unique issues facing their clients. 
As part of the geographical reorganization, DPIC has opened an underwriting
field office in Atlanta, Georgia.  At the same time, in order to cater to
specific needs of architect and engineering professionals, DPIC has expanded
its environmental professionals programs, its project-specific professional
liability policies and now also offers general liability coverage.

     DPIC markets a program of professional liability insurance for law firms,
the Lawyers Professional Liability System.  The program is analogous to its
architects and engineers products.  In addition, DPIC writes the Accountants
Professional Liability System, a program for selected medium-sized certified
public accounting firms that is similar to the lawyers' program.  Matching the
architects, engineers and special risk divisions reorganization,  the lawyers
and accountants units will be consolidated and reorganized along geographic
regions.

     Professional liability insurance covers liability arising out of alleged
negligent performance of professional services.  Underwriting and claims
management require a high level of knowledge and expertise.  In an attempt to
limit risk exposure, DPIC's specialized underwriters evaluate a great number
of factors, including the experience of an applicant firm's professional
personnel, the loss history of the firm, the employees covered, the type of
work performed and the firm's utilization of suggested loss prevention
measures.  DPIC uses a premium credit incentive program to encourage insureds
to participate in its liability education programs and to use other loss
prevention practices, such as  "limitation of liability" clauses in contracts
with its clients.

     The professional liability coverage offered by DPIC is on a "claims-made"
policy form, a form which generally insures only those claims reported by the
insured during the policy term.  DPIC generally uses a policy form in which
defense costs, primarily legal fees, are limited by their inclusion within the
insured's stated policy limits.  This policy form has had a favorable impact
in controlling legal costs. The general liability coverage is only offered to
those firms which maintain their professional liability coverage with DPIC.
This is written on an occurrence basis for architectural, engineering and
environmental consulting firms, although some consulting firms will only be
offered claims-made coverage.  

                                    -12-

<PAGE>
     DPIC's specialized claims staff stresses early intervention in disputes
to avoid litigation whenever possible.  DPIC has pioneered the use of
alternative dispute resolution ("ADR") and other loss mitigation methods to
promptly resolve disputes.  DPIC's "Mediation Works" program has been
particularly successful offering incentives to insureds who agree to mediate
disputes.  Currently, approximately one third of all open claims are in
mediation or some other form of ADR.  Additionally, DPIC has instituted a
program with a selected group of its counsel network, to investigate
alternative fee structures and then channeling more work to the preferred
group of lawyers.  We believe that the use of such methods has had a
beneficial impact on DPIC's operating results.

     DPIC markets its products through 55 specialized agencies, each highly
knowledgeable about risk management for the professions served and about
DPIC's loss prevention programs.  We believe that our "value-added" approach
is the reason why DPIC has experienced a high customer retention rate
(averaging over 90% for the tenth consecutive year) and why it is less
vulnerable to price competition.  The agents participate in continuing
education programs sponsored by DPIC and are active in their clients'
professional societies and associations.  
    
Connecticut Specialty.  
----------------------

     Connecticut Specialty Insurance Group, Inc. ("Connecticut Specialty")
currently administers the operation of approximately 30 specialty programs
written through general agents. The specialized programs include workers
compensation for underground coal mines, brownwater marine insurance
(generally coverage for non-ocean going vessels), professional liability,
surety coverage and various auto liability coverages for the trucking
industry.  Connecticut Specialty serves businesses principally east of the
Mississippi.  Its principal offices are located in Farmington, Connecticut and
it has claims offices in Georgia and Louisiana.

     Connecticut Specialty finds opportunity in commercial niches, utilizing
general agents not only as an efficient and ready-made means of distribution
but drawing upon their established expertise and contacts.  Connecticut
Specialty also develops its own expertise in order to supplement the
contributions of its general agents.  Connecticut Specialty has developed a
methodology for judging opportunities that stresses the knowledge and quality
of the general agent and the unique aspects of the type of coverage or class
of business being underwritten in order to provide a competitive advantage.   

     Connecticut Specialty defines a "program" as the writing of risks in a
class of business not widely pursued, utilizing forms, coverage, pricing
methodologies and risk management techniques tailored to the needs of the
customer.  While the average program premium size is $6 million, a few
programs are larger, such as long-haul and intermediate truck liability,
workers compensation for underground coal mines, brownwater marine, and multi-
line coverage for volunteer firefighters.



                                    -13-

 <PAGE>
     Connecticut Specialty has formed strategic alliances with what it
believes are knowledgeable and well respected general agents in the specialty
insurance field.  Each of its general agents has superior knowledge of its
markets and has earned customer loyalty by providing quality services and
support.  Connecticut Specialty strives to provide its customers with services
ranges from loss control expertise to administrative, actuarial and legal
support, from forms and filing services to risk management analysis and
reports, each in a mix that best fits a particular program or customer.

     Connecticut Specialty utilizes a profit-sharing approach in writing its
special programs whereby a portion of the agent's compensation is tied to the
profitability of the program.  Connecticut Specialty closely monitors its
programs throughout their existence to ensure that profit potential is
maximized.  

      The specialty nature of Connecticut Specialty's business provides some
insulation against the competitive pressures of the overall insurance market. 
Enhanced automation designed for each general agent promotes efficiency and
effectiveness for both the agent and Connecticut Specialty.  This relationship
with the general agent creates a competitive advantage in the insurance
marketplace and also directly impacts the cost of entry by competitors. 

     Connecticut Specialty is aggressively streamlining its processes and
upgrading its technology in order to better serve its customer base and expand
in its strongest programs.

McGee.  
------

     In 1995, the Company acquired Wm. H. McGee & Co., Inc. ("McGee"), a
leading ocean cargo, inland marine and commercial property insurance
underwriter.  McGee has been in business for over 109 years.  Security
Insurance Company of Hartford, a subsidiary of the Company, has been
represented by McGee since 1894.  McGee provides all related services in
connection with this business, including policy issuance, claim settlement,
accounting and placement of reinsurance.  Operations are conducted in the
United States, through its headquarters in New York and twenty branch offices
throughout the country.  Activities in Canada, Bermuda and Puerto Rico are
managed by McGee's subsidiaries located in those jurisdictions and they
perform substantially similar services.  

     In the United States, McGee ranks among the top 10 writers of ocean cargo
insurance and among the 20 largest writers of inland marine insurance.  Ocean
cargo insurance covers cargo against the perils of the sea and is usually
broadened to include loss or damage to the goods while in transit until they
arrive at the destination specified in the policy.  Inland marine insurance
covers property while being transported, property of a movable nature and
property instrumental to transportation or communication.  Some common
examples of property covered by inland marine insurance are cargo being
shipped by train, truck or airplane; mobile equipment; bridges and tunnels;
radio and television transmitting equipment; personal jewelry and furs; art
collections; livestock and medical equipment.

      Each insurer represented by McGee participates in either the United
States or Canadian Inter-Office Reinsurance Agreement (the "McGee Pools").  It
is through these underwriting pooling agreements that premiums and risk 
are allocated among the various insurers.  The insurers participating in the
McGee Pools and the percentage allocated to each insurer is reviewed and 

                                    -14-

<PAGE>     
revised annually.  The current pool participants have an average tenure of 48
years.  Security is a participant in both the United States and Canadian
pools.  For the year ending December 31, 1996, McGee underwrote approximately
$210 million premiums on behalf of the insurers participating in the McGee
Pools.  The Company's participation in the United States pool was 37%, 14.5%
and 7% in 1996, 1995 and 1994, respectively.  Participation in the Canadian
pool was approximately 49% in 1996, 15% in 1995 and 10% in 1994.  The Company
will increase its rate of participation in the McGee Pools for 1997 to 52% in
the United States and 60.5% in Canada.

     McGee excels at providing innovative coverages that respond to the often
distinctive exposures of the property being insured.  McGee's strategy is to
identify and serve those clients which require strong technical problem
solving and risk management support.  McGee's strong underwriting and claim
capabilities allow it to tackle unusual risks, such as armored car and jewelry
store chains, bringing a highly specialized resource to those markets.

     McGee, as an underwriting manager, does not directly solicit business
from insureds but instead relies on a production force consisting of insurance
brokers and agents appointed to represent the portion of the insurers'
business which McGee manages.  McGee is compensated for its services by the
insurers it represents based upon a combination of factors, including a
percentage of the premiums written, the profitability of the business written
and the management services provided.


Intercargo Corporation.  
-----------------------

     The Special Programs segment also includes the Company's 24.8% interest
in Intercargo Corporation ("Intercargo").  Intercargo is an insurance holding
company whose subsidiaries specialize in international trade and
transportation coverages.  Its principal product lines are U.S. customs bonds
and marine cargo insurance sold to importers and exporters through customs
brokers and other service firms engaged in the international shipment of
goods.  Intercargo operates as an independent entity and a pro rata share of
any profit or loss is reflected in the Company's consolidated financial
statements, based on the Company's equity interest in Intercargo.  


SecurityRe Companies.  
---------------------

     In November 1996, the Company exited the assumed reinsurance business and
sold for cash the ongoing business of its subsidiary, Security Reinsurance
Company ("SecurityRe").  The Company may receive an additional cash payment
depending upon the amount of actual renewals obtained by the purchaser. 
SecurityRe underwrote a diverse book of primarily casualty business, using
reinsurance intermediaries, with exposures largely concentrated in the
domestic market.  SecurityRe's premiums in recent years had been principally
concentrated in the treaty segment reinsuring small to medium-sized regional
and specialty companies in various lines of business (primarily automobile and
commercial coverages).  Facultative coverage was provided on an excess of loss
basis for casualty and property exposures.  Generally, the largest net amount
insured by SecurityRe was $1,000,000.  As a result of the sale, SecurityRe
discontinued writing business.  The Company kept the reserves of approximately
$108 million with respect to the outstanding business and will continue to
manage the settlement of claims arising out of that business.


                                    -15-

<PAGE>
                         GUARANTY NATIONAL CORPORATION

     The Company participates in nonstandard business and personal automobile
insurance and surplus lines insurance through its interest in Guaranty
National Corporation ("Guaranty National") and its subsidiaries (collectively,
"Guaranty National Companies").  Based in Englewood, Colorado, the Guaranty
National Companies underwrite and sell specialty property and casualty
coverages which are not readily available in traditional insurance markets. 
Guaranty National is a publicly held company with its stock listed on the New
York Stock Exchange.  Information about Guaranty National Companies can be
found on the Internet at http://www.gnic.com.

     Approximately 84% of the Guaranty National Companies' net premiums
written during 1996 was derived from writing personal and commercial
automobile insurance.  Other types of insurance products sold by Guaranty
National Companies are general liability, standard multi-peril, umbrella,
excess insurance and property.   Guaranty National Companies have historically
focused their operations on the nonstandard markets.  Nonstandard risks
require specialized underwriting, claims management and other skills and
experience.  However, approximately 9 percent of the Guaranty National
Companies' net premiums written consists of standard commercial coverage.  

     Nonstandard risks generally involve a potential for poor claims
experience because of increased risk exposure.  Premium levels  for
nonstandard risks are substantially higher than for preferred or standard
risks.  In personal lines, Guaranty National Companies' loss exposure is
limited by the fact that its insureds typically purchase low liability limits,
often a state's statutory minimum.  The nonstandard insurance industry is also
characterized by the insurer's ability to minimize its exposure to
unprofitable business by effecting timely changes in premium rates and policy
terms in response to changing loss and other experiences.
     
     Guaranty National Companies' personal lines unit principally writes
nonstandard automobile insurance, insurance (i) for drivers usually
unacceptable to other insurers for, among other reasons, adverse driving or
accident history, age or vehicle type, or (ii) for customers who can only
afford a low down payment or are transitioning from an uninsured to an insured
status.  This insurance coverage is sold primarily in the State of California
and the Rocky Mountain and Pacific Northwest regions, and in general, is sold
through approximately 8,900 independent agents located in 28 states.  

     Guaranty National Companies' commercial lines unit writes commercial
automobile insurance, which covers policyholders such as local and
intermediate trucking, garages, used car dealers, public and private livery,
and artisan contractors.  Other commercial lines of coverage include property
(for example, motor-truck cargo), general liability (for example, contractors
and fuel-convenience stores), standard umbrella insurance, standard commercial
packages and other commercial coverages.  

     The nonstandard commercial lines business primarily offers commercial
coverages for transportation risks, regional programs, specialized coverages
for small to medium-sized businesses, and umbrella coverages for a broad range
of organizations.  This nonstandard commercial business is written through 69
general agents and various brokers throughout the United States except for
some Northeastern states.  These general agents specialize in particular types
of risks and/or geographical locations.  Guaranty National Companies'
objective for its nonstandard commercial business is to maintain long-term.
mutually profitable relationships with a small number of select general agents
who follow strict underwriting guidelines.

                                    -16-
<PAGE>
     Guaranty National Companies also markets, through Intercon General
Agency, Inc.,  collateral protection insurance, primarily insuring automobiles
pledged as security for loans for which the borrower has not maintained
physical damage coverage as required by the lender.  Such business represents
15% of Guaranty National Companies' gross written premiums for 1996. 
Information about Intercon can be found on the Internet at
http://www.gniccp.com.
       
    In 1995, Guaranty National acquired all the capital stock of Viking
Insurance Holdings, Inc. ("Viking").  Viking is the parent company of Viking
Insurance Company of Wisconsin and other affiliated companies which specialize
in providing nonstandard personal automobile insurance.  The Viking
acquisition has enabled the Guaranty National Companies to change its business
mix, expand its personal lines business into new territories, strengthen
personal lines market share in existing states, and provide flexibility in
marketing Guaranty National Companies' personal lines products.  In 1996, the
Guaranty National Companies and Viking personal lines business were integrated
into one unit.  

     Overall, Guaranty National Companies seeks to distinguish itself from its
personal lines competitors by providing a superior, highly automated and
responsive level of service to its agents and insureds.  In addition to high
quality service, the Guaranty National Companies' personal lines business unit
provides ease of payment for insureds through low monthly installments.
  
     In underwriting nonstandard automobile risks, the Guaranty National
Companies sets premium rates which are substantially higher than standard
rates.  Policy coverage periods are generally one or six months on personal
automobile policies.  Commercial policy coverage periods are generally one
year.  Collateral protection policy coverage periods generally range from one
month to one year, although some policies are issued for the term of the
underlying loan.  The business of the Guaranty National Companies is not
materially dependent upon any single customer, group of customers, or group of
agents.                             

     Customer service and policy processing operations are a critical part of
the personal lines business unit.  Operation centers are currently located in
Freeport, Illinois; Denver, Colorado; Salt Lake City, Utah; and Salem, Oregon. 
Multiple locations in multiple time zones contribute to efficient volume
routing, as well as providing a convenient disaster recovery mechanism.  In
the customer service area, use of the Interactive Voice Response system
permits efficient, automated answering of routine agent and customer
questions.

     Colorado Casualty Insurance Company ("CCIC"), an insurance subsidiary of
Guaranty National Companies, writes primarily standard commercial lines
business.  CCIC writes small, standard commercial package policies.  The
standard commercial business is primarily written in the Rocky Mountain
region, but has recently expanded to states outside of the Rocky Mountain
region, mainly in the southeast region of the United States.  CCIC has been
successful in serving a niche market of approximately 600 small to medium
retail agents.  In addition, CCIC utilizes seven general agents as branch
offices.       

                                     -17-

<PAGE>
     The Company owns 81% of Guaranty National Corporation.  Prior to July
1996, the Company owned slightly less than 50% of Guaranty National, but
during that month the Company bought 4,600,000 additional shares at $18.50 per
share in a public tender offer.  Later in July the Company purchased 120,000
shares in the open market at $14.50 per share.  The total cost of the new
shares was $88,206,000 which was paid in cash.  The Company's greater
ownership of Guaranty National allows it to become more involved in its
strategic management.  Also, Guaranty National is now included in the
Company's consolidated federal income tax return.

     Guaranty National and its subsidiaries have entered into a series of
agreements with the Company.  One of these agreements is a shareholder
agreement pursuant to which the Company has the right to designate four 
members of Guaranty National's board, including the Chairman of the Board, for
so long as the Company beneficially owns 30% or more of Guaranty National. 
Currently, five of the eleven Guaranty National board of directors also serve
on the Company's board of directors.  Also, a senior officer of the Company
serves on Guaranty National's board.  Under the shareholder agreement, the
Company also has a right until November 1997 to require Guaranty National to
register under the Securities Act of 1933, all or part of the shares of common
stock the Company owns. 
          
     In addition, in the ordinary course of business, the Company's insurance
subsidiaries and the Guaranty National Companies entered into certain
reinsurance agreements and a trade name agreement.  Orion and Guaranty
National have signed an investment management agreement pursuant to which most
of the Guaranty National Companies' investment portfolio, including that of
Viking (other than short-term investments and a portion of its equity
securities portfolio), is managed by Orion's investment managers (under the
direction and supervision of Guaranty National).  Orion was paid a fee of
$650,000 in 1996 under the agreement. 



























                                     -18-
<PAGE>

                      INSURANCE INDUSTRY CHARACTERISTICS                      

Loss Reserves
-------------

     The Company establishes reserve liabilities for reported losses, incurred
but not reported ("IBNR") losses, and claim settlement and administration
expenses.  Reserves for reported losses and loss adjustment expenses are
estimates of the ultimate costs of claims reported to the Company but not
settled.  IBNR loss reserves are estimates for both unreported claims and
additional development of previously reported claims.  Reserves are based on
the circumstances surrounding each claim, the Company's historical experience
with losses arising from claims not yet reported and the particular experience
associated with the line of business and type of risk involved.  Consideration
is also given to expected changes in costs for property, repairs to property,
medical care, litigation and other legal costs, and vocational rehabilitation. 
The Company regularly monitors the factors affecting its reserves to better
control claim costs, which also provides a base of information to reevaluate
reserve estimates.  The reserve estimates are regularly reviewed and adjusted
to consider all pertinent information as it becomes available.  Such
reevaluation is a normal, recurring activity that is inherent in the process
of loss reserve estimation. 

     Several methods are used for reviewing reserves, including paid and
incurred loss development, and incurred claim counts and average claim costs. 
These methods can be subject to variability in reserve estimation for a number
of reasons, including improved claims department operating procedures and
accelerated claims settlement due to the use of alternate dispute resolution
and expedited resolution of civil suits in litigation.  Other factors that are
analyzed and are considered in the determination of loss reserves include (i)
claim emergence and settlement patterns and changes in these patterns from
year to year, (ii) trends in the frequency and severity of paid and incurred
losses, (iii) changes in policy limits and changes in reinsurance coverages,
(iv) changes in the mix and classes of business, and (v) changes in claims
handling procedures.

     Management revises its reserve estimates as appropriate and believes that
the loss and loss adjustment expense reserves of the Company's insurance
subsidiaries make reasonable and sufficient provision for the ultimate cost of
all losses and claims incurred.  However, no assurances can be given that
reserve development will not occur in the future.










                                      -19-
<PAGE>
Accident Year Loss and Loss Adjustment Expense Analysis
-------------------------------------------------------

     Accident year is a period of exposure that is used to accumulate loss and
loss adjustment experience by the year in which an incident giving rise to a
claim occurs.  Accident year information is used for loss reserving and in
establishing premium rates.  The accident year loss experience is updated in
subsequent calendar years until all losses and loss adjustment expenses
related to that given accident year have been settled.  Accident year loss
ratio relates losses associated with incidents giving rise to claims occurring
within a given calendar year to premiums earned during the same calendar year. 
Presented below are loss reserve development tables for the five years ended
December 31, 1996 prepared in accident year format.
<TABLE>
<CAPTION>
     For each accident year, the following table presents premiums earned, and
the provision for loss and loss adjustment expenses as a percentage of
premiums earned (the "loss ratios") as established in the initial accident
year and cumulative as of December 31, 1996: 
                                            Loss and Loss Adjustment
                                               Expense Development
                                         -------------------------------
Accident            Premiums
  Year               Earned              Initial              Cumulative
--------            --------             -------              ----------
                 (000s omitted)
<S>               <C>                      <C>                   <C>
1992              $  560,205               71.0%                 68.5%
1993                 617,404               70.4                  69.4
1994                 691,223               69.6                  70.2
1995                 749,003               66.8                  68.0
1996               1,300,752               67.2                     -

<CAPTION>
     The table set forth below indicates premiums earned, the cumulative loss
ratio for each accident year, the ratio of policy acquisition costs and other
insurance expenses to premiums earned (the "expense ratio"), the ratio of
policyholders' dividends to premiums earned (the "policyholders' dividend
ratio") and the total of the ratios (the "combined ratio") at December 31,
1996:

Accident   Premiums      Loss        Expense     Policyholders'    Combined
  Year      Earned       Ratio        Ratio      Dividend Ratio     Ratio
--------   --------      -----       -------     --------------    --------
        (000s omitted)
<S>      <C>              <C>          <C>             <C>           <C>
1992     $  560,205       68.5%        27.3%           2.4%          98.2%
1993        617,404       69.4         26.8            2.0           98.2
1994        691,223       70.2         27.0            2.1           99.3
1995        749,003       68.0         29.0            2.9           99.9
1996      1,300,752       67.2         30.1            1.8           99.1



                                      -20-
<PAGE>
<CAPTION>
Calendar Year Loss Reserve Analysis
-----------------------------------

     An analysis of the Company's calendar year loss and loss adjustment
expense reserves, net of reinsurance, is presented in the following table. 
The current year provision for 1996 includes favorable loss development for
Guaranty National of $995,000 and current year payments for 1996 include
$144,775,000 attributable to periods prior to the consolidation of Guaranty
National's results in the Company's financial statements.

                                                Year Ended December 31,   
                                         ------------------------------------
                                            1996         1995         1994     
                                            ----         ----         ----
                                                    (000s omitted)
<S>                                      <C>          <C>          <C>  
Beginning of year .....................  $  993,978   $  891,542   $  830,805
Consolidation of Guaranty National
  reserves ............................     286,339            -            -
                                         ----------   ----------   ----------
                                          1,280,317      891,542      830,805  
                                         ----------   ----------   ----------
Provision:
  Current year ........................     874,123      500,514      480,826
  Prior years .........................       8,869       11,719       17,297
                                         ----------   ----------   ----------
                                            882,992      512,233      498,123
                                         ----------   ----------   ---------- 
Payments:
  Current year ........................     499,176      146,540      134,120
  Prior years .........................     295,713      263,257      303,266
                                         ----------   ----------   ----------
                                            794,889      409,797      437,386  
                                         ----------   ----------   ----------
End of year ...........................  $1,368,420   $  993,978   $  891,542  
                                         ==========   ==========   ==========
<CAPTION>
     Cumulative reserve development for the Company's majority-owned insurance
subsidiaries (including Guaranty National for 1996) as of December 31, 1996
for the calendar years 1992 through 1996 is shown in the table that follows:

                                           December 31,
                    ----------------------------------------------------------

                       1992        1993        1994        1995        1996
                       ----        ----        ----        ----        ----
                                          (000s omitted)
<S>                 <C>         <C>         <C>         <C>         <C>
Gross liability ..  $1,081,396  $1,140,403  $1,181,329  $1,274,982  $1,785,664 
  Reinsurance    
  recoverable ....     335,098     309,598     289,787     281,004     417,244
                    ----------  ----------  ----------  ----------  ----------
Net liability ....  $  746,298  $  830,805  $  891,542  $  993,978  $1,368,420
                    ==========  ==========  ==========  ==========  ==========
Gross re-estimated
  liability ......  $1,091,963  $1,133,514  $1,184,498  $1,280,118  $        -
Re-estimated 
  recoverable ....     290,799     278,165     281,530     277,271           -
                    ----------  ----------  ----------  ----------  ----------
Net re-estimated 
  liability ......  $  801,224  $  855,349  $  902,968  $1,002,847  $        -
                    ==========  ==========  ==========  ==========  ==========
Gross deficiency..  $  (68,898) $  (25,856) $  (15,597) $   (5,136) $        -
                    ==========  ==========  ==========  ==========  ==========

                                       -21
<PAGE>
<CAPTION>
     Cumulative reserve development, net of reinsurance, for the Company's majority-owned insurance subsidiaries (including
Guaranty National for 1996) as of December 31, 1996 for the calendar years 1986 through 1996 is shown in the table that follows:

December 31,            1986      1987      1988      1989      1990      1991     1992     1993     1994      1995      1996
--------------------    ----      ----      ----      ----      ----      ----     ----     ----     ----      ----      ----
                                                                    (000s omitted)
<S>                   <C>       <C>       <C>       <C>       <C>       <C>      <C>      <C>      <C>      <C>        <C>
Net liability for 
  unpaid loss and 
  loss adjustment 
  expenses..........  $359,623  $401,677  $520,304  $602,519  $595,455  $668,467 $746,298 $830,805 $891,542 $  993,978 $1,368,420

Paid (cumulative) 
  as of:        
  One year later ....  211,102   178,100   236,657   281,224   261,464   240,318  249,583  303,266  263,257    295,713          -
  Two years later....  320,000   318,883   403,147   438,250   408,624   378,524  429,501  445,369  434,672          -          -
  Three years later..  409,019   414,616   488,397   526,235   493,218   484,335  514,172  543,687        -          -          -
  Four years later ..  468,971   457,182   544,449   581,880   567,068   540,325  577,547        -        -          -          -
  Five years later ..  494,838   490,973   582,527   633,413   605,039   580,117        -        -        -          -          -
  Six years later ...  518,397   515,478   624,415   660,648   629,654         -        -        -        -          -          -
  Seven years later..  537,567   551,055   643,447   676,869         -         -        -        -        -          -          -
  Eight years later..  566,205   563,977   653,826         -         -         -        -        -        -          -          -
  Nine years later ..  576,116   577,818         -         -         -         -        -        -        -          -          -
  Ten years later ...  585,487         -         -         -         -         -        -        -        -          -          -
Net liability 
  reestimated as of:
  One year later ....  434,056   469,137   573,632   647,585   657,100   694,948  770,590  848,102  903,261  1,002,847          -
  Two years later ...  486,631   504,814   624,337   695,154   685,692   714,953  782,348  854,998  902,969          -          -
  Three years later..  517,476   548,883   658,024   722,626   705,516   732,047  785,995  855,349        -          -          -
  Four years later ..  557,124   568,114   687,818   741,789   741,096   744,251  801,224        -        -          -          -
  Five years later ..  577,977   597,103   705,475   770,359   756,522   763,658        -        -        -          -          -
  Six years later ...  604,056   610,086   733,836   788,288   786,616         -        -        -        -          -          -
  Seven years later..  611,108   637,322   747,525   812,440         -         -        -        -        -          -          -
  Eight years later..  633,723   651,402   771,372         -         -         -        -        -        -          -          -
  Nine years later ..  650,303   677,310         -         -         -         -        -        -        -          -          -
  Ten years later ...  677,387         -         -         -         -         -        -        -        -          -          -

Net deficiency ...... (317,764) (275,633) (251,068) (209,922) (191,161)  (95,192) (54,926) (24,544) (11,426)    (8,869)         - 

</TABLE>

                                                                 -22-

<PAGE>
     The preceding loss reserve development tables indicate the aggregate 
year-end liability for loss and loss adjustment expenses net of reinsurance,
the cumulative amounts paid attributable to those reserves through December
31, 1996, the re-estimate of the aggregate liability as of December 31 of each
subsequent year and the cumulative development of prior years' reserves. 
Information is also provided on a gross basis for 1992 through 1996. 
Consistent with industry practice, certain claims for long-term disability
workers compensation benefits are carried at discounted values.  At December
31, 1996 and 1995, long-term disability workers compensation loss reserves are
carried at $54,832,000 and $56,603,000, respectively, in the consolidated
financial statements at net present value using a statutory interest rate of
3.5%.  

     The Company's IBNR loss and loss adjustment expense reserves and other
bulk reserves for losses and loss adjustment expenses for which claim files
have not been established, net of reinsurance, were $753,638,000, $508,872,000
and $438,194,000 as of December 31, 1996, 1995 and 1994, respectively.  The
increase in IBNR for 1996 includes $195,345,000 from the consolidation of
Guaranty National's reserves.

     During 1996, the Company strengthened loss reserves and experienced
development for prior years' business of $8,869,000.  Adverse development for
various pools and associations (other than from the McGee operations),
reinsurance and certain program business in 1996 was partly offset by
favorable development from workers compensation and professional liability for
architects and engineers.  Adverse development relating to the Company's pools
and associations business is based on their experience, which is generally
recorded as the information is reported to the Company.  The development from
reinsurance relates to the Company's assumed reinsurance business.  In 1996
the Company sold the renewal book of business of its reinsurance operations. 
The favorable development from the workers compensation and professional
liability lines of business is the result of continued improvement from the
application of loss prevention and loss control procedures.

     Loss reserve estimates are based on forecasts of the ultimate settlement
of claims and are subject to uncertainty with respect to future events.  Loss
reserve amounts are based on management's informed estimates and judgments,
using data currently available.  Reserve amounts and the underlying actuarial
factors and assumptions are regularly analyzed and adjusted to reflect new
information.  The significantly decreased level of adverse development during
more recent years is consistent with the strengthening of loss reserves and
the strong performance of the Company's ongoing lines of business.  Current
operations are more focused on underwriting risks where the Company has
specialized knowledge and can provide enhanced service to reduce loss costs. 
This concentration, and the specialized knowledge and growing experience in
its selected lines of business arising from such concentration, have enabled
the Company to implement improvements in its claims administration and
underwriting procedures which have enhanced the Company's ability to analyze
data and project reserve trends.



                                     -23-
<PAGE>
     The following table presents the differences between loss and loss
adjustment expense reserves reported in the consolidated financial statements
in accordance with generally accepted accounting principles ("GAAP"), and
those reported in the combined annual statement filed with state insurance
departments in accordance with statutory accounting practices ("SAP"): 
<TABLE>
<CAPTION>
                                                     December 31,     
                                                ----------------------
                                                   1996        1995
                                                   ----        ----
                                                    (000s omitted)
<S>                                             <C>         <C>
Liability on SAP basis ......................   $1,363,741  $1,002,864  
  Estimated salvage and subrogation
    recoveries recorded on a cash basis for
    SAP in 1995 and on an accrual basis for 
    GAAP ....................................            -     (10,381)  
  GAAP Reinsurance payable included in SAP
    reserves ................................       (5,928)     (7,774)
  Foreign subsidiary reserves ...............       10,607       9,269 
                                                ----------  ----------
Liability on GAAP basis, net of reinsurance..    1,368,420     993,978  
Reinsurance on GAAP reserves ................      417,244     281,004 
                                                ----------  ----------
Liability on GAAP basis .....................   $1,785,664  $1,274,982  
                                                ==========  ==========
</TABLE>


























                                   -24-
<PAGE>
Investments
-----------
     The Company derives a significant part of its income from its
investments.  The investment portfolio of the Company's insurance subsidiaries
must comply with applicable insurance laws and regulations of the respective
states in which such companies are domiciled and other jurisdictions in which
they conduct business.  Neither Orion nor any of its non-insurance
subsidiaries is constrained by investment restrictions set forth in state
insurance laws.

     The Company maintains a diversified portfolio representing a broad
spectrum of industries and types of securities.  Investments are managed to
achieve a superior total return after taxes, while maintaining a proper
balance of safety, liquidity, maturity and marketability.  Investments are
made based on long-term economic value rather than short-term market
conditions.  Approximately 50% of the Company's fixed maturity portfolio is
invested in tax advantaged securities at December 31, 1996.  Except for
investments in securities of the United States Government and its agencies,
the Company did not have any other investments in any one issuer that exceeded
$25,000,000 at December 31, 1996.

       The Company has the ability to hold its fixed maturity investments to
term since its operating cash flow and its short-term investment portfolio
provide the Company with substantial liquidity.  Fixed maturity investments
that the Company has the positive intent to hold to maturity are recorded at
amortized cost.  Fixed maturity investments which may be sold in response to,
among other things, changes in interest rates, prepayment risk, income tax
strategies, or liquidity needs are classified as available-for-sale and are
carried at market value, with unrealized gains and losses reflected in
stockholders' equity.  Equity securities are stated at market value.  Both the
fixed maturities and the equity investments consist primarily of readily
marketable securities. 

     The following table shows the composition of the investment portfolio of
the Company as of December 31, 1996 and 1995, and the quality ratings for the
Company's fixed maturity investments. The investments shown below are listed
at their cost, market value and financial statement (book) values.















                                     -25-

<PAGE>
<TABLE>
<CAPTION>
December 31, 1996          Cost            Market Value         Book Value    
-----------------   ------------------  ------------------  ------------------
                             (000s omitted - except for percentages)
<S>                 <C>         <C>     <C>         <C>     <C>         <C>
Fixed Maturities:
  AAA ............. $  610,930   27.7%  $  622,076   26.9%  $  618,338   26.8
  AA ..............    369,190   16.8      385,071   16.6      381,548   16.5
  A ...............    170,853    7.8      176,308    7.6      175,896    7.6
  BBB .............    133,756    6.1      137,135    5.9      136,894    5.9
  BB ..............     76,156    3.5       77,348    3.3       77,348    3.4
  B and Below .....    102,080    4.6      107,122    4.6      107,122    4.6
  Not Rated .......     33,688    1.5       35,003    1.5       35,003    1.5
                    ----------  -----   ----------  -----   ----------  -----
    Sub-total .....  1,496,653   68.0    1,540,063   66.4    1,532,149   66.3
Equity Securities..    288,070   13.1      361,593   15.6      361,593   15.7
Other Long Term
  Investments .....     90,129    4.1       90,144    3.9       90,129    3.9
Short Term
  Investments .....    325,896   14.8      325,896   14.1      325,896   14.1
                    ----------  -----   ----------  -----   ----------  -----
                    $2,200,748  100.0%  $2,317,696  100.0%  $2,309,767  100.0%
                    ==========  =====   ==========  =====   ==========  =====

December 31, 1995          Cost            Market Value         Book Value    
-----------------   ------------------  ------------------  ------------------
                             (000s omitted - except for percentages)
<S>                 <C>         <C>     <C>         <C>     <C>         <C>
Fixed Maturities:
  AAA ............. $  403,434   26.5%  $  421,737   26.1%  $  415,460   25.9% 
  AA ..............    232,810   15.3      248,478   15.4      244,607   15.3
  A ...............    148,950    9.8      155,697    9.7      154,801    9.7
  BBB .............     90,132    5.9       94,231    5.8       94,182    5.9
  BB ..............     55,602    3.7       55,432    3.4       55,352    3.4
  B and Below .....     47,024    3.1       46,945    2.9       47,005    2.9
  Not Rated .......     35,225    2.3       36,631    2.3       36,631    2.3
                    ----------  -----   ----------  -----   ----------  -----
    Sub-total .....  1,013,177   66.6    1,059,151   65.6    1,048,038   65.4
Equity Securities..    257,378   16.9      304,885   18.9      304,885   19.0
Other Long Term
  Investments .....     62,925    4.2       62,925    3.9       62,925    3.9
Short Term
  Investments .....    187,013   12.3      187,013   11.6      187,013   11.7
                    ----------  -----   ----------  -----   ----------  -----
                    $1,520,493  100.0%  $1,613,974  100.0%  $1,602,861  100.0%
                    ==========  =====   ==========  =====   ==========  ===== 

 <CAPTION>
                               Year Ended December 31,
                               -----------------------
                                  1996         1995
                                  ----         ----
<S>                               <C>          <C>
Yield on average  
  investments:     
  Pre-tax .........               6.9%         7.1%
                                  ===          ===
  After-tax .......               5.4%         5.5% 
                                  ===          ===

</TABLE>


                                     -26-

<PAGE>
    Included in other long-term investments on December 31, 1996 were
investments in limited partnerships carried at $87,637,000.  The assets of
these partnerships are managed by outside entities.  Individual partnerships
may invest in a variety of investment vehicles, including but not limited to
U.S. and foreign bonds and equities, both public and private, and real estate. 
Such partnerships are carried at the Company's interest in the underlying net
assets of the limited partnerships.  The Company's portion of the
partnerships' earnings or losses are recorded in net investment income in the
Company's statement of earnings.  Net investment income from these
partnerships was $15,954,000 (including $3,528,000 of earnings from
partnerships in which Guaranty National invested), $9,065,000 and $555,000 for
1996, 1995 and 1994, respectively.

     The Company strives to enhance the average return of its portfolio by
investing a small percentage of it in a diversified group of non-investment
grade fixed maturity securities, or securities that are not rated.  In the
non-investment grade segment of the investment portfolio, the Company
maintains a high degree of diversity, with an average investment per issuer of
approximately $1,535,000 at December 31, 1996.
 
     The Company closely monitors the financial stability of issuers of
securities that it owns.  When conditions are deemed appropriate, the Company
ceases to accrete discount, or accrue interest and dividends.  In cases where
the value of investments are deemed to be other than temporarily impaired, the
Company recognizes losses.  During 1996 provisions for such losses were
$315,000 for equity securities and $1,119,000 for fixed maturity investments.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations - Net Investment Income and Realized Investment Gains."

Reinsurance
-----------
        
     In the ordinary course of business, the Company's insurance subsidiaries
enter into reinsurance contracts with other insurers which serve to provide
greater diversification of business and to limit the Company's maximum loss
from catastrophes, large risks or unusually hazardous risks.  Ceding
reinsurance reduces an insurer's operating leverage ratio.

     A large portion of the Company's reinsurance protection is provided by
reinsurance contracts or treaties under which all risks meeting prescribed
criteria are automatically covered.  In other instances, reinsurance is
obtained by negotiation for individual risks, or facultative reinsurance.  The
Company's insurance subsidiaries have certain excess-of-loss and catastrophe
treaties with unaffiliated insurers or reinsurers which provide protection
against a specified part or all of certain types of losses over stipulated
dollar amounts arising from one or more occurrences. The amount of each risk
retained by an insurer is subject to maximum limits which vary by line of
business and type of coverage.  Retention limits are periodically revised as
the capacity of the Company's insurance subsidiaries to retain risk varies and
as reinsurance prices change.  Reinsurance contracts do not relieve the 
Company of its obligation to the policyholders.  The collectibility of

                                     -27-
<PAGE>
reinsurance is subject to the solvency of the reinsurers.  The Company is very
selective as to its reinsurers, placing reinsurance with only those reinsurers
considered to be in sound financial condition and having satisfactory
underwriting ability.  Many of the Company's reinsurance agreements are
subject to annual renewal as to coverage, limits and price.  The financial
strength of its reinsurers is continually monitored by the Company.  The
Company's insurance subsidiaries, to their knowledge, have no material
exposure to potential unrecognized losses due to reinsurers that are in known
financial difficulties.

     The Company's insurance subsidiaries have reinsurance protection for
workers compensation losses in excess of $1,500,000 up to $100,000,000.  DPIC
has reinsurance for 85% of losses from architect and engineer liability in
excess of $1,000,000 up to $5,000,000.  Most of the Company's program business
is protected by per event coverage for 85% of losses over $1,000,000 up to
$5,000,000 and 100% of losses above $5,000,000 up to $10,000,000.  Certain
commercial auto and general liability program policies are also reinsured for
losses in excess of $500,000 up to $1,000,000.  Guaranty National has
coverages for losses above $300,000 to $600,000, up to $6,000,000 per
occurrence, and an additional layer of coverage for 95% of losses from
$6,000,000 up to $20,000,000.  In addition to the foregoing, the Company's
insurance subsidiaries also maintain other reinsurance arrangements in support
of their specific business needs.  

Government Regulation 
---------------------
 
     The Company's insurance subsidiaries, in common with those of other
insurance companies, are subject to comprehensive regulation by insurance
authorities.  In particular, the Company is subject to regulation by the
insurance departments of the states of incorporation of all of the Company's
insurance subsidiaries.  These states include California, Connecticut,
Colorado, Oklahoma, Texas and Wisconsin .  All insurance companies must file
annual statements and other reports with state regulatory agencies and are
subject to regular and special examinations by those agencies.  A regular
periodic examination of the Company's insurance subsidiaries, covering their
operations and statutory financial statements are conducted on a regular basis
by the state of domicile of each insurance company. The last periodic
examinations of the Company's wholly-owned pooled insurance subsidiaries were
completed for the period ending December 31, 1991 and a regulatory examination
for all other insurance subsidiaries were completed for various periods, all
ending December 31, 1993.  No significant adjustments resulted from the
examinations of any of the Company's subsidiaries.  A regular periodic
examination covering the Company's wholly-owned insurance operations for the
three year period ended December 31, 1994 by the Insurance Department of
Connecticut is currently in process.






                                     -28-
<PAGE>
     Each of the Company's insurance subsidiaries is also subject to
regulation by other jurisdictions in which it sells insurance, including
Puerto Rico, certain Canadian provinces and Bermuda.  States regulate the
insurance business through supervisory agencies which have broad
administrative powers, including powers relating to, among other things

       - the standards of solvency which must be met and maintained; 
       - the licensing of insurers and their agents; 
       - restrictions on the amount of risk which may be insured under a       
         single policy; 
       - the approval of premium rates; 
       - the form and content of the insurance policy and sales literature;    
       - the form and content of financial statements; 
       - reserve requirements; 
       - the imposition of monetary penalties for rules violation; and 
       - the nature of and limitations on permitted investments. 

In general, such regulations are for the protection of policyholders rather
than stockholders.
  
    In some instances, particularly in connection with workers compensation
insurance, various states routinely require deposits of assets for the
protection of policyholders and their employee claimants located in those
states.  As of December 31, 1996 and 1995, securities representing
approximately 10% and 15%, respectively, of the book value of the Company's
investment portfolio were on deposit with various state treasurers or
custodians.  Such deposits consist of securities of the types which comply
with standards established by each state.

     The Company is also subject to state laws regulating insurance holding
company systems.  Most states have enacted legislation and adopted
administrative regulations affecting insurance holding companies and the
acquisition of control of insurance companies, as well as transactions between
insurance companies and their affiliates.  The nature and extent of such
legislation and regulations currently in effect vary from state to state. 
Most states currently require administrative approval of the acquisition of
10% or more of the outstanding shares of an insurance company incorporated in
the state or the acquisition of 10% or more of an insurance holding company
whose insurance subsidiary is incorporated in the state.  The acquisition of
10% of such shares is deemed to be the acquisition of "control" for the
purpose of most holding company statutes and requires the filing of detailed
information concerning the acquiring parties and the plan of acquisition and
administrative approval prior to such acquisition.  Material transactions
between insurance companies and affiliated members of the holding company
system are generally required to be "fair and reasonable" and in some cases
are subject to administrative approval. 

     Other states, in addition to an insurance company's state of domicile,
may regulate affiliated transactions and the acquisition of control of
licensed insurers.  The State of California, for example, presently treats 
certain insurance subsidiaries of the Company which are not domiciled in

                                     -29-
<PAGE>
California as though they were domestic insurers for insurance holding company
purposes.  Such subsidiaries are required to comply with the holding company
provisions of the California Insurance Code, certain of which provisions may
be more restrictive than the comparable laws of the insurance company's state
of domicile.

     All state jurisdictions in which the Company is authorized to transact
business require participation in guaranty funds.  Insurers authorized to
transact business in those jurisdictions can be assessed by a state guaranty
fund a percentage (usually from 1% to 2%) of direct premiums written in that
jurisdiction each year to pay claims on behalf of insolvent insurers.  The
likelihood and amount of any future assessment cannot be estimated until after
an insolvency has occurred.  For the years ended December 31, 1996 and 1995
the Company's insurance subsidiaries were assessed approximately $543,000 and
$222,000, respectively (net of estimated future recoveries) as a result of
known insolvencies.  Insurance companies are required by certain states in
which they do business to participate in automobile insurance plans and
workers compensation plans.  These plans provide insurance on risks which are
not written in the voluntary market. Participation in these plans has usually
been unprofitable for the Company.

     A number of state legislatures and the United States Congress have for
years been considering, or have now enacted, some type of legislative
proposals which alter the rules for tort claims and increase the states'
authority to regulate insurance companies.  These initiatives have expanded,
in some instances, the states' regulation over rates (See "Rates" below) and
also have increased data reporting requirements.  In recent years the state
insurance regulatory framework has come under federal scrutiny, and certain
state legislatures have considered or enacted laws that alter, and in many
cases increase, state authority to regulate insurance companies and insurance
holding company systems.                   

     The National Association of Insurance Commissioners ("NAIC") and state
regulators are re-examining existing laws and regulations relating to the
solvency of insurers.  The NAIC has adopted risk based capital ("RBC")
requirements for property and casualty insurers.  RBC refers to the
determination of the amount of statutory capital required for an insurer    
based on the risks assumed by the insurer (including, for example, investment
risks, credit risks relating to reinsurance recoverables and underwriting
risks) rather than just the amount of net premiums written by the insurer.  A
formula that applies prescribed factors to the various risk  elements in an
insurer's business is used to determine the minimum statutory capital
requirement for the insurer.  The statutory capital of each of the Company's
active insurance subsidiaries at December 31, 1996 exceeds the RBC
requirements.

     Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the
business in a variety of ways.  There are various current, proposed and
tabled federal measures which may significantly affect the Company's insurance
business, including, among other proposals:

                                     -30-

<PAGE>
          - Superfund reform; 
          - tort liability reform, including limitation on punitive damages    
            and "loser pays" litigation expense costs; 
          - regulatory reform concerning financial services modernization;     
          - revocation of the antitrust exemption provided by the              
            McCarran-Ferguson Act and the ensuing federal regulation of        
            the business of insurance; and
          - suggested changes of the nation's health care system that, if      
            enacted, might negatively affect the Company's workers             
            compensation and automobile liability businesses 

The economic and competitive effects of any such proposals upon the Company
would depend upon the final form such legislation might take.  The Company is
unable to predict what regulatory proposals may be adopted in the future or
the effect any such proposals might have on the Company's businesses if
adopted.

Limitations on Payments from Insurance Subsidiaries
---------------------------------------------------
          
     The principal sources of cash available to Orion are dividends,
reimbursement of various administrative charges, and tax payments from its
subsidiaries.  The payment of dividends to Orion by its insurance subsidiaries
is subject to state regulation.  No state restricts dividend payments by Orion
or Guaranty National to its stockholders.

     The ability of the Company's insurance subsidiaries to declare dividends
is governed primarily by the insurance laws of such subsidiaries state of
incorporation.  Generally, such laws currently provide that, unless prior
approval is obtained, dividends of a property and casualty insurance company
in any consecutive 12-month period shall not exceed the greater of its net
income for the preceding calendar year or 10% of its policyholders' surplus as
of the preceding December 31, determined on a statutory accounting basis. 
Dividends and distributions by the Company's insurance subsidiaries are also
subject to a requirement that statutory policyholders' surplus be reasonable
in relation to outstanding liabilities and adequate to meet the companies'
financial needs following the declaration of any dividends or distributions. 
State insurance regulators, however, have broad discretionary authority with
respect to approving the payment of dividends by insurance companies.  Under
current regulations, the maximum dividends permitted at December 31, 1996 for 
the ensuing twelve months, without prior approval, aggregated $102,138,000,
including $25,307,000 from subsidiaries of Guaranty National.  Orion received
$35,286,000 in the aggregate in dividends from its subsidiaries in 1996. 
Since it is difficult to predict future levels of statutory policyholders'
surplus or earnings, the amount of dividends that could be paid in the future
without prior approval cannot be determined at this time.






                                     -31-

<PAGE>
Rates
-----

     The Company's insurance subsidiaries are generally subject to regulation
as to rates.  Most states have insurance laws requiring that rate schedules 
and other information be filed with or made available to the state's
regulatory authority, either directly or through a rating organization with
which the insurer is affiliated.  The regulatory authority may, in most
states, disapprove a rate filing if it finds that the rates are inadequate,
excessive or unfairly discriminatory.  Rates, which are not necessarily
uniform for all insurers, vary by class of business, hazard assumed and size
of risk.  Subject to regulatory requirements, the Company's management
determines the prices charged for its policies based on a variety of factors
including recent historical claims experience, inflation, competition, tax law
and anticipated changes in the legal environment, both judicial and
legislative.  Methods for arriving at rates vary by type of business, exposure
assumed and size of risk.  Underwriting profitability is affected by the
accuracy of these assumptions, by the willingness of insurance regulators to
approve changes in those rates which they control and by such other matters as
underwriting selectivity and expense control.  

     Some states have adopted open rating systems for workers compensation
which permit insurers to set premium rates independently without the prior
approval of the insurance commissioners.  A number of other states permit
insurers to deviate from standard rates for workers compensation insurance
after receiving prior approval.  In insuring professional liability risks DPIC
is generally not limited to the standard rates of a rating organization but
establishes its own rates because of the unique nature of the risks being
underwritten.  Ocean marine insurance rates are exempt from regulation. 
Nonstandard and special risks, including nonstandard automobile insurance
rates, are generally not limited to the standard rates of national rating
bureaus. The Guaranty National Companies are permitted to file rates which are
usually higher than those charged for standard risks, reflecting the higher
probability of loss.  Several states have recently adopted laws or their
legislatures are considering proposed laws which, among other things, limit
the ability of insurance companies to effect rate increases and to cancel,
reduce or not renew coverage with respect to existing policies, particularly
personal auto insurance.

Competition
-----------

     The insurance industry is highly competitive.  Over 3,200 property and
casualty insurance companies write business in the United States, but most of
the business is written by about 900 companies.  No single company or group
has more than 10% of the market.  The Company's insurance subsidiaries are in
competition with numerous stock and mutual property and casualty insurance
companies, as well as state run workers compensation insurance funds, many of
which are substantially larger and have significantly greater resources than
the Company.  Guaranty National limits its business to the relatively small
market for nonstandard lines of insurance, and more recently to standard lines
of commercial insurance in a limited geographical area.

                                     -32-
<PAGE>
     Competition may take the form of lower premiums, specialized products,
more complete and complex product lines, greater pricing flexibility, 
superior service, different marketing methods, higher policyholder dividend
rates or better agent compensation.  Superior service and marketing methods
are of particular importance in workers compensation.  Competition might also
come from service organizations which administer self-insured workers
compensation programs.

     The Company's insurance subsidiaries sell their insurance principally
through independent agents, brokers and general agents, who typically also
represent one or more competing insurance companies.  They are paid
commissions based on premiums collected from insureds.  Commission rates vary
according to the type and amount of insurance sold.  Some competitors in
certain lines obtain their business at a lower direct cost through the use of
salaried personnel rather than independent agents and brokers.  

Rating
------

     A.M. Best Company rates the Company's wholly-owned active insurance
subsidiaries "A (Excellent)," and it rates Guaranty National Insurance Company
and its subsidiaries as "A (Excellent)" and Viking Insurance Company of
Wisconsin and its affiliate as "A- (Excellent)."  In general, A.M. Best
Company's ratings are based on an analysis of the financial condition and
operation of an insurance company as it relates to the industry.  These
ratings are not primarily designed for investors and do not constitute
recommendations to buy, sell or hold any security.  A.M. Best Company has
upgraded the ratings of the Company's wholly-owned subsidiaries three times in
the last seven years.  

     Management believes that a significant change in its A.M. Best ratings
could affect the business of the subsidiary where ratings were altered,
including its relationship with its independent agents, positive in the case
of an upgrade or negative in the case of a downgrade.
           
                       MISCELLANEOUS OPERATIONS

     The Company's fourth business segment consists primarily of the
miscellaneous income and expense (principally interest and general and
administrative expenses) of Orion itself.  For financial reporting purposes,
the Company applies federal income taxes and benefits, as if fully utilizable,
to its segments.  Any consolidating elimination entries are accounted for in
this fourth segment. 

ITEM 2. PROPERTIES             

     The Company's executive office is located at 600 Fifth Avenue, New York,
New York.  Other executive offices and the home office of the wholly-owned
insurance operations of the Company is located in Farmington, Connecticut. 
The Company's New York executive office facilities consist of approximately
12,000 square feet and are leased at an average annual rental, over ten years,

                                     -33-

<PAGE>
of $465,000.  The Farmington office consists of approximately 140,000 square
feet and is leased at an annual rental of $4,310,000.  DPIC owns its office
building, which consists of approximately 42,000 square feet, in Monterey,
California.  The Guaranty National Companies owns facilities in Englewood,
Colorado; Madison, Wisconsin; Salem, Oregon; and Freeport, Illinois.  Those
facilities consist, in the aggregate, of approximately 272,000 square feet.

     All of the other insurance operations of the Company are conducted from
leased premises in or adjacent to major urban centers throughout the United
States, Puerto Rico, Canada and in Bermuda.  These operations, in the
aggregate, occupy approximately 623,000 square feet, at an annual rental of
approximately $11,540,000.

     The Company believes that its current facilities are suitable and
adequate for their present use and anticipated requirements.

ITEM 3. LEGAL PROCEEDINGS
                    
     The Company is routinely engaged in litigation incidental to its
businesses. In the judgment of the Company's management, there are no
significant legal proceedings pending against the Company which, net of
reserves established therefor, are likely to result in judgments for amounts
that are material to the financial condition, liquidity or results of
operations of Orion and its consolidated subsidiaries, taken as a whole.  

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          
         None.

INFORMATION CONCERNING EXECUTIVE OFFICERS OF THE COMPANY          

     The following is a summary of certain information regarding the current
executive officers of Orion.  All officers of Orion and its subsidiaries serve
at the pleasure of their respective Boards of Directors.

      W. Marston Becker, Chairman and Chief Executive Officer of Orion since
January 1, 1997; Vice Chairman of the Board from March 8, 1996 to December 31,
1996;  Senior Vice President of Orion and President and Chief Executive
Officer of the DPIC Companies and Senior Vice President of the Orion Capital
Companies ("OC Companies") since July 1994; President and Chief Executive
Officer of McDonough Caperton Insurance Group, an insurance brokerage firm,
from March 1987 to July 1994; age 44.

     Jonathan H. Gice - Vice President of Orion since January 1, 1997;
President and Chief Executive Officer of EBI since July 1996; President of EBI
from March 1996 to July 1996; Executive Vice President of EBI from November
1994 to March 1996; Senior Vice President of EBI from April 1993 to November
1994; and Vice President, Claims of EBI from September 1989 to April 1993; age
46.

     Stephen M. Mulready - Vice President of Orion since January 1, 1997;
President of Connecticut Specialty since November 1996; Senior Vice President
- Strategic Underwriting and Product Development of Travelers/Aetna Property
Casualty Corporation from January 1996 to November 1996; Senior Vice President
- National Commercial Accounts of Aetna Life & Casualty from 1994 to 1996;
Vice President, Field Operations - National Commercial Accounts of Aetna Life
& Casualty from 1991 to 1994; age 47. 

                                     -34-
<PAGE>
     Thomas M. Okarma - Vice President of Orion since January 1, 1997;
President and Chief Executive Officer of DPIC Companies since July 1996; Chief
Claims Officer of DPIC Companies from December 1995 to June 1996; President of
Professional Concepts Insurance Agency and Executive Vice President of AVA
Insurance Agency Inc. from February 1984 to November 1995; age 47.

     Vincent T. Papa, Senior Vice President of Orion since January 1, 1997;
Vice President and Treasurer of Orion from June 1985 to December 31, 1996;
Chairman of McGee since September 1995; Senior Vice President of OC Companies
since March 1987 and Treasurer from December 1990 to March 1996; age 50.

     Daniel L. Barry, Senior Vice President and Chief Financial Officer of
Orion since January 1, 1997; Vice President and Controller of Orion from
October 1987 to December 31, 1996; Vice Chairman of SecurityRe Inc. from 1989
to March 1997; Senior Vice President of OC Companies since January 1989;
Controller of OC Companies from October 1986 to December 31, 1996; age 46.

     Raymond W. Jacobsen, Senior Vice President of Orion since July 1994; Vice
President of Orion from March 1990 to July 1994; Chairman of EBI since July
1996; President and Chief Executive Officer of EBI from June 1, 1993 to July
1996; Acting President and Chief Executive Officer of Connecticut Specialty
from October 1995 to November 1996; Executive Vice President of EBI from
December 1989 to May 1993; Senior Vice President of the OC Companies since
March 1990; age 44.

      Michael P. Maloney, Senior Vice President, General Counsel and Secretary
of Orion since January 1, 1997;  Vice President, General Counsel and Secretary
from August 1979 to December 31, 1996; Senior Vice President of OC Companies
since March 1987; age 52.

    Raymond J. Schuyler, Senior Vice President and Chief Investment Officer of
Orion since January 1, 1997; Vice President-Investments from June 1984 to
December 31, 1996; Senior Vice President of OC Companies since March 1986; age
61.

     Angelica T. Cantlon, Vice President of Orion since January 1, 1997; Vice
President - Human Resources of OC Companies since October 1994; Director -
Human Resources of Avon Products from 1985 to 1994; age 45.

     Robert T. Claiborne - Vice President, Portfolio Manager and Director of
Research of Orion since January 1, 1997; Assistant Vice President and
Portfolio Manager, Director of Research from March 1994 to December 31, 1996;
Investment Analyst from September 1990 to March 1994; age 41.     

    Claudia F. Lindsey - Vice President of Orion since January 1, 1997; Vice
President - Business Development of the OC Companies since September 1996;
President of Strategic Marketing & Research, Inc. from 1995 to 1996; Vice
President of Anthem Financial from 1994 to 1995; Managing Partner & Chief
Financial Officer of McDonough Caperton Insurance Group from 1985 to 1994; age
41.

     Victor L. Matthews - Vice President and Controller of Orion since January
1, 1997; Assistant Vice President and Assistant Controller from July 1990 to
December 31, 1996; age 40.
                                     -35-
<PAGE>
     William G. McGovern, Vice President and Chief Actuary of Orion since
March 1990; Senior Vice President and Chief Actuary of OC Companies since
October 1989; age 44.   

     Craig A. Nyman - Vice President and Treasurer of Orion since January 1,
1997; Assistant Vice President and Assistant Treasurer from June 1988 to
December 31, 1996; Vice President and Treasurer of OC Companies since March
1996; Vice President and Assistant Treasurer of OC Companies from January 1991
to March 1996; age 41.

    David B. Semeraro - Vice President of Orion since January 1, 1997; Vice
President and Chief Information Officer of OC Companies since April 1996; Vice
President - Business & Technology Solutions of Connecticut Mutual Life
Insurance Company from November 1990 to April 1996; age 49.

     Kevin W. Sullivan - Vice President and Assistant Chief Investment Officer
of Orion since January 1, 1997; Assistant Vice President and Assistant Chief
Investment Officer from 1989 to December 31, 1996; age 41.
                                                                               
                             PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS
       
          (a) Principal Market.  The principal market on which Orion's Common
Stock is traded is the New York Stock Exchange.
         
          (b)  Stock Price and Dividend Information.  The table below presents
the high and low market prices and dividend information for Orion's Common
Stock for 1996 and 1995.
                                                         Cash
                                      Stock Prices     Dividends
                                      High     Low     Declared 
                                      ----     ---     ---------
1996:
Quarter Ended December 31........   $63.00   $50.25      $ .28
Quarter Ended September 30.......    51.875   47.875       .25
Quarter Ended June 30............    51.00    42.625       .25 
Quarter Ended March 31...........    47.75    42.50        .25
                                                         -----
    Total........................                        $1.03
                                                         =====

1995:             
Quarter Ended December 31........   $45.125  $39.875     $ .23     
Quarter Ended September 30.......    45.25    38.375       .23
Quarter Ended June 30............    40.25    34.50        .20
Quarter Ended March 31...........    37.875   34.25        .20
                                                         -----
    Total........................                        $ .86
                                                         =====

     Cash dividends have been paid on Orion's Common Stock in every quarter
since the fourth quarter of 1978, when dividends were first commenced.

     (c)  Approximate Number of Holders of Common Stock.  The number of
holders of record of Orion's Common Stock as of March 19, 1997 was 1,836.
                                                   
                                      -36-

<PAGE>
<TABLE>
ITEM 6.  SELECTED FINANCIAL DATA

     The following table summarizes information with respect to the operations and
financial condition of Orion and its subsidiaries.  Common stock and per common share data
have been restated to give effect to the 5-for-4 stock split paid on November 15, 1993. 
All of Orion's $1.90 Preferred Stock, $2.125 Preferred Stock and Adjustable Rate Preferred
Stock were converted into common stock or redeemed during 1992 and 1993.  The Company
owned slightly less than 50% of Guaranty National until the Company increased its
ownership to 81% in July 1996.  Guaranty National is included in the financial statements
of the Company on a consolidated basis for all of 1996.  For 1992 through 1995 the
Company's investment in Guaranty National was accounted for using the equity method.  The
Company's consolidated financial statements and related notes thereto are furnished under
Item 8 of this report. 
<CAPTION>
                                  1996        1995        1994        1993        1992     
                                  ----        ----        ----        ----        ----
                                         (000s omitted-except for per share data)
<S>                            <C>         <C>         <C>         <C>         <C>       
Year ended December 31:
  Total revenues ............. $1,493,449  $  874,280  $  780,947  $  720,155  $  647,718  
  After-tax investment gains .     13,687       7,708       2,427       5,888       3,113  
  Operating earnings .........     72,944      59,914      52,818      51,100      42,679
  Earnings before cumulative 
    effect of change in  
    accounting principles and 
    extraordinary loss .......     86,631      67,622      55,245      56,988      45,792
  Net earnings................     86,631      67,622      55,245      68,813      42,872  
  Operating earnings per
    common share .............       5.25        4.22        3.68        3.47        3.33
  Earnings per common share 
    before cumulative effect  
    of change in accounting 
    principles and 
    extraordinary loss .......       6.24        4.77        3.85        3.88        3.62
  Net earnings per common 
    share.....................       6.24        4.77        3.85        4.69        3.35
  Dividends declared -
    Adjustable rate preferred
      share ..................          -           -           -        1.10        4.16
    $1.90 preferred share ....          -           -           -           -        1.43
    $2.125 preferred share ...          -           -           -         .12       2.125
    Common share .............       1.03         .86         .76         .68         .60
  Weighted average number of 
    common shares and 
    equivalents outstanding...     13,894      14,187      14,348      14,598      10,914

As of December 31:
  Total cash and investments.. $2,321,374  $1,606,445  $1,325,241  $1,328,969  $1,169,379
  Total assets ...............  3,464,357   2,473,588   2,112,761   2,117,454   1,937,408
  Total policy liabilities ...  2,304,402   1,596,033   1,450,835   1,412,285   1,326,872
  Notes payable and debentures    310,904     209,148     152,382     160,372     129,863
  Adjustable rate preferred 
    stock.....................          -           -           -           -      18,705
  Minority interest...........     45,231           -           -           -           -
  Stockholders' equity .......    576,733     490,903     365,088     394,195     311,287
  Common shares outstanding...     13,769      13,953      14,041      14,372      13,100
  Book value per common share. $    41.89  $    35.18  $    26.00  $    27.43  $    21.48
</TABLE>
                                                -37-
<PAGE>
ITEM 7:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

GENERAL

     Orion Capital Corporation ("Orion") and its majority-owned subsidiaries
(collectively the "Company") operate principally in the property and casualty
insurance business.  The Company reports its insurance operations in three
segments - Regional Operations, Special Programs and Guaranty National
Corporation.  Regional Operations provides workers compensation insurance
products through EBI Companies.  Special Programs includes (i) DPIC Companies
("DPIC"), which markets professional liability insurance, (ii) Connecticut
Specialty, which writes specialty insurance programs, (iii) Wm. H. McGee &
Co., Inc. ("McGee"), an underwriting management company that specializes in
ocean marine, inland marine and commercial property insurance and (iv) a 24.8%
interest in Intercargo Corporation ("Intercargo") which underwrites insurance
coverages for international trade.  The third segment, Guaranty National
Corporation, ("Guaranty National"), specializes in nonstandard commercial and
personal automobile insurance.  The miscellaneous income and expenses
(primarily interest, general and administrative expenses and other
consolidating elimination entries) of the parent company are reported as a
fourth segment.

     On July 2, 1996, the Company completed a tender offer for 4,600,000
shares of Guaranty National common stock.  Together with the open-market
purchase of 120,000 additional shares on July 17, 1996, the Company has
increased its ownership of Guaranty National from 49.5% to 81.0%.  The
aggregate purchase price, including expenses, of approximately $88,206,000 was
paid in cash.  The Company increased its investment in Guaranty National as
management believes it will provide a favorable investment return.  The
Company's increased ownership percentage allows the Company's management to
become more involved in setting the strategic direction of Guaranty National. 
It will also allow the inclusion of Guaranty National in Orion's consolidated
federal income tax return.

     The purchases of Guaranty National shares were recorded as of June 30,
1996.  All revenues and expenses of Guaranty National for 1996 have been
consolidated with those of the Company, and minority interest expense has been
recorded for the portion of Guaranty National's 1996 earnings that was
attributable to the shares not owned by the Company.  For 1994 and 1995 the
Company's investment in Guaranty National was accounted for using the equity
method.

     On June 30, 1995, Orion purchased all of the capital stock of McGee for
$22,000,000 in cash.  McGee specializes in underwriting ocean marine, inland
marine and property insurance through an underwriting pool in the United
States and one in Canada.  The business is written by McGee on behalf of the
insurance companies that comprise the pools.   Orion's subsidiary, Security
Insurance Company of Hartford, which has been a pool member for over 100
years, is a member of both the United States and Canadian pools.  The
Company's participation in the United States pool was 7%, 14.5% and 37% in
1994, 1995 and 1996, respectively.  Participation in the Canadian pool was 10%
in 1994, 15% in 1995 and approximately 49% in 1996.  The Company has agreed to
increase its rate of participation for 1997 to 52% in the United States and
60.5% in Canada.  

                                     -38-


<PAGE>
     The Company's insurance operations have experienced favorable trends for
the past several years, as indicated by its combined ratio which has improved 
from 105.4% in 1992 to 103.2% in 1993, 101.2% in 1994, 100.3% in 1995 and
99.8% in 1996.  Operating earnings (earnings after taxes, excluding the
effects of the adoption of new accounting principles, extraordinary items and
after-tax realized investment gains) were $72,944,000, $59,914,000 and
$52,818,000, or $5.25, $4.22 and $3.68 per share, in 1996, 1995 and 1994,
respectively, based on weighted average shares outstanding of 13,894,000 in
1996, 14,187,000 in 1995 and 14,348,000 in 1994.  For the five year period
ended December 31, 1996, the Company's return on equity from operating
earnings averaged 14.3% per year.

RESULTS OF OPERATIONS

     Earnings (loss) by segment before federal income taxes and minority
interest expense are summarized as follows for the three years in the period
ended December 31, 1996:
<TABLE>
<CAPTION>
                                              Year Ended December 31,
                                        -----------------------------------
                                          1996         1995         1994
                                          ----         ----         ----
                                                  (000s omitted)
<S>                                     <C>          <C>          <C>
Regional Operations ..................  $ 68,371     $ 57,830     $ 42,514
Special Programs .....................    44,052       43,241       34,117
Guaranty National Corporation ........    35,727        4,466       11,244
                                        --------     --------     --------
    Total ............................   148,150      105,537       87,875
Other ................................   (20,794)     (17,502)     (16,329)
                                        --------     --------     --------
                                        $127,356     $ 88,035     $ 71,546 
                                        ========     ========     ========
</TABLE>
REVENUES

Premiums

     Net premiums written increased 76.1% ($576,685,000) to $1,334,121,000 in
1996 from $757,436,000 in 1995 and 6.4% ($45,381,000) in 1995 from
$712,055,000 in 1994.  The consolidation of Guaranty National increased the
Company's 1996 net premiums written by $491,232,000.  The results by segment
are as follows:

  -  Regional Operations' net premiums written increased 6.1% ($20,443,000) to
     $353,041,000 in 1996 from $332,598,000 in 1995 and 18.9% ($52,860,000) in
     1995 from $279,738,000 in 1994.  The premiums written increases were
     primarily attributable to EBI's program of selective geographic expansion
     and penetration, which included the opening of 18 branch offices in 1995
     and 1996.  The offices were opened in territories where the Company
     believes it will benefit from its service oriented approach.  The
     increases were partially offset by the impact of legislative reforms in
     certain states which have led to an increasingly competitive workers
     compensation insurance marketplace with lower premium rates and a
     concomitant decrease in commission expenses as well as a reduction in
     losses.

                                     -39-

<PAGE>
-    Special Programs' net premiums written increased 15.3% ($65,010,000) to
     $489,848,000 in 1996 and decreased 1.7% ($7,479,000) to $424,838,000 in
     1995 from $432,317,000 in 1994.  Net premiums written by DPIC for
     professional liability insurance, the largest special program, were
     $195,546,000, $184,130,000 and $173,205,000 in 1996, 1995 and 1994,
     respectively.  The premium increases of 6.2% in 1996 and 6.3% in 1995
     (15.4% excluding a $13,704,000 premium refund received in 1994 from the
     discontinuation of a reinsurance contract) reflect both new business and
     a continuation of a high level of policy renewals in a very competitive
     market.  Premium volume for Connecticut Specialty increased 28.0%
     ($47,037,000) to $215,299,000 in 1996 and decreased 8.3% ($15,165,000) to
     $168,262,000 in 1995 from $183,427,000 in 1994.  Connecticut Specialty's
     premiums were increased in both 1996 and 1995 from greater participation
     in the underwriting pools managed by McGee and from increased premiums
     written in low exposure professional liability programs.  The increase in
     1996 was also impacted by higher retention for most programs after a
     change in reinsurance in May 1996, and offset in part by lower premiums
     from other marine coverages.  The decrease in 1995 resulted from the
     cancellation in the second half of 1994 of a personal injury protection
     program in Florida and an automobile physical damage program in Texas,
     where the Company had unfavorable loss experience.  The percentage of
     treaty and facultative reinsurance assumed to total net premiums written
     for this segment amounted to 16.1%, 17.1% and 17.5% in 1996, 1995 and
     1994, respectively.  In November 1996, the Company sold the renewal book
     of business of its reinsurance operations in order to concentrate on
     businesses where the Company can better service specialized niche
     markets.

-    Guaranty National's net premiums written of $491,232,000 for 1996 have
     been included in the Company's financial statements.  Net premiums
     written for Guaranty National were $397,899,000 in 1995.  Guaranty
     National's net premiums written for its personal lines, commercial lines,
     and collateral protection unit increased 30.4%, 5.9% and 46.3%,
     respectively, for 1996 as compared to 1995.  The increase for personal
     lines was the result of Guaranty National's acquisition of Viking
     Insurance Company of Wisconsin ("Viking") in July 1995.  Commercial lines
     premium increases, which resulted from the expansion of automobile
     physical damage and property programs, were partially offset by a planned
     reduction in commercial automobile liability premiums.  The increase in
     the collateral protection unit was primarily due to two new products,
     automobile financing GAP and mortgage fire insurance.

     Premiums earned increased 73.7% ($551,749,000) to $1,300,752,000 in 1996
from $749,003,000 in 1995 and 8.4% ($57,780,000) in 1995 from $691,223,000 in
1994.  The 1996 increase was attributable to the inclusion of Guaranty
National's premiums earned of $481,648,000, as well as the recognition in
income of increased premium writings from other operations.

Net Investment Income

     Pre-tax net investment income amounted to $145,391,000, $99,040,000 and
$84,915,000 in 1996, 1995 and 1994, respectively.  The pre-tax yields on the
average investment portfolio were 6.9% in 1996, 7.1% in 1995 and 6.5% in 1994, 

                                  -40-
<PAGE>
with after-tax yields of 5.4%, 5.5% and 5.0%, respectively.  Net investment
income increased in 1996 by the inclusion of Guaranty National's net
investment income of $40,089,000, as well as by increased earnings on a higher
investment base, notwithstanding a growing portfolio of lower yielding tax-
advantaged securities and the cash outlay to acquire Guaranty National common
stock.  The year-to-year changes in net investment income also reflect
increases in equity earnings from limited partnership investments of
$6,889,000 from 1995 to 1996 and $8,510,000 from 1994 to 1995.  Approximately
one-half of the 1996 increase in limited partnership earnings is attributable
to the inclusion of Guaranty National's partnership earnings.  Earnings from
limited partnership investments can vary considerably from year-to-year. 
However, the Company's long-term experience with these investments has been
quite favorable.  The increase in net investment income for 1995 is also
attributable to a higher average portfolio yield on a higher investment base. 
Net investment income was increased in both years by income generated from the
deployment of operating cash flow of $167,741,000 in 1996 and $148,017,000 in
1995.  The carrying value of the Company's investment portfolio amounted to
$2,309,767,000 at December 31, 1996 and $1,602,861,000 at December 31, 1995.  

     Fixed maturity investments which the Company has both the positive intent
and the ability to hold to maturity are recorded at amortized cost.  Fixed
maturity investments which may be sold in response to, among other things,
changes in interest rates, prepayment risk, income tax strategies or liquidity
needs are classified as available-for-sale and are carried at market value. 
The carrying value of fixed maturity and short-term investments amounted to
$1,858,045,000 and $1,235,051,000 at December 31, 1996 and 1995, respectively,
or approximately 80.0% and 76.9% of the Company's cash and investments.  

     The Company's investment philosophy is to achieve a superior rate of
return after taxes, while maintaining a proper balance of safety, liquidity,
maturity and marketability.  The Company invests primarily in investment grade
securities and strives to enhance the average return of its portfolio through
limited investment in a diversified group of non-investment grade fixed
maturity securities or securities that are not rated.  The risk of loss due to
default is generally considered greater for non-investment grade securities
than for investment grade securities because the former, among other things,
are often subordinated to other indebtedness of the issuer and are often
issued by highly leveraged companies.  At December 31, 1996 and 1995, the
Company's investment in non-investment grade and unrated fixed maturity
securities were carried at $219,473,000 and $139,075,000, respectively.  The
1996 increases reflect the inclusion of Guaranty National's portfolio. These
investments represented a total of 9.5% and 8.7% of cash and investments and
6.3% and 5.6% of total assets at December 31, 1996 and 1995, respectively.  

     The Company monitors the financial condition of the issuers of securities
that it owns.  When conditions are deemed appropriate, the Company ceases to
accrete discount, or accrue interest and dividends, and, in cases where the
value of such investments is deemed to be other than temporarily impaired,
recognizes losses.  The Company's non-investment grade investments are highly
diversified, with an average investment per issuer of approximately $1,535,000
at December 31, 1996.  Only one non-investment grade investment of $12,415,000
was in excess of $10,000,000 at December 31, 1996.

                                     -41-
<PAGE>
Realized Investment Gains

     Net realized investment gains amounted to $24,180,000 in 1996,
$11,885,000 in 1995 and $3,437,000 in 1994.  Sales of equity securities
resulted in net gains of $22,428,000, $16,531,000 and $3,845,000 and sales of
fixed maturities resulted in net gains (losses) of $2,067,000, $(311,000) and
$723,000 in 1996, 1995 and 1994, respectively.  Realized investment gains were
reduced by provisions for losses on securities deemed to be other than
temporarily impaired.  These provisions amounted to $315,000 in 1996, $285,000
in 1995 and $381,000 in 1994 for equity securities and $1,119,000, $4,050,000
and $750,000 in 1996, 1995 and 1994, respectively, for fixed maturity
investments.  Such provisions, based on available information at the time,
were made in consideration of the decline in the financial condition of the
issuers of these securities.

     The performance of the Company's investments, including net investment
income, net realized gains (losses) and unrealized appreciation (depreciation)
is as follows for the three most recent years:

                                                  Year Ended December 31,
                                             --------------------------------
                                               1996        1995        1994    
                                               ----        ----        ----
                                                      (000s omitted)
Net investment income .....................  $145,391    $ 99,040    $ 84,915 
                                             --------    --------    --------
Net realized gains (losses):
  Fixed maturities ........................     2,067      (4,361)        (27)
  Equity securities .......................    22,113      16,246       3,464 
                                             --------    --------    --------  
                                               24,180      11,885       3,437 
                                             --------    --------    --------
Net unrealized appreciation (depreciation):
  Fixed maturities ........................   (16,414)     89,932     (92,325)
  Equity securities .......................    18,461      34,002     (18,827) 
                                             --------    --------    --------
                                                2,047     123,934    (111,152)
                                             --------    --------    --------
                                             $171,618    $234,859    $(22,800)
                                             ========    ========    ========

     Realized gains (losses) vary from period to period, depending on market
conditions relative to the Company's investment holdings, the timing of
investment sales generating gains and losses, the occurrence of events which
give rise to other than temporary impairment of investments, and other
factors.  At December 31, 1996 the Company held equity securities with
unrealized appreciation of $73,523,000, and the market value of the fixed
maturities portfolio exceeded amortized cost by $43,410,000.  Such amounts can
vary significantly depending upon fluctuations in the financial markets.
Equity securities had unrealized appreciation of $18,461,000 for 1996, even
after taking $22,428,000 of realized gains, which was largely offset by the
impact of a rise in the interest rates resulting in unrealized depreciation of
$16,414,000 for fixed maturities.  The rise in market values during 1995 is
primarily attributable to the decline in interest rates during the year.  The
average maturity of the Company's fixed maturities has not varied
significantly in recent years.

                                     -42-
<PAGE>
EXPENSES AND OTHER

Operating Ratios

     The following table sets forth certain ratios of insurance operating
expenses to premiums earned for the Company:
                                                 Year Ended December 31,
                                             -------------------------------   
                                               1996        1995        1994
                                               ----        ----        ----
  Loss and loss adjustment expenses .......    67.9%       68.4%       72.1% 
  Policy acquisition and other insurance
    expenses ..............................    30.1        29.0        27.0  
                                              -----       -----       -----
    Total before policyholders' dividends .    98.0        97.4        99.1 
  Policyholders' dividends ................     1.8         2.9         2.1 
                                              -----       -----       ----- 
    Total after policyholders' dividends ..    99.8%      100.3%      101.2%
                                              =====       =====       =====

     The ratio of loss and loss adjustment expenses to premiums earned (the
"loss ratio") was 67.9%, 68.4% and 72.1% in 1996, 1995 and 1994, respectively.
The decreases in the 1996 and 1995 loss ratios were attributable to
improvements in both the Regional Operations and Special Programs segments,
offset in part by the consolidation of Guaranty National in 1996.  The
Company's efforts to reduce its loss costs have had a very positive impact on
the Company's profitability.

     The loss ratio for Regional Operations was 58.8% in 1996, 62.4% in 1995
and 67.1% in 1994.  The improvement in the loss ratio for Regional Operations
results from the very favorable loss development and loss experience achieved
by EBI through its service oriented approach of working with its customers to
prevent losses and reduce claim costs.  EBI has also had growth in high-
deductible policies where experience has been favorable.

     Special Programs' loss ratio was 72.6% in 1996, 72.9% in 1995 and 75.4%
in 1994.  The improvement in the 1996 loss ratio for this segment is primarily
attributable to a lower loss ratio for Connecticut Specialty, both from the
change in its reinsurance during 1996 and the impact on 1995 results of
certain cancelled programs which had unfavorable loss experience in 1995 and
1994.  These improvements were offset in part by reserve strengthening for the
Company's pools and associations and reinsurance businesses and higher initial
reserving for DPIC in 1996.  The decrease in the 1995 loss ratio for this
segment was primarily the result of favorable loss experience for DPIC and the
cancellation of the personal injury protection and automobile physical damage
Connecticut Specialty programs.

     Guaranty National's loss ratio for its personal lines book of business
improved to 71.3% for 1996 from 78.6% for 1995.  The commercial lines loss
ratio also improved to 72.1% in 1996 from 78.0% in 1995.  The lower loss
ratios for 1996 are primarily attributable to Guaranty National having
significantly strengthened its loss reserves for both personal and commercial
lines in 1995 in response to adverse claim trends during 1995.  Also during
1996, personal lines experienced lower claims severity and commercial lines
had lower overall claims severity and frequency.  

                                  -43-
<PAGE>
     The ratio of deferred acquisition costs and other insurance expenses to
premiums earned (the "expense ratio") was 30.1%, 29.0% and 27.0% in 1996, 1995
and 1994, respectively.  The increases in the expense ratio are attributable
to the Company's continued investment in building its loss prevention and
claims management competencies as well as the costs of opening EBI offices in
new territories.  The increase for 1996 was also the result of the change in
Connecticut Specialty's reinsurance, providing for lower ceding commissions,
and the consolidation of Guaranty National.  The 1994 expense ratio reflects a
low level of assessments from certain assigned risk pools.  The ratio of
policyholders' dividends to premiums earned (the "dividend ratio") was 1.8%,
2.9% and 2.1% in 1996, 1995 and 1994, respectively.  The decrease in the
dividend ratio for 1996 results from the consolidation of premiums from
Guaranty National, which does not have participating policies.  The increase
in the dividend ratio for 1995 is reflective of the lower loss ratios on
workers compensation insurance coverages.  The Company's combined ratio was
99.8% in 1996, 100.3% in 1995 and 101.2% in 1994.

     Provisions for losses and loss adjustment expenses include development of
loss and loss adjustment expense reserves relating to prior accident years,
which increased the calendar year combined ratio by .7 percentage point in
1996, 1.6 percentage points in 1995 and 2.5 percentage points in 1994.  The
loss ratios were adversely affected by loss development in the pool and
association and reinsurance businesses, as well as from discontinued lines and
certain program business.  This adverse development was reduced for 1994
through 1996 by favorable development in the workers compensation insurance
and professional liability lines of business from the improved application of
loss prevention and loss control procedures.

     The Company's environmental claims principally relate to asbestos and
hazardous waste, arising from certain liability business written prior to the
mid 1980's, which business was never a major element of the Company's
operations.  Environmental claims are also received from certain reinsurance
pools and associations where reserves are established based on information
reported to the Company by the managers of those pools and associations.  The
Company discontinued its participation in these reinsurance pools and
associations in the mid 1980's.

     Establishing reserve liabilities for environmental claims is subject to
significant uncertainties that make reserve estimation difficult.  Legal
decisions have tended to expand insurance coverage beyond the intent of the
policies.  The disposition of such claims often requires lengthy and costly
litigation.  Uncertainties as to required clean-up remedies and difficulties
in identifying the responsible parties add further to the complexity of
reserve estimation for these claims.  In recent years, the Company has
intensified its efforts to settle and close environmental claims.  To help
minimize the cost of losses and claims, the Company maintains a dedicated
environmental claims staff which administers and continually evaluates each
claim and its defense and settlement possibilities.  In 1996 (including
Guaranty National), 1995 and 1994, the Company paid $4,771,000, $5,675,000 and
$7,233,000, respectively, for the costs of defending and settling such claims. 
Payments in 1996, 1995 and 1994 related to 160, 213 and 292 claims,
respectively, for the Company's direct business.  Claim counts have been
aggregated by year of coverage for each occurrence for which policyholders are
being defended, and often include numerous claimants.

                                     -44-

<PAGE>
     As of December 31, 1996 and 1995, the Company has environmental claims-
related loss and loss adjustment expense reserves, net of reinsurance
recoverables, of $57,028,000 (including Guaranty National) and $34,559,000,
respectively, which include 632 and 474 claims, respectively, for direct
business written by the Company.  In estimating liabilities for environmental-
related claims, the Company considers all pertinent information as it becomes
available.

     Management believes that the Company's reserves for loss and loss
adjustment expenses make reasonable and sufficient provision for the ultimate
cost of all losses on claims incurred.  However, there can be no assurance
that changes in loss trends will not result in additional development of prior
years' reserves in the future.  Variability in claim emergence and settlement
patterns and other trends in loss experience can result in future development
patterns different than expected.  The Company believes that any such
development will continue at the low levels experienced in recent years,
considering actions that have been taken to increase reserving levels, improve
underwriting standards and emphasize loss prevention and control.  The
Company's loss ratios in recent years, including development of prior years'
losses, have compared favorably with loss ratios experienced by the industry.

     The Company limits both current losses and future development of losses
by ceding business to reinsurers.  The Company continually monitors the
financial strength of its reinsurers and, to the Company's knowledge, has no
material exposure with regard to potential unrecognized losses due to
reinsurers having known financial difficulties.

Interest Expense

     Interest expense was $24,687,000 in 1996, $15,943,000 in 1995 and
$13,597,000 in 1994, increasing 54.8% in 1996 and 17.3% in 1995.  Interest
expense increased in 1996 from the inclusion of interest on Guaranty
National's $100,000,000 bank debt, and increased in both 1995 and 1996 due to
higher average debt outstanding after the issuance of $100,000,000 of Senior
Notes by Orion on July 17, 1995, offset in part by the repayment of Orion's
bank debt at that time.

Other Expenses

     Other expenses were $42,932,000, $24,740,000 and $7,862,000 in 1996, 1995
and 1994, respectively.  The increases in both other income and other expenses
for 1996 and 1995 are primarily attributable to the inclusion of McGee's pool
management revenue and expenses after it was acquired by the Company on June
30, 1995.

Equity in Earnings of Affiliates

     Equity in earnings of affiliates for 1996 consists of a loss of $389,000
recorded from the Company's investment in Intercargo.  The Company records its
share of Intercargo's results in the subsequent quarter, and the loss for 1996
reflects a loss reported by Intercargo in the fourth quarter of 1995. 
Earnings of $1,038,000 and $342,000 were recorded from the Intercargo
investment in 1995 and 1994, respectively.  In 1995 and 1994 Guaranty National
was a non-majority owned affiliate of the Company and was therefore accounted
for using the equity method.  Included in equity in net earnings of affiliates
from Guaranty National were $4,466,000 in 1995 and $11,244,000 in 1994.        

                                    -45-

<PAGE>
Guaranty National became a majority-owned subsidiary in July 1996, and its
results have been consolidated in the Company's financial statements for all
of 1996.  Minority interest expense of $8,692,000 was recorded for the after-
tax portion of Guaranty National's 1996 earnings attributable to stockholders
of Guaranty National other than the Company.

     In June 1995 Guaranty National sold 1,550,000 shares of its common stock
in an offering under Regulation S of the Securities Act of 1933, as amended,
at a net offering price of $15.76 per share.  The Company converted
$20,896,000 of Guaranty National subordinated notes it held into 1,326,128
shares of Guaranty National common stock at the net price received by Guaranty
National from the offering.  The sale of stock and conversion of the
subordinated notes increased the stockholders' equity of Guaranty National and
facilitated the procurement of bank financing for Guaranty National's
acquisition of Viking in July 1995.

Earnings Before Federal Income Taxes and Minority Interest Expense

     Earnings before federal income taxes and minority interest expense were
$127,356,000, $88,035,000 and $71,546,000 for 1996, 1995 and 1994,
respectively.  The increases in pre-tax earnings of 44.7% and 23.0% for 1996
and 1995 reflect improvement in insurance operations profitability of
$27,026,000 and $8,041,000 and increases in realized investment gains of
$12,295,000 and $8,448,000, respectively.  

Federal Income Taxes

     Federal income taxes on pre-tax operating results and the related
effective tax rates amounted to $32,033,000 (25.2%), $20,413,000 (23.2%) and
$16,301,000 (22.8%) in 1996, 1995 and 1994, respectively.  The Company files
consolidated federal income tax returns.  The Company's effective tax rates
for 1996, 1995 and 1994 are less than the statutory tax rate of 35% primarily
because of income derived from tax-advantaged securities.

     In October 1996 the Internal Revenue Service ("IRS") completed an
examination of the Company's federal income tax returns through 1992.  As
described in previously issued financial statements of the Company, certain
tax benefits from tax attributes existing at the date of the Company's
reorganization in 1976 were not recognized pending completion of the IRS
examination.  Accordingly, the Company recorded a credit to capital surplus in
1996 for tax benefits of $11,900,000 with respect to the 1976 reorganization. 
The recording of this credit had no impact on the Company's earnings. 
                             
     The liability for deferred taxes established by the Company through June
30, 1996 for its share of Guaranty National's undistributed earnings has been
reversed, resulting in a reduction of $21,547,000 in the amount of goodwill
recorded from the purchase of Guaranty National shares, with no effect on net
income.

Earnings Per Common Share

     Primary earnings per common share amounted to $6.24 in 1996, $4.77 in
1995 and $3.85 in 1994.  Fully diluted earnings per share is not presented as
dilution is less than three percent for all periods.

                                     -46-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     Cash provided by operating activities increased $19,724,000 to
$167,741,000 in 1996 from $148,017,000 in 1995 and increased $29,238,000 in
1995 from $118,779,000 in 1994.  The increase for 1996 is attributable to
including Guaranty National's cash flow in the Company's consolidated
financial statements.  The increase in operating cash flow for 1995 was the
result of an increase in premiums collected, net investment income received
and lower paid losses, offset in part by higher payments for policy
acquisition costs and federal income taxes.  Cash flow for 1995 included a
disbursement of $7,800,000 under a retrospectively rated program written by
DPIC.  In 1994 operating cash flow included a $10,223,000 receipt from DPIC's
discontinuation of a reinsurance contract.

     Cash used in investment activities decreased $56,079,000 to $132,369,000
in 1996 from $188,448,000 in 1995 and increased $102,263,000 in 1995 from
$86,185,000 in 1994.  Cash is used in investment activities primarily for 
purchases of investments.  The purchases are funded by maturities and sales of
investments, as well as by the net cash from positive operating cash flows
after cash provided by or used in financing activities.  In July 1996 the
Company purchased Guaranty National common stock for cash of approximately
$88,206,000, including expenses.  In June 1995 Orion paid $22,000,000 in cash
plus acquisition costs to acquire McGee.

     Cash used in financing activities was $27,336,000 for 1996.  Cash of
$37,778,000 was provided by financing activities in 1995 and cash of
$32,582,000 was used in 1994.  Orion borrowed $12,000,000 under its bank line
of credit in June 1995 to finance part of the McGee acquisition.  In July 1995
Orion issued $100,000,000 of senior debt and repaid all of its outstanding
bank debt.  Cash used in financing activities includes dividend payments, debt
repayments and payments related to the Company's common stock repurchase
program.  Orion increased the quarterly dividend rate on its common stock by
11.1% and 15.0% in the third quarters of 1994 and 1995, respectively, and by
an additional 8.7% and 12.0% in the first and fourth quarters of 1996,
respectively.
                 
     Orion's uses of cash consist of debt service, dividends to stockholders
and overhead expenses.  These cash uses are funded from existing available
cash, financing transactions and receipt of dividends, reimbursement of
overhead expenses and amounts in lieu of federal income taxes from Orion's
insurance subsidiaries.  Orion received $35,286,000, $30,546,000 and
$30,013,000 in dividends, $7,410,000, $6,232,000 and $5,735,000 for overhead
expenses and federal tax payments of $7,455,000, $4,500,000 and $6,000,000
from its insurance subsidiaries in 1996, 1995 and 1994, respectively. 
Payments of dividends by Orion's insurance subsidiaries must comply with
insurance regulatory limitations concerning stockholder dividends and capital
adequacy.  State insurance regulators have broad discretionary authority with
respect to limitations on the payment of dividends by insurance companies. 
Limitations under current regulations are well in excess of Orion's cash
requirements.  


                                     -47-
<PAGE>
     Orion's insurance subsidiaries maintain liquidity in their investment
portfolios substantially in excess of that required to pay claims and
expenses.  The insurance subsidiaries held cash and short-term investments of
$293,477,000 and $123,457,000 at December 31, 1996 and 1995, respectively.
Orion's insurance subsidiaries had consolidated policyholders' surplus of
$670,572,000 on a combined basis with Guaranty National at December 31, 1996 
and $521,510,000 including the market value of the Company's investment in
Guaranty National at December 31, 1995, and statutory operating leverage
ratios of net premiums written to policyholders' surplus of 2.0:1 and 1.5:1 at
December 31, 1996 and 1995, respectively.  

     On July 17, 1995, Orion issued 7 1/4% Senior Notes due 2005 with a face
value of $100,000,000 in a public offering pursuant to a shelf registration
filed with the Securities and Exchange Commission in 1994.  The senior notes
issued are non-callable to maturity, and were sold at 99.23% of par to yield
7.36% per annum.  The net proceeds from the offering were $98,113,000, of
which $46,500,000 was used to repay all of Orion's debt under its bank loan
agreement.

     The  terms of Orion's indentures for its $100,000,000 of 7 1/4% Senior
Notes due 2005 and its $110,000,000 of 9 1/8% Senior Notes due 2002 limit the
amount of liens and guarantees by the Company, and the Company's ability to
incur secured indebtedness without equally and ratably securing the senior
notes.  Management does not believe that these limitations unduly restrict the
Company's operations or limit Orion's ability to pay dividends on its stock. 
At December 31, 1996 the Company was in compliance with the terms of its
senior note indentures.  Management believes that the Company continues to
have substantial sources of capital and liquidity from the capital markets and
bank borrowings.

     On June 2, 1995 Guaranty National entered into a $110,000,000 credit
agreement (the "Credit Agreement") with several participating banks.  The
Credit Agreement provides for an unsecured reducing revolving credit facility,
which was used to fund the Viking acquisition, to retire the outstanding
balance of $29,000,000 under Guaranty National's previous revolving line of
credit, and for working capital and general corporate purposes.  As of
December 31, 1996, the outstanding loan balance under the Credit Agreement was
$100,000,000, with an interest rate of 6.24%.  Principal payments are due
beginning April 15, 1999, until the loan is retired in 2002.  Guaranty
National has two interest rate swap agreements with banks which effectively
change the interest rate exposure on $80,000,000 of the loan to a fixed rate
of approximately 6.3% through March 16, 1998.  Guaranty National is in
compliance with the various covenants and restrictions in the Credit
Agreement.    

     The Company repurchased 241,114 shares, 173,181 shares and 442,327 shares
of its common stock at an aggregate cost of $11,148,000, $7,183,000 and
$13,745,000 in 1996, 1995 and 1994, respectively.  The Company's remaining
stock purchase authorization from its Board of Directors amounted to
$4,514,000 at December 31, 1996.


                                     -48-

<PAGE>
     Orion and its subsidiaries are routinely engaged in litigation incidental
to their businesses.  Management believes that there are no significant legal
proceedings pending against the Company which, net of reserves established
therefor, are likely to result in judgments for amounts that are material to
the financial condition, liquidity or results of operations of Orion and its
consolidated subsidiaries, taken as a whole.

     On January 13, 1997 Orion issued $125,000,000 of 8.73% Junior
Subordinated Debentures due January 1, 2037 to Orion Capital Trust I, a
Delaware statutory business trust sponsored by Orion.  Orion Capital Trust I
then sold $125,000,000 of 8.73% Capital Securities which mature on January 1,
2037 (the "Capital Securities") in a private placement.  The net proceeds from
the sale of the Capital Securities will be used for general corporate
purposes.  The Capital Securities are subordinate to all liabilities of the
Company, and may be redeemed without premium on or after January 1, 2007. 
Orion agreed to register the Capital Securities under the Securities Act of
1933, and has accordingly filed a registration statement with the Securities
and Exchange Commission.  

FORWARD-LOOKING STATEMENTS

     All statements made in this Annual Report that do not reflect historical
information are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.  Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements.  Such factors include,
among other things, (i) general economic and business conditions; (ii)
interest rate changes; (iii) competition and regulatory environment in which
the Company operates; (iv) claims frequency; (v) claims severity; (vi) medical
cost inflation; (vii) increases in the cost of property repair; (viii) the
number of new and renewal policy applications submitted to the Company; and
(ix) other factors over which the Company has little or no control.  The
Company disclaims any obligation to update or to publicly announce the impact
of any such factors or any revisions to any forward looking statements to
reflect future events or developments.















                                       -49-

<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                             REPORT OF MANAGEMENT


     The management of Orion Capital Corporation is responsible for the
consolidated financial statements and the information included therein.  The
consolidated financial statements are fairly presented and have been prepared
in accordance with generally accepted accounting principles appropriate in the
circumstances, and, where necessary, include amounts based on management's
informed estimates and judgments.  

     The Company has a system of internal controls which it believes provides
reasonable assurance that assets are safeguarded from loss or unauthorized
use, that transactions are recorded in accordance with management's policies
and that the financial records are reliable for preparing financial
statements.  The system of internal controls includes written policies and
procedures which are communicated to all appropriate personnel and updated as
necessary.  

     Compliance with the system of internal controls is continuously
maintained and monitored by management.  The internal audit staff of the
Company evaluates and reports on the adequacy of and adherence to these
controls, policies and procedures.  In addition, as part of its audit of the
consolidated financial statements, Deloitte & Touche LLP, the independent
auditors for the Company, perform an evaluation of the system of internal
controls to the extent they consider necessary to express an opinion on the
consolidated financial statements.  Recommendations concerning the system of
internal controls are provided by both the internal auditors and Deloitte &
Touche LLP, and management takes actions which are believed to be appropriate
responses to these recommendations.

     The Audit and Information Services Committee of the Board of Directors is
comprised of independent directors, and has general responsibility for
oversight of financial controls and audit activities of the Company and its
subsidiaries.  The Audit and Information Services Committee, which reports to
the Board, annually reviews the qualifications of the independent auditors and
meets periodically with them, the internal auditors and management to review
the plans and results of the audits.  Both internal and independent auditors
have free access to the Audit and Information Services Committee, without
members of management present, to discuss the adequacy of the system of
internal controls and any other matters which they believe should be brought
to the attention of the Committee.




W. Marston Becker                             Daniel L. Barry
Chairman & Chief Executive Officer            Chief Financial Officer



                                      -50-

<PAGE>
INDEPENDENT AUDITORS' REPORT
                                                    



The Board of Directors and Stockholders
Orion Capital Corporation
New York, New York

     We have audited the accompanying consolidated balance sheets of Orion
Capital Corporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996.  Our
audits also included the financial statement schedules listed in the Index at
Item 14(a)2.  These financial statements and financial statement schedules are
the responsibility of the Company's management.  Our responsibility is to
express an opinion on the financial statements and financial statement
schedules based on our audits.

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

     In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Orion Capital Corporation 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.  Also, in our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.


DELOITTE & TOUCHE LLP


Hartford, Connecticut
February 14, 1997







                                     -51-
<PAGE>
<TABLE>
<CAPTION>
                   ORION CAPITAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET        
                                 (000s omitted)     

                                     ASSETS 
                                                            December 31,
                                                     -------------------------
                                                         1996           1995
                                                         ----           ----
<S>                                                  <C>            <C>
Investments:
  Fixed maturities at amortized cost (market 
    $334,755 - 1996 and $276,282 - 1995) ..........  $  326,841     $  265,169

  Fixed maturities at market (amortized cost 
    $1,169,812 - 1996 and $748,008 - 1995) ........   1,205,308        782,869

  Common stocks at market (cost $136,631 - 1996
    and $108,211 - 1995) ..........................     209,281        158,895 

  Non-redeemable preferred stocks at market (cost 
    $151,439 - 1996 and $149,167 - 1995) ..........     152,312        145,990 

  Other long-term investments .....................      90,129         62,925 

  Short-term investments ..........................     325,896        187,013 
                                                     ----------     ----------
     Total investments ............................   2,309,767      1,602,861 
 
Cash ..............................................      11,607          3,584
 
Accrued investment income .........................      25,724         19,290
 
Investments in affiliates .........................      22,170        125,731

Accounts and notes receivable (less allowance 
  for doubtful accounts $3,696 - 1996 and  
  $3,212 - 1995) ..................................     181,495        137,197

Reinsurance recoverables and prepaid reinsurance ..     517,209        360,052

Deferred policy acquisition costs .................     136,168         77,673

Property and equipment (less accumulated
  depreciation $33,953 - 1996 and $23,223 - 1995)..      68,763         34,009
      
Excess of cost over fair value of net assets 
  acquired (less accumulated amortization 
  $25,633 - 1996 and $19,119 - 1995) ..............      81,198         50,199
 
Deferred federal income taxes .....................      23,554          8,726

Other assets ......................................      86,702         54,266 
                                                     ----------     ---------- 
     Total assets .................................  $3,464,357     $2,473,588
                                                     ==========     ========== 
<FN> 
                 See Notes to Consolidated Financial Statements
                                      -52-

<PAGE>
<CAPTION>
                   ORION CAPITAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                     (000s omitted - except for share data)

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                            December 31,
                                                     -------------------------
                                                         1996          1995
                                                         ----          ----
<S>                                                  <C>           <C>
Liabilities:
  Policy liabilities -                              
    Losses ........................................  $1,421,920    $1,007,016
    Loss adjustment expenses ......................     363,744       267,966
    Unearned premiums .............................     496,249       302,105
    Policyholders' dividends ......................      22,489        18,946
                                                     ----------    ----------
      Total policy liabilities ....................   2,304,402     1,596,033 

  Notes payable ...................................     310,904       209,148 
  Other liabilities ...............................     227,087       177,504 
                                                     ----------    ----------
      Total liabilities ...........................   2,842,393     1,982,685
                                                     ----------    ----------

Commitments and Contingencies (Notes J and K)

Minority interest .................................     45,231              -
                                                     ----------    ----------

Stockholders' equity:
  Preferred stock, authorized 5,000,000 shares; 
    issued and outstanding - none
  Common stock, $1 par value; authorized 
    30,000,000 shares; issued 15,337,650 shares ...      15,338        15,338
  Capital surplus .................................     158,587       146,658
  Net unrealized investment gains, net of federal
    income taxes of $31,674 - 1996 and $26,691 -
    1995 ..........................................      72,260        63,255
  Net unrealized foreign exchange translation 
    losses, net of federal income taxes (benefits) 
    of $414 - 1996 and $(540) - 1995 ..............      (2,164)       (3,935)
  Retained earnings ...............................     370,793       298,452
  Treasury stock, at cost (1,569,115 shares - 1996
    and 1,385,012 shares - 1995) ..................     (34,980)      (26,534)
  Deferred compensation on restricted stock .......      (3,101)       (2,331)
                                                     ----------    ----------
      Total stockholders' equity ..................     576,733       490,903
                                                     ----------    ----------

      Total liabilities and stockholders' equity...  $3,464,357    $2,473,588
                                                     ==========    ==========


<FN>   
                 See Notes to Consolidated Financial Statements

                                      -53-<PAGE>
<PAGE>
<CAPTION>


                        ORION CAPITAL CORPORATION AND SUBSIDIARIES
                            CONSOLIDATED STATEMENT OF EARNINGS
                        (000s omitted - except for per share data)


                                                            Year Ended December 31,
                                                        -------------------------------
                                                          1996        1995       1994
                                                          ----        ----       ----
<S>                                                    <C>          <C>        <C>
Revenues:
  Premiums earned ...................................  $1,300,752   $749,003   $691,223
  Net investment income .............................     145,391     99,040     84,915
  Realized investment gains .........................      24,180     11,885      3,437
  Other income ......................................      23,126     14,352      1,372
                                                       ----------   --------   --------
    Total revenues ..................................   1,493,449    874,280    780,947
                                                       ----------   --------   --------

Expenses:
  Losses incurred ...................................     694,534    388,409    386,685
  Loss adjustment expenses ..........................     188,458    123,824    111,438    
  Amortization of deferred policy acquisition costs .     363,547    195,481    165,108
  Other insurance expenses ..........................      27,912     21,562     21,461
  Dividends to policyholders ........................      23,634     21,790     14,836
  Interest expense ..................................      24,687     15,943     13,597
  Other expenses ....................................      42,932     24,740      7,862
                                                       ----------   --------   --------
    Total expenses ..................................   1,365,704    791,749    720,987
                                                       ----------   --------   --------

Earnings before equity in earnings of affiliates, 
  federal income taxes and minority interest expense      127,745     82,531     59,960

Equity in earnings (loss) of affiliates .............        (389)     5,504     11,586 
                                                       ----------   --------   --------

Earnings before federal income taxes and minority 
  interest expense ..................................     127,356     88,035     71,546 

Federal income taxes ................................      32,033     20,413     16,301 
Minority interest expense ...........................       8,692          -          -
                                                       ----------   --------   --------

  Net earnings ......................................  $   86,631   $ 67,622   $ 55,245 
                                                       ==========   ========   ========


  Net earnings per common share .....................  $     6.24   $   4.77   $   3.85
                                                       ==========   ========   ========

<FN>
                      See Notes to Consolidated Financial Statements




                                           -54-

<PAGE>
<CAPTION>
                     ORION CAPITAL CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                   (000s omitted)

                                                    Year Ended December 31,
                                                ------------------------------
                                                  1996       1995       1994
                                                  ----       ----       ----
<S>                                             <C>        <C>        <C>
Common Stock ................................   $ 15,338   $ 15,338   $ 15,338
                                                ========   ========   ========
Capital surplus:
  Balance, beginning of year ................   $146,658   $147,598   $148,167
  Issuance of common stock ..................          -        152          -
  Exercise of stock options and issuance /
    cancellation of restricted stock ........         29     (1,092)      (569)
  Recognition of pre-reorganization federal
    income tax benefits .....................     11,900          -          - 
                                                --------   --------   --------
  Balance, end of year ......................   $158,587   $146,658   $147,598 
                                                ========   ========   ========
Net unrealized investment gains (losses):
  Balance, beginning of year ................   $ 63,255   $(11,498)  $ 49,566
  Change in unrealized investment gains 
    (losses), net of taxes ..................      9,005     74,753    (61,064)
                                                --------   --------   -------- 
  Balance, end of year ......................   $ 72,260   $ 63,255   $(11,498)
                                                ========   ========   ========
Net unrealized foreign exchange translation
  losses:
  Balance, beginning of year ................   $ (3,935)  $ (3,959)  $ (3,665)
  Change in unrealized foreign exchange
    translation losses, net of taxes ........      1,771         24       (294)
                                                --------   --------   --------
  Balance, end of year ......................   $ (2,164)  $ (3,935)  $ (3,959)
                                                ========   ========   ========
Retained earnings:
  Balance, beginning of year ................   $298,452   $242,908   $198,491
  Net earnings ..............................     86,631     67,622     55,245
  Dividends declared ........................    (14,290)   (12,078)   (10,828)
                                                --------   --------   --------
  Balance, end of year ......................   $370,793   $298,452   $242,908 
                                                ========   ========   ========
Treasury stock:
  Balance, beginning of year ................   $(26,534)  $(22,451)  $(12,182)
  Issuance of common stock ..................          -        770          -
  Exercise of stock options and issuance /
    cancellation of restricted stock ........      2,702      2,330      3,476
  Acquisition of treasury stock .............    (11,148)    (7,183)   (13,745)
                                                --------   --------   --------
  Balance, end of year ......................   $(34,980)  $(26,534)  $(22,451)
                                                ========   ========   ========
Deferred compensation on restricted stock:
  Balance, beginning of year ................   $ (2,331)  $ (2,848)  $ (1,520)
  Issuance / cancellation of restricted stock     (1,827)      (517)    (2,247)
  Amortization of deferred compensation on
    restricted stock ........................      1,057      1,034        919 
                                                --------   --------   --------     
  Balance, end of year ......................   $ (3,101)  $ (2,331)  $ (2,848)
                                                ========   ========   ========
<FN>
                 See Notes to Consolidated Financial Statements

                                      -55-
<PAGE>
<CAPTION>
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENT OF CASH FLOWS
                                  (000s omitted)

                                                     Year Ended December 31,
                                               ----------------------------------
                                                  1996        1995        1994
                                                  ----        ----        ----
<S>                                            <C>         <C>         <C>
Cash flows from operating activities:
  Premiums collected ........................  $1,330,319  $ 738,083   $ 696,735
  Net investment income collected ...........     127,036     91,964      83,603
  Losses and loss adjustment expenses paid ..    (794,889)  (409,797)   (437,386) 
  Policy acquisition costs paid .............    (387,685)  (204,319)   (185,217) 
  Dividends paid to policyholders ...........     (20,091)   (15,495)    (14,708) 
  Interest paid .............................     (24,071)   (12,530)    (12,931) 
  Federal income tax payments ...............     (30,274)   (18,756)    (10,860) 
  Other payments ............................     (32,604)   (21,133)       (457) 
                                               ----------  ---------   ---------
    Net cash provided by operating 
      activities ............................     167,741    148,017     118,779  
                                               ----------  ---------   ---------

Cash flows from investing activities:
  Maturities of fixed maturity investments 
    held-to-maturity ........................      34,648     36,804      55,200 
  Maturities of fixed maturity investments
    available-for-sale ......................     144,231     12,640      28,839 
  Sale of fixed maturity held-to-maturity ...           -          -       1,155
  Sales of fixed maturities 
    available-for-sale ......................     250,858    184,501      88,804 
  Sales of equity securities.................     153,233     78,351      49,881 
  Investments in fixed maturities 
    held-to-maturity ........................      (8,609)   (41,709)    (53,230)
  Investments in fixed maturities
    available-for-sale ......................    (449,516)  (278,173)   (156,927)
  Investments in equity securities ..........     (83,427)   (64,450)    (84,582) 
  Purchase of Guaranty National common stock.     (88,628)         -           -
  Acquisition of McGee ......................           -    (22,355)          -
  Effect on cash of consolidating Guaranty
    National in 1996 and McGee in 1995.......       6,794        349           -
  Net purchases of short-term investments ...     (78,096)   (83,617)     (7,505)  
  Other payments ............................     (13,857)   (10,789)     (7,820)  
                                               ----------  ---------   ---------
    Net cash used in investing activities ...    (132,369)  (188,448)    (86,185)  
                                               ----------  ---------   ---------
<PAGE>
Cash flows from financing activities:
  Proceeds from issuance of notes payable ...           -    110,413           - 
  Proceeds from exercise of stock options ...          42        246         598 
  Repayment of notes payable ................      (1,313)   (54,500)     (8,000)
  Dividends paid to stockholders ............     (13,648)   (11,674)    (10,609)
  Dividends paid to minority stockholders....      (1,721)         -           -
  Purchases of common stock .................     (10,743)    (6,689)    (14,220)
  Other receipts (payments) .................          47        (18)       (351)
                                               ----------  ---------   ---------
    Net cash provided by (used in) financing 
      activities ............................     (27,336)    37,778     (32,582)
                                               ----------  ---------   ---------
Effect of foreign exchange rate changes 
  on cash ...................................         (13)        36        (244)
                                               ----------  ---------   ---------
    Net increase (decrease) in cash .........       8,023     (2,617)       (232)
Cash balance, beginning of year .............       3,584      6,201       6,433 
                                               ----------  ---------   ---------
Cash balance, end of year ...................  $   11,607  $   3,584   $   6,201 
                                               ==========  =========   =========
<FN>                                                         
                      See Notes to Consolidated Financial Statements

                                           -56-




<PAGE>
<CAPTION>
                   ORION CAPITAL CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENT OF CASH FLOWS - (Continued)
                                 (000s omitted)

                                                    Year Ended December 31,
                                                ------------------------------
                                                  1996       1995       1994
                                                  ----       ----       ----
<S>                                             <C>        <C>        <C>
Reconciliation of net earnings to net cash
  provided by operating activities:
Net earnings .................................  $ 86,631   $ 67,622   $ 55,245 
                                                --------   --------   --------
Adjustments:
  Depreciation and amortization ..............    12,063      5,900      4,936
  Amortization of excess of cost over fair
    value of net assets acquired .............     3,096      1,533      1,172
  Deferred federal income taxes ..............     9,999     (5,165)     9,906
  Amortization of fixed maturity investments .     1,432        815      1,700
  Non-cash investment income .................   (17,778)   (11,272)    (2,840)
  Equity in (earnings) loss of affiliates ....       389     (5,504)   (11,586)
  Dividends received from affiliates .........       302      2,597      3,295 
  Realized investment gains ..................   (24,180)   (11,885)    (3,437)
  Minority interest expense ..................     8,692          -          -
  Foreign exchange transaction adjustment ....     1,083        163        257 
  Other.......................................       952        (43)       (38)

Changes in assets and liabilities (net of
  effects of acquiring Guaranty National in 
  1996 and McGee in 1995):
  Decrease (increase) in accrued investment 
    income ...................................     1,179       (952)       259 
  Decrease (increase) in accounts and notes 
    receivable ...............................     7,497    (11,488)   (13,593)
  Decrease (increase) in reinsurance
    recoverables and prepaid reinsurance .....   (77,999)   (24,020)    57,277 
  Increase in deferred policy acquisition 
    costs ....................................   (20,858)    (7,536)   (12,615)
  Increase in other assets ...................   (34,302)   (18,405)    (7,589)
  Increase in losses .........................   115,202     54,485     14,756 
  Increase in loss adjustment expenses .......    32,363     39,168     26,170 
  Increase (decrease) in unearned premiums ...    58,906     45,250     (2,504)
  Increase in policyholders' dividends .......     3,543      6,295        128 
  Increase (decrease) in other liabilities ...      (471)    20,459     (2,120)
                                                --------   --------   --------
    Total adjustments and changes ............    81,110     80,395     63,534 
                                                --------   --------   --------
  Net cash provided by operating activities ..  $167,741   $148,017   $118,779 
                                                ========   ========   ========
<FN>          
                 See Notes to Consolidated Financial Statements

                                      -57-

/TABLE
<PAGE>
<PAGE>
                  ORION CAPITAL CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                 Years Ended December 31, 1996, 1995 and 1994

Note A - Significant Accounting Policies

     Basis of Financial Statement Presentation - Orion Capital Corporation
("Orion") and its majority-owned subsidiaries (collectively the "Company")
operate principally in the property and casualty insurance business.  The
Company reports its insurance operations in three segments - Regional
Operations, Special Programs and Guaranty National Corporation.  Regional
Operations provides workers compensation insurance products through EBI
Companies.  Special Programs includes (i) DPIC Companies ("DPIC"), which
markets professional liability insurance, (ii) Connecticut Specialty, which
writes specialty insurance programs, (iii) Wm. H. McGee & Co., Inc. ("McGee"),
an underwriting management company that specializes in ocean marine, inland
marine and commercial property insurance and (iv) a 24.8% interest in
Intercargo Corporation ("Intercargo") which underwrites insurance coverages
for international trade.  The third segment, Guaranty National Corporation,
("Guaranty National"), specializes in nonstandard commercial and personal
automobile insurance.  The miscellaneous income and expenses (primarily
interest, general and administrative expenses and other consolidating
elimination entries) of the parent company are reported as a fourth segment. 
The consolidated financial statements and notes thereto are presented in
accordance with generally accepted accounting principles ("GAAP") for property
and casualty insurance companies and include the accounts of Orion and its
majority-owned subsidiaries.  The Company's investments in unconsolidated
affiliates are accounted for using the equity method (See Note D).  All
material intercompany balances and transactions have been eliminated.  The
preparation of the Company's consolidated financial statements in conformity
with GAAP requires Company management to make estimates and assumptions that
affect the amounts reported in these consolidated financial statements and
accompanying notes.  Actual results could differ from those estimates.

     Regulation - The Company's insurance subsidiaries are subject to
comprehensive regulation by various state insurance departments including
regulations limiting dividend payments to Orion and intercompany transactions. 
Under these regulations, the maximum dividends permitted at December 31, 1996
for the ensuing twelve months, without prior approval, aggregated
$102,138,000, including $25,307,000 from subsidiaries of Guaranty National. 
However, state insurance regulators have broad discretionary authority with
respect to approving the payment of dividends by insurance companies. 
Policyholders' surplus of Orion's insurance subsidiaries determined in
accordance with prescribed statutory accounting practices amounted to
$670,572,000 on a combined basis with Guaranty National at December 31, 1996
and $521,510,000 including the market value of the Company's investment in
Guaranty National at December 31, 1995.  Statutory net income amounted to
$107,866,000, $83,842,000 and $61,518,000 for 1996, 1995 and 1994,
respectively.  


                                      -58-
<PAGE>
                  ORION CAPITAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Cash - For purposes of the consolidated statement of cash flows, the
Company considers only demand deposit accounts to be cash.
    
     Investments - Fixed maturity investments include bonds, preferred stocks
with mandatory redemption features, and certificates of deposit that mature
more than one year after the balance sheet date.  Fixed maturity investments
that the Company has both the positive intent and the ability to hold to
maturity are recorded at amortized cost.  Fixed maturity investments which may
be sold in response to, among other things, changes in interest rates,
prepayment risk, income tax strategies or liquidity needs, are classified as
available-for-sale and are carried at market value.  Common stocks and non-
redeemable preferred stocks are also carried at market value.  Fluctuations in
the market value of these available-for-sale securities are recorded as
unrealized investment gains or losses and credited or charged to stockholders'
equity.  Other long-term investments principally include equity ownership
interests in limited partnerships, which are recorded using the equity method
of accounting.  Short-term investments include certificates of deposit and
commercial paper which mature within one year of the balance sheet date, money
market accounts and United States Treasury Bills.  Market values are generally
based on quoted market prices or dealer quotes.  Realized investment gains and
losses, including provision for other than temporary impairment of investment
securities, are recognized on the specific identification method.  

     Deferred Policy Acquisition Costs - Costs that vary with, and are
directly related to, the production of new and renewal business are deferred
and amortized as the related premiums are earned.  The test for recoverability
of such deferred costs includes the consideration of net investment income.

     Excess of Cost Over Fair Value of Net Assets Acquired - The excess of the
cost of acquiring subsidiaries over the fair value of their net assets
("goodwill") is amortized on a straight-line basis over periods of 25 to 40
years.  The Company evaluates the recoverability of goodwill from expected
future cash flows, and impairments would be recognized in operating results if
a permanent diminution in value were to occur.

     Revenue Recognition - Premiums are earned on a daily pro rata basis over
the policy period.  A provision is made for anticipated retrospective premium
adjustments and audit premiums.  Direct and assumed premiums are reduced for
reinsurance ceded to other insurers.










                                    -59-

<PAGE>
                  ORION CAPITAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Policy Liabilities and Reinsurance - Loss and loss adjustment expense
liabilities are established in consideration of individual cases for reported
losses and past experience for incurred but not yet reported losses ("IBNR"). 
Estimated reinsurance receivables are recognized in a manner consistent with
the liabilities relating to the underlying reinsured contracts.  At December
31, 1996 and 1995, long-term disability workers compensation loss reserves are
carried at $54,832,000 and $56,603,000, respectively, in the consolidated
financial statements at net present value using a statutory interest rate of
3.5%.  Policyholders' dividends on participating policies are accrued at
estimated payment rates as the related premiums are earned.  Participating
business represented 17% and 24% of premiums in-force at December 31, 1996 and
1995, respectively.  As a percent of premiums earned, participating business
amounted to 16% in 1996, 24% in 1995 and 21% in 1994.
                
     Federal Income Taxes - The Company recognizes taxes payable or refundable
for the current year, and deferred taxes for the future tax consequences of
differences between the financial reporting and tax basis of assets and
liabilities.  Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years the temporary
differences are expected to reverse.  

     Earnings Per Common Share - Earnings per common share is computed using
the weighted average common and dilutive common equivalent shares outstanding. 

     Reclassifications - The 1995 and 1994 consolidated financial statements
have been reclassified to conform to the classifications used in 1996.  

Note B - Purchase of Guaranty National Corporation Common Stock

     On July 2, 1996, the Company completed a tender offer for 4,600,000
shares of Guaranty National common stock.  Together with the open-market
purchase of 120,000 additional shares on July 17, 1996, the Company has
increased its ownership of Guaranty National from 49.5% to 81.0%.  The
aggregate purchase price, including expenses, of approximately $88,206,000 was
paid in cash.

     The purchases of Guaranty National shares were recorded as of June 30,
1996 using the purchase method of accounting.  All revenues and expenses of
Guaranty National for 1996 have been consolidated with those of the Company,
and minority interest expense has been recorded for the portion of Guaranty
National's 1996 earnings that was attributable to the shares not owned by the
Company.  







                                     -60-
<PAGE>
                  ORION CAPITAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The increase in the Company's ownership to over 80% of Guaranty
National allows the inclusion of Guaranty National in Orion's consolidated
federal income tax return, as well as the reversal of a deferred tax
liability previously established by the Company for its share of the
undistributed earnings of Guaranty National.  The excess of cost over the
estimated fair value of the 31.5% interest in Guaranty National's net
assets acquired during 1996 was $9,080,000, after the reversal of
$21,547,000 of deferred taxes, and will be amortized over 28 years, which
is the remaining amortization period for goodwill recorded upon Orion's
initial investment in Guaranty National.  

     On July 18, 1995 Guaranty National acquired Viking Insurance Holdings,
Inc., and its subsidiaries ("Viking"), in a business combination accounted
for as a purchase.  Viking is a property and casualty insurance company
writing nonstandard personal automobile insurance, primarily in the state
of California.  The results of operations of Viking are included in
Guaranty National's financial statements since the date of acquisition. 
The total cost of the acquisition was $97,225,000, with total cash paid of
approximately $95,559,000, including acquisition expenses.  The total
consideration exceeded the fair value of the net assets of Viking by
approximately $10,612,000, which is being amortized over 40 years.

     Pro forma information as if the Guaranty National shares had been
purchased as of the beginning of each of the years ended December 31, 1996
and 1995, and as if the Viking acquisition had occured as of January 1,
1995, is as follows:

                                                         Year Ended
                                                        December 31,  
                                                   ----------------------
                                                      1996        1995
                                                      ----        ----
                                                       (000s omitted)

Total revenues ................................    $1,491,212  $1,380,857  
                                                   ==========  ==========
Net earnings ..................................    $   91,573  $   67,447
                                                   ==========  ==========
Net earnings per common share .................    $     6.59  $     4.75 
                                                   ==========  ==========











                                     -61-
<PAGE>
                  ORION CAPITAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note C - Acquisition of Wm. H. McGee & Co., Inc.

     On June 30, 1995, Orion purchased all of the capital stock of McGee
for $22,000,000 in cash, and incurred acquisition expenses of $355,000. 
McGee specializes in underwriting ocean marine, inland marine and
commercial property insurance through an underwriting pool in the United
States and one in Canada.  The business is written by McGee on behalf of
the insurance companies that comprise the pools.  The Company's
participation in the United States pool was 7%, 14.5% and 37% in 1994, 1995
and 1996, respectively.  Participation in the Canadian pool was 10% in
1994, 15% in 1995 and approximately 49% in 1996.  The Company has agreed to
increase its rate of participation for 1997 to 52% in the United States and
60.5% in Canada.  The acquisition has been accounted for by the purchase
method, and McGee's operations are included in the Company's results of
operations from July 1, 1995.  The Company recorded $22,317,000 for the
excess of cost over the estimated fair value of the net assets acquired,
which is being amortized over a 30 year period.  The proforma consolidated
results of the Company's operations, as if the purchase had been made as of
the beginning of 1995, would not be materially different than reported
herein.

Note D - Investments in Affiliates

     Investments in affiliates include the Company's interest in Guaranty
National through December 31, 1995, and the Company's 24.8% interest in
Intercargo, both publicly-held companies.  The Company's financial
statements include the portion of Guaranty National's and Intercargo's
results attributable to the Company's ownership on an equity accounting
basis.  The Company records its share of Intercargo's operating results in
the subsequent quarter, after Intercargo has reported its financial
results.  The carrying values of the Company's investments in affiliates
were $22,170,000 at December 31, 1996 and $125,731,000 at December 31,
1995, with market values of $16,262,000 and $128,120,000, respectively. 
The carrying value of the Company's investment in Intercargo included
$11,022,000 of goodwill at December 31, 1996.

     In June 1995 Guaranty National sold 1,550,000 shares of its common
stock in an offering under Regulation S of the Securities Act of 1933, as
amended, at a net offering price of $15.76 per share.  The Company
converted $20,896,000 of Guaranty National subordinated notes it held into
1,326,128 shares of Guaranty National common stock at the net price
received by Guaranty National from the offering.  The sale of stock and
conversion of the subordinated notes increased the stockholders' equity of
Guaranty National and facilitated the procurement of financing for Guaranty
National's acquisition of Viking in July 1995.

     Transactions with Guaranty National for 1995 and 1994 reported in the
consolidated statement of earnings include interest income on the Guaranty
National subordinated notes of $1,101,000 and $1,640,000 and investment
management fee income of $595,000 and $550,000 respectively, and interest
expense on a mortgage participation loan of $407,000 in both years.

                                     -62-
<PAGE>
<TABLE>
<CAPTION>
                  ORION CAPITAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Summarized financial information for the Company's affiliates is set
forth below:                    
                                                              
                                            Year Ended December 31,    
                                     ------------------------------------
                                         1996         1995         1994
                                         ----         ----         ----
                                                (000s omitted)
<S>                                  <C>          <C>          <C>
Revenues:
  Premiums earned ................   $   66,324   $  474,534   $  376,444
  Realized investment gains ......            -        3,291        3,007
  Investment and other income ....        5,688       38,422       28,090
                                     ----------   ----------   ----------
                                         72,012      516,247      407,541
                                     ----------   ----------   ----------
Expenses:
  Insurance expenses .............       74,019      490,952      367,501
  Interest and other .............          785        7,452        5,428
                                     ----------   ----------   ----------
                                         74,804      498,404      372,929
                                     ----------   ----------   ----------
Earnings (loss) before equity in 
  earnings of affiliate and 
  federal income taxes ...........       (2,792)      17,843       34,612
Equity in earnings of affiliate ..        2,469            -            -
Federal income (taxes) benefit ...          225       (1,482)      (8,734)
                                     ----------   ----------   ----------
  Net earnings (loss) ............   $      (98)  $   16,361   $   25,878
                                     ==========   ==========   ==========
The Company's proportionate share,
  including amortization of 
  goodwill .......................   $     (389)  $    5,504   $   11,586
                                     ==========   ==========   ==========
<CAPTION>
                                                        December 31,    
                                                  -----------------------
                                                      1996         1995
                                                      ----         ----
                                                       (000s omitted)
<S>                                               <C>          <C>
Cash and investments ............................ $   75,269   $  714,584
Other assets ....................................     49,560      306,307      
                                                  ----------   ----------
                                                     124,829    1,020,891 
 
Policy liabilities ..............................    (57,608)    (582,884)
Notes payable ...................................     (9,735)    (112,735)
Other liabilities ...............................    (12,541)     (63,341)     
                                                  ----------   ----------
Stockholders' equity ............................ $   44,945   $  261,931 
                                                  ==========   ==========


                                     -63-

<PAGE>
<CAPTION>
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note E - Investments

     The amortized cost and estimated market values of investments in fixed
maturities, equity securities and short-term investments are as follows:

                                              Gross        Gross     Estimated
                                Amortized   Unrealized   Unrealized    Market
December 31, 1996                  Cost       Gains        Losses      Value  
-----------------               ----------  ----------   ----------  --------- 
                                               (000s omitted)
<S>                             <C>          <C>         <C>        <C>
Held-to-maturity securities:
  United States Government
    and government agencies
    and authorities ........... $  119,058   $  1,917    $ (1,131)  $  119,844
  States, municipalities and
    political subdivisions ....    179,465      6,273        (172)     185,566
  Foreign governments .........         50          -           -           50
  Corporate securities ........     28,268      1,030          (3)      29,295
                                ----------   --------    --------  ----------
                                $  326,841   $  9,220    $ (1,306)  $  334,755
                                ==========   ========    ========  ==========

Available-for-sale securities:
  United States Government
    and government agencies
    and authorities ........... $  321,087   $  9,553    $ (3,970)  $  326,670
  States, municipalities and
    political subdivisions ....    395,732     19,646        (524)     414,854
  Foreign governments .........      5,855        678           -        6,533
  Corporate securities ........    407,541     14,712      (5,240)     417,013
  Mortgage-backed securities 
    (exclusive of government
     agencies) ................     39,597        747        (106)      40,238
  Equity securities ...........    288,070     86,171     (12,648)     361,593
  Short-term investments.......    325,896          -           -      325,896
                                ----------   --------    --------   ----------
                                $1,783,778   $131,507    $(22,488)  $1,892,797 
                                ==========   ========    ========   ==========
<PAGE>
December 31, 1995
-----------------
Held-to-maturity securities:
  United States Government
    and government agencies
    and authorities ........... $   90,770   $  3,363    $   (295)  $   93,838
  States, municipalities and
    political subdivisions ....    137,807      6,424           -      144,231
  Foreign governments .........         50          -           -           50
  Corporate securities ........     36,542      1,638         (17)      38,163
                                ----------   --------    --------   ----------
                                $  265,169   $ 11,425    $   (312)  $  276,282
                                ==========   ========    ========   ==========

Available-for-sale securities:
  United States Government
    and government agencies
    and authorities ........... $  206,722   $ 13,054    $ (3,712)  $  216,064
  States, municipalities and
    political subdivisions ....    246,026     18,619        (157)     264,488
  Foreign governments .........      7,900        562           -        8,462
  Corporate securities ........    270,001      9,895      (3,647)     276,249
  Mortgage-backed securities 
    (exclusive of government
     agencies) ................     17,359        282         (35)      17,606
  Equity securities ...........    257,378     61,979     (14,472)     304,885
  Short-term investments.......    187,013          -           -      187,013
                                ----------   --------    --------   ----------
                                $1,192,399   $104,391    $(22,023)  $1,274,767 
                                ==========   ========    ========   ==========

                                       -64-

<PAGE>
<CAPTION>
                  ORION CAPITAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Net investment income for the three years ended December 31, 1996 was as
follows:
                                                Year Ended December 31,
                                           ---------------------------------
                                              1996        1995        1994
                                              ----        ----        ----
                                                     (000s omitted)
<S>                                        <C>         <C>         <C>
Net investment income:
  Fixed maturities ......................  $ 98,213    $ 69,453    $ 67,305
  Equity securities .....................    19,901      15,410      14,964
  Other long-term investments ...........    16,084       9,125         685
  Short-term investments ................    13,224       6,311       2,902
  Accounts and notes receivable .........       309         113         134
  Other .................................       310         353         411    
                                           --------    --------    --------
    Total investment income .............   148,041     100,765      86,401
  Less investment expenses ..............     2,650       1,725       1,486
                                           --------    --------    --------
    Net investment income ...............  $145,391    $ 99,040    $ 84,915
                                           ========    ========    ========
<CAPTION>
     Certain information concerning realized and unrealized gains (losses) for
fixed maturities and equity securities is set forth below:

                                                Year Ended December 31,
                                           ---------------------------------
                                              1996        1995        1994
                                              ----        ----        ----
                                                     (000s omitted)
<S>                                        <C>         <C>         <C>
Fixed maturities available-for-sale:
  Gross realized gains ..................  $ 10,257    $  7,891    $  4,774
  Gross realized losses .................    (7,045)     (8,372)     (4,267)
  Provision for other than temporary
    impairment ..........................    (1,119)     (4,050)       (750) 
                                           --------    --------    --------
                                           $  2,093    $ (4,531)   $   (243)
                                           ========    ========    ========
  Change in unrealized gains (losses) 
    recorded in stockholders' equity ....  $(11,089)   $ 70,317    $(66,076)
                                           ========    ========    ========
Equity securities:
  Gross realized gains ..................  $ 29,007    $ 17,879    $  5,319
  Gross realized losses .................    (6,579)     (1,348)     (1,474)
  Provision for other than temporary
    impairment ..........................      (315)       (285)       (381)
                                           --------    --------    --------
                                           $ 22,113    $ 16,246    $  3,464 
                                           ========    ========    ========
  Change in unrealized gains (losses) 
    recorded in stockholders' equity ....  $ 18,461    $ 34,002    $(18,827)
                                           ========    ========    ========
<CAPTION>






                                      -65-

<PAGE>
                  ORION CAPITAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)              

     In December 1995 the Company reclassified investments with a market value
of $102,581,000 from fixed maturities recorded at amortized cost to fixed
maturities recorded at market, and recorded unrealized appreciation net of taxes
of $1,329,000. This one-time transfer from the held-to-maturity portfolio was
permitted by the implementation guide for Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt and Equity
Securities."  In 1994 the Company transferred securities of two issuers with an
amortized cost of $11,469,000 and a market value of $10,122,000 from the held-
to-maturity portfolio to the available-for-sale category due to a deterioration
in the creditworthiness of these issuers.  The Company sold only one security
with an amortized cost of $991,000 from the held-to-maturity portfolio during
1994, resulting in a realized gain of $164,000.

     The amortized cost and estimated market values of fixed maturity and short-
term investments at December 31, 1996, by contractual fiscal maturity, are shown
below.  Expected maturities will differ from contractual maturities because
issuers of securities may have the right to call or prepay obligations with or
without call or prepayment penalties.

                                    Fixed Maturities       Fixed Maturities
                                    Held-to-Maturity      Available-for-Sale
                                   ------------------   -----------------------
                                              Estimated              Estimated
                                   Amortized   Market    Amortized    Market 
                                     Cost      Value        Cost      Value 
                                   ---------  ---------  ----------  ----------
                                                  (000s omitted)
<S>                                <C>        <C>        <C>         <C>
Due in one year or less .......... $   8,280  $   8,332  $  375,782  $  375,854
Due after one year through five 
  years ..........................   175,774    178,671     161,283     161,475
Due after five years through ten 
  years ..........................    80,226     82,017     204,462     213,931
Due after ten years ..............    62,561     65,735     525,376     548,910
                                   ---------  ---------  ----------  ----------
                                     326,841    334,755   1,266,903   1,300,170
Mortgage-backed securities ......          -          -     228,805     231,034
                                   ---------  ---------  ----------  ----------
                                   $ 326,841  $ 334,755  $1,495,708  $1,531,204
                                   =========  =========  ==========  ==========
</TABLE>
     Other long-term investments had aggregate carrying values of $90,129,000 at
December 31, 1996 and $62,925,000 at December 31, 1995 including mortgage loans
on real estate of $1,187,000 and $1,979,000, respectively.  Estimated market
values of mortgage loans and other long-term investments approximate their
carrying values.  The carrying value of the Company's investments in principal-
only securities and interest-only securities totalled approximately $6,277,000,
or .3% of total invested assets, at December 31, 1996.  

     The carrying value of securities on deposit with state regulatory
authorities in accordance with statutory requirements totalled $236,328,000 and
$237,732,000 at December 31, 1996 and 1995, respectively.  Excluding investments
in securities of the United States Government and its agencies, the Company did
not have any investments in securities of any one issuer that exceeded
$25,000,000.  The Company had $2,227,000 and $1,441,000 of fixed maturity
investments for which it was not accruing income for the years ended December
31, 1996 and 1995, respectively.   
                                    -66-
<PAGE>
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note F - Reinsurance

     In the normal course of business, the Company's insurance subsidiaries
reinsure certain risks, generally on an excess-of-loss or pro rata basis, with
other companies in order to limit losses.  Reinsurance does not discharge the
primary liability of the original insurer.  As of December 31, 1996 and 1995,
recoverables for reinsurance ceded to the Company's four largest reinsurers
were an aggregate of $150,175,000 and $84,654,000, respectively, excluding
recoverables for reinsurance ceded to Phoenix Assurance Company of New York
("Phoenix"), the largest McGee pool member other than the Company in 1996 and
the clearing company for the McGee pool in 1995.  As of December 31, 1996,
recoverables for reinsurance ceded to Phoenix were $85,105,000, versus
$60,745,000 for 1995, and the Company had ceded balances payable to Phoenix of
$19,042,000 and $22,660,000, respectively.  The table below illustrates the
effect of reinsurance on premiums written and premiums earned: 
<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                         -------------------------------------
                                             1996         1995         1994
                                             ----         ----         ----
                                         (000s omitted-except for percentages)
<S>                                       <C>          <C>          <C>
Direct premiums written ................  $1,431,450   $ 799,284    $ 691,493
Reinsurance assumed ....................     174,681     127,445      120,851
                                          ----------   ---------    ---------
Gross premiums written .................   1,606,131     926,729      812,344
Reinsurance ceded ......................    (272,010)   (169,293)    (100,289) 
                                          ----------   ---------    ---------
Net premiums written ...................  $1,334,121   $ 757,436    $ 712,055  
                                          ==========   =========    =========
Percentage of amount assumed to net ....        13.1%       16.8%        17.0% 
                                          ==========   =========    =========

Direct premiums earned .................  $1,388,893   $ 754,927    $ 685,110 
Reinsurance assumed ....................     182,482     126,552      129,737  
                                          ----------   ---------    ---------
Gross premiums earned ..................   1,571,375     881,479      814,847 
Reinsurance ceded ......................    (270,623)   (132,476)    (123,624) 
                                          ----------   ---------    ---------
Net premiums earned ....................  $1,300,752   $ 749,003    $ 691,223  
                                          ==========   =========    =========
Loss and loss adjustment expenses
  incurred recoverable from reinsurers..  $  174,344   $  70,872    $  56,778
                                          ==========   =========    =========
</TABLE>
     Reinsurance recoverables and prepaid reinsurance includes prepaid
reinsurance of $86,916,000 at December 31, 1996 and $68,525,000 at December
31, 1995.
                            



                                     -67-

<PAGE>
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note G - Loss and Loss Adjustment Expense Reserves

     An analysis of the Company's calendar year net loss and loss adjustment
expense reserves is summarized in the following table.  The current year
provision and payments for 1996 include favorable loss development for
Guaranty National of $995,000 and payments of $144,775,000 attributable to
periods prior to the consolidation of Guaranty National's results in the
Company's financial statements.
<TABLE>
<CAPTION>
                                               Year Ended December 31,
                                        ------------------------------------
                                           1996         1995         1994
                                           ----         ----         ----
                                                   (000s omitted)
<S>                                     <C>          <C>          <C>
Net balance, beginning of year .......  $  993,978   $  891,542   $  830,805
Consolidation of Guaranty National         
  reserves ...........................     286,339            -            -
                                        ----------   ----------   ----------
                                         1,280,317      891,542      830,805
                                        ----------   ----------   ----------
Provision:
  Current year .......................     874,123      500,514      480,826
  Prior years ........................       8,869       11,719       17,297
                                        ----------   ----------   ----------
                                           882,992      512,233      498,123
                                        ----------   ----------   ----------
Payments:
  Current year .......................     499,176      146,540      134,120
  Prior years ........................     295,713      263,257      303,266
                                        ----------   ----------   ----------
                                           794,889      409,797      437,386
                                        ----------   ----------   ----------
Net balance, end of year .............   1,368,420      993,978      891,542
  Add reinsurance recoverables .......     417,244      281,004      289,787
                                        ----------   ----------   ----------
Balance, end of year .................  $1,785,664   $1,274,982   $1,181,329
                                        ==========   ==========   ==========
</TABLE>
     Loss reserve estimates are based on forecasts of the ultimate settlement
of claims and are subject to uncertainty with respect to future events.  Loss
reserve amounts are based on management's informed estimates and judgments,
using data currently available.  Reserve amounts and the underlying actuarial
factors and assumptions are regularly analyzed and adjusted to reflect new
information.  Such reevaluation is a normal, recurring activity that is
inherent in the process of loss reserve estimation and therefore, no
assurances can be given that reserve development will not occur in the future. 
A substantial portion of the loss development experienced by the Company
during the three years ended December 31, 1996 resulted from pools and
associations, reinsurance, certain discontinued lines and program business,
reduced by favorable development in workers compensation and professional
liability lines of insurance.  Reserve strengthening, higher initial reserving
and increased stabilization in the Company's business have resulted in a
decreasing level of loss development.

                                     -68-

<PAGE>
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     An analysis of the Company's loss and loss adjustment expense
environmental reserves and related claim counts for the three years ended
December 31, 1996 is presented below.  Claim counts have been aggregated by
year of coverage for each occurrence for which policyholders are being
defended, and often include numerous claimants.
<TABLE>
<CAPTION>
                                        Year Ended December 31,
                         -----------------------------------------------------
                               1996               1995               1994
                         ---------------    ---------------    --------------- 
                                  Claim              Claim              Claim
                         Amount   Counts    Amount   Counts    Amount   Counts
                         ------   ------    ------   ------    ------   ------
                                   (000s omitted for dollar amounts)
<S>                      <C>        <C>     <C>        <C>     <C>        <C>
Net balance, beginning 
  of year .............  $34,559    474     $20,601    467     $17,189    512  
Consolidation of
  Guaranty National ...    2,817     70           -                  -
  Provision ...........   24,423             19,633             10,645         
  Payments ............   (4,771)            (5,675)            (7,233)        
                         -------            -------            -------
Net balance, end of 
  year ................   57,028    632      34,559    474      20,601    467
  Add reinsurance 
    recoverables ......   12,457             10,509             11,391   
                         -------            -------            -------
Balance, end of year ..  $69,485            $45,068            $31,992
                         =======            =======            =======
</TABLE>
     The Company's environmental claims principally relate to asbestos and
hazardous waste, arising from certain liability business written prior to the
mid 1980's, which business was never a major element of the Company's
operations.  Environmental claims are also received from certain reinsurance
pools and associations where reserves are established based on information
reported to the Company by the managers of those pools and associations.  In
view of the lines of insurance that the Company has traditionally written,
environmental claims have not represented, and are not expected to represent
in the future, a material portion of the Company's total claims.  

     Establishing reserve liabilities for environmental claims is subject to
significant uncertainties that make reserve estimation difficult.  Legal
decisions have tended to expand insurance coverage beyond the intent of the
policies.  The Company does not use discounting in determining its reserves
for environmental claims.  IBNR of $38,699,000 and $21,739,000 is included in
net reserves for environmental claims at December 31, 1996 and 1995,
respectively.




                                     -69-
<PAGE>
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note H - Notes Payable

     On July 17, 1995, Orion issued 7 1/4% Senior Notes due 2005 with a face
value of $100,000,000 (the "7 1/4% Senior Notes") in a public offering.  The
net proceeds from the offering were approximately $98,113,000, of which
$46,500,000 was used to repay Orion's debt under a bank loan agreement and the
balance was used for general corporate purposes.  The indentures for the 7
1/4% Senior Notes and for Orion's 9 1/8% Senior Notes due 2002 limit the
amount of liens and guarantees by the Company, and the Company's ability to
incur secured indebtedness without equally and ratably securing the senior
notes.  

     On June 2, 1995 Guaranty National entered into a $110,000,000 credit
agreement ("Credit Agreement") with several participating banks.  The Credit
Agreement provides for an unsecured reducing revolving credit facility, which
was used to fund the Viking acquisition, to retire the outstanding balance of
$29,000,000 under Guaranty National's previous revolving line of credit, and
for working capital and general corporate purposes.  As of December 31, 1996,
the outstanding loan balance under the Credit Agreement was $100,000,000, with
an interest rate of 6.24%.  Principal payments are due beginning April 15,
1999, until the loan is retired in 2002.  Guaranty National is in compliance
with the covenants in the Credit Agreement, including various financial
covenants and restrictions.  Guaranty National has two interest rate swap
agreements with banks which effectively change the interest rate exposure on
$80,000,000 of the loan to a fixed rate of approximately 6.3% through March
16, 1998.  The estimated fair value of these interest rate swap agreements is
a liability of $214,000 at December 31, 1996.  

     Maturities of the Company's notes payable are as follows:  1997 -
$562,500;  1998 - $750,000;  1999 - $22,375,000;  2000 - $24,000,000;  2001 -
$26,000,000;  2002 - $138,000,000; and 2005 - $100,000,000.

     Notes payable are recorded at face value less unamortized discount.  The
carrying value and estimated market value of notes payable consist of the
following:
<TABLE>
<CAPTION>
                                                                   Estimated
                                             Carrying Value       Market Value  
                                           ------------------  ------------------
               December 31,                  1996      1995      1996      1995
               ------------                  ----      ----      ----      ----
                                                     (000s omitted)
  <S>                                      <C>       <C>       <C>       <C>
  $110,000,000 face amount, 9 1/8% Senior
    Notes, due September 1, 2002 ........  $109,906  $109,894  $120,703  $125,642
  $100,000,000 face amount, 7 1/4% Senior
    Notes, due July 15, 2005 ............    99,310    99,254    97,660   104,160
  Borrowings under loan agreement with
    banks (variable interest rate) ......   100,000         -   100,000         -
  Collateralized term loan - 6.5% .......     1,688         -     1,696         -
                                           --------  --------  --------  --------
                                           $310,904  $209,148  $320,059  $229,802
                                           ========  ========  ========  ========

                                        -70-                                     
<PAGE>
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note I - Federal Income Taxes

     Orion and its majority-owned subsidiaries file consolidated federal
income tax returns, including Guaranty National from July 2, 1996.  The
consolidated federal income tax current provisions for 1996 and 1995 were
based on the regular tax method.  The current provision for 1994 was
computed by the alternative minimum tax method.  Substantially all federal
income taxes incurred by Orion and its subsidiaries relate to domestic
operations.  

     In October 1996 the Internal Revenue Service ("IRS") completed an
examination of the Company's federal income tax returns through 1992.  As
described in previously issued financial statements of the Company, certain
tax benefits from tax attributes existing at the date of the Company's
reorganization in 1976 were not recognized pending completion of the IRS
examination.  Accordingly, the Company recorded a credit to capital surplus
in 1996 for tax benefits of $11,900,000 with respect to the 1976
reorganization.  The recording of this credit had no impact on the
Company's earnings. 

</TABLE>
<TABLE>
<CAPTION>
     The components of the provision (benefit) for federal income taxes on
income from operations, and allocations of taxes (benefits) to other items
for the three years ended December 31, 1996 are as follows:

                                                 Year Ended December 31,
                                            --------------------------------
                                              1996        1995        1994
                                              ----        ----        ----
                                                     (000s omitted)
<S>                                         <C>         <C>         <C>
Taxes on income from continuing 
  operations:
  Current ...............................   $ 22,034    $ 25,578    $  6,395 
  Deferred ..............................      9,999      (5,165)      9,906 
                                            --------    --------    --------
                                              32,033      20,413      16,301 
Taxes allocated to other items:
  Stockholders' equity, for unrealized 
    appreciation (depreciation) of 
    securities ..........................      1,971      40,837     (32,864)
  Stockholders' equity, for foreign 
    exchange translation gains (losses)..        954          13        (159)
  Stockholders' equity, for 
    pre-reorganization income tax         
    benefits ............................    (11,900)          -           -
  Stockholders' equity, other ...........       (386)          -           -
                                            --------    --------    --------
                                            $ 22,672    $ 61,263    $(16,722)
                                            ========    ========    ========

                                     -71-
<PAGE>
<CAPTION>
                   ORION CAPITAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The tax effects of the temporary differences comprising the Company's net
deferred tax asset as of December 31, 1996 and 1995 are as follows:

                                                          December 31,    
                                                     ---------------------
                                                       1996        1995
                                                       ----        ----
                                                        (000s omitted)
<S>                                                  <C>          <C>
Deferred tax assets:
  Loss reserve discounting ......................    $ 69,306     $ 55,512 
  Unearned premium reserves .....................      28,183       16,609 
  Policyholders' dividends ......................       7,830        6,596 
  Realized investment losses ....................       2,435        4,319
  Deferred income ...............................       2,226        2,482  
  Retiree medical benefits ......................       5,240        4,263
  Deferred compensation .........................       4,484        2,609
  Other .........................................      11,640        8,951  
                                                     --------     --------
                                                      131,344      101,341  
                                                     --------     --------

Deferred tax liabilities:                                                      
  Deferred policy acquisition costs .............      47,659       27,186
  Investment in affiliates ......................           -       20,114
  Investment income .............................      12,798        9,933
  Unrealized investment gains ...................      38,131       31,482
  Other .........................................       9,202        3,900
                                                     --------     --------
                                                      107,790       92,615 
                                                     --------     --------
                                                     $ 23,554     $  8,726
                                                     ========     ========
<CAPTION>
     A reconciliation of expected federal income tax expense on pre-tax
earnings at regular corporate rates to actual tax expense is as follows:

                                          Year Ended December 31,
                              ------------------------------------------------
                                   1996             1995             1994     
                                   ----             ----             ----
                              Amount   Rate    Amount   Rate    Amount   Rate  
                              ------   ----    ------   ----    ------   ----
                                     (000s omitted-except for percentages)
<S>                           <C>      <C>    <C>       <C>    <C>       <C>
Expected income tax expense.. $44,575  35.0%  $30,812   35.0%  $25,041   35.0%
Dividends-received deduction.  (6,509) (5.1)   (5,601)  (6.4)   (5,830)  (8.2)
Tax-exempt interest ......... (10,203) (8.0)   (6,470)  (7.3)   (5,362)  (7.5)
Amortization of goodwill ....   1,042    .8       536     .6       410     .6 
Other .......................   3,128   2.5     1,136    1.3     2,042    2.9
                              -------  ----   -------   ----   -------   ----
Actual income tax expense ... $32,033  25.2%  $20,413   23.2%  $16,301   22.8% 
                              =======  ====   =======   ====   =======   ====
</TABLE>
                                     -72-
<PAGE>
[CAPTION]
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note J - Commitments

     Minimum lease commitments at December 31, 1996, with the majority having
initial lease periods from one to twenty-five years, are as follows:

                                                        (000s omitted)
       1997 .......................................        $ 16,541
       1998 .......................................          14,433
       1999 .......................................          12,072
       2000 .......................................           8,941
       2001 .......................................           6,528
       2002 and thereafter ........................          55,051
                                                           --------
         Minimum lease commitments ................        $113,566
                                                           ========

     Rent expense amounted to $19,824,000, $14,112,000 and $11,519,000 for
1996, 1995 and 1994, respectively, net of sublease rentals of $9,000 in
1994. Substantially all leases are for office space and equipment.  A
number of lease commitments contain renewal options ranging from one to
thirty years.  

Note K - Contingencies

     Orion and its subsidiaries are routinely engaged in litigation
incidental to their businesses.  Management believes that there are no
significant legal proceedings pending against the Company which, net of
reserves established therefore, are likely to result in judgments for
amounts that are material to the financial condition, liquidity or results
of operations of Orion and its consolidated subsidiaries, taken as a whole.

Note L - Stockholders' Equity and Earnings Per Common Share

     During 1996, the Company repurchased 241,114 shares of its common
stock at an aggregate cost of $11,148,000.  The Company repurchased 173,181
shares for $7,183,000 in 1995 and 442,327 shares for $13,745,000 in 1994.  

     Orion declared dividends on its common stock of $14,290,000,
$12,078,000 and $10,828,000, or $1.03, $.86 and $.76 per share in 1996,
1995 and 1994, respectively.  

     The weighted average common shares outstanding for purposes of
computing earnings per share amounted to 13,894,000, 14,187,000 and
14,348,000 shares for 1996, 1995 and 1994, respectively.    





                                     -73-

<PAGE>
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Effective as of September 11, 1996, Orion redeemed its old stockholder
rights plan and adopted a new Stockholder Rights Plan (the "Rights Plan"). 
Under the Rights Plan each outstanding share of common stock includes one
preferred stock purchase right (the "Rights").  The Rights Plan is designed to
assure stockholders that they will receive equitable treatment in the event of
a proposed takeover.  Under the Rights Plan, each holder of a Right is
entitled to buy two-hundredth of a share of Series B Junior Participating
Preferred Stock.  The Rights become exercisable (i) if an acquiror gains a 15%
or greater beneficial ownership interest in Orion's outstanding common stock,
on other than fair and favorable terms to all stockholders or (ii) following
the commencement of a tender offer or exchange offer that would result in an
acquiror owning 15% or more of Orion's outstanding common stock.  Each Right
not owned by such acquiror will enable the holder to purchase, at an initial
purchase price of $200, common stock having a value of twice the Right's
purchase price.  In addition, under certain circumstances if Orion is involved
in a merger each Right will entitle its holder to purchase, at the Right's
then current purchase price, common shares of such other company having a
value of twice the Right's purchase price.

Note M - Employee Benefit Plans

     The Company maintains a Stock Savings and Retirement Plan (the "Plan"),
qualified under Internal Revenue Code Section 401(k), for eligible employees
of the Company (except for employees of Guaranty National and McGee). 
Employee and employer matched contributions to the savings funds are limited
to the extent allowable under the Plan and federal income tax law.  The Plan
also provides for defined contribution savings and retirement benefits that
allow the Company to make annual contributions to the Plan based on a
percentage of employees' compensation.  Employees vest in the Company's
contributions over a six-year period.  The Company has adopted a Surplus
Benefit Plan which provides deferred benefits for those employees who received
less than the full employer contribution to the Company's 401(k) plan as a
result of federal tax limitations on participation in the Plan.

     Guaranty National has a defined contribution profit sharing plan (the
"Guaranty Plan"), which also qualifies under Section 401(k), for which
substantially all of its employees are eligible.  Guaranty National makes
matching contributions to the Guaranty Plan in accordance with the limits of
the Guaranty Plan and federal income tax law.  Guaranty National has a non-
qualified Supplemental Executive Retirement Plan ("SERP") for employees whose
compensation meets a minimum requirement.  The SERP provides deferred benefits
for those employees who received less than the full employer contribution of
Guaranty National's defined contribution profit sharing plan as a result of
federal tax limitations on participation in the plan.  

     McGee maintains a Profit Sharing Plan (the "McGee Plan") which is also a
401(k) plan for eligible employees of McGee.  Employee and employer
contributions are limited by the McGee Plan and federal income tax law. 
Employer contributions vest over a seven-year period.  McGee has
noncontributory defined benefit retirement plans covering all eligible
employees, and a nonqualified supplemental retirement plan for certain key
employees.  At December 31, 1996 and 1995 the accumulated benefit obligation
of the defined benefit plans were approximately $20,620,000 and $20,205,000,
and plan assets for these plans were approximately $20,695,000 and
$19,233,000, respectively.
                                     -74-

<PAGE>
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The Company maintains a number of incentive plans for key employees,
including the 1982 Long-Term Performance Incentive Plan (the "1982 Plan"), and
the Equity Incentive Plan (together the "Incentive Plans").  Orion has awarded
both stock options and restricted stock to members of the Company's management
under the Incentive Plans.  All stock options are granted by Orion with
exercise prices at fair market value at date of grant, and are intended to
qualify to the maximum extent possible as incentive stock options.  Stock
options become exercisable from the first through fourth anniversaries of the
date of grant, and expire ten years after the date of grant.  Restricted stock
is considered issued and outstanding when awarded. There are restrictions as
to its transferability, which restrictions lapse in 25% increments over four
or five year periods from the date of grant.  As of December 31, 1996, the
number of shares of stock reserved under the Incentive Plans is 1,114,534, of
which 446,859 are for outstanding stock options and 96,084 and 571,591 are
available for future awards under the 1982 Plan and the Equity Incentive Plan,
respectively.  A summary of the status of Orion's stock option plans as of
December 31, 1996, 1995 and 1994 and changes during the years ending on those
dates is presented below:
<TABLE>
<CAPTION>
                                        Year Ended December 31,  
                       -------------------------------------------------------
                             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>
Beginning of year .... 294,171   $24.80   348,802   $23.34   284,337   $17.05
Granted .............. 187,021    51.36         -        -   129,800    32.89  
Cancelled ............  (6,928)   34.27    (5,273)   23.92   (19,531)   16.06  
Exercised ............ (27,405)   18.94   (49,358)   14.55   (45,804)   14.46  
                       -------            -------            -------    
End of year .......... 446,859    36.13   294,171    24.80   348,802    23.34
                       =======            =======            =======     
Exercisable at end     
  of year ............ 201,007    22.96   175,180    20.33   173,064    15.89
                       =======            =======            =======
<CAPTION>

                          December 31, 1996 
----------------------------------------------------------------------
                            Weighted  Weighted                Weighted
  Range of                  Average    Average                Average
  Exercise       Options    Exercise  Remaining    Options    Exercise
   Prices      Outstanding   Price      Years    Exercisable   Price
-------------  -----------  --------  ---------  -----------  --------
<S>              <C>         <C>         <C>       <C>         <C> 
$10.16-$20.00     59,869     11.54       2.6        59,869     11.54  
 20.00- 35.00    200,397     29.30       6.9       141,138     27.80 
 35.00- 50.00     10,000     46.75       9.3             -         - 
 50.00- 61.56    176,593     51.62       9.8             -         -  
                 -------                           -------        
 10.16- 61.56    446,859     36.13       7.5       201,007     22.96
                 =======                           ======= 
</TABLE>  

                                     -75-
<PAGE>
                 ORION CAPITAL CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)   

     The weighted average fair value of options granted during 1996 was
$14.58 per share.  The fair value of options granted was estimated on the
date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions:  dividend yield of 1.9%, expected
volatility of 19.0%, risk free interest rate of 6.0% and expected life of
7.1 years.

     The Company applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for stock options granted under the
Incentive Plans.  Accordingly, no compensation cost has been recognized for
stock options awarded to employees.  Had compensation cost for the
Company's stock option plans been determined based on the fair value at the
grant dates for the 1996 awards under those plans consistent with the
method of FASB Statement 123, the Company's net earnings and earnings per
share for the year ended December 31, 1996 would have been $86,477,000, or
$6.22 per share.

     Orion granted 46,318 shares of restricted stock at a weighted average
fair value of $51.22 per share during 1996, 27,515 shares at $28.06 during
1995 and 70,015 shares at $32.86 for 1994.  As of December 31, 1996, the
restrictions have not lapsed on 117,531 shares of restricted stock.  The
fair market value of restricted stock on the date of issuance is amortized
over the vesting period during which the restrictions lapse.  

     Orion maintains a non-qualified defined benefit retirement plan for
members of the Board of Directors who are not employees.  Benefits are
based on years of service and director fee levels at retirement.  In 1995,
Orion's stockholders authorized 100,000 shares for a stock option plan for
non-employee directors.  During 1996 and 1995 Orion granted 9,000 and
54,000 stock options, respectively, to directors at fair market value,
which become exercisable one year from the date of grant and expire in ten
years.

     The total expense for 1996, 1995 and 1994 for the above savings,
retirement and pension benefit plans for employees and directors amounted
to $9,473,000, $6,588,000 and $4,659,000, respectively.













                                  -76-

<PAGE>

                 ORION CAPITAL CORPORATION AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)   

Note N - Postretirement Medical Benefits

     The Company provides postretirement medical benefits to full-time
employees (except for employees of Guaranty National and McGee), who have
attained age 55 and have 10 years of consecutive service immediately prior
to retirement.  McGee employees that attain age 55 while in service with
McGee are eligible for postretirement medical benefits if they have 10
years of  service, with an increasing level of benefits for additional
years of service up to 35.  The postretirement health care plans are not
funded.  The accumulated postretirement benefit obligation of these plans 
included in other liabilities in the consolidated balance sheet is as
follows:
                                   
                                                        December 31,
                                                      ----------------
                                                        1996     1995
                                                        ----     ----
                                                       (000s omitted)
       Retirees .................................     $ 3,864  $ 3,353
       Fully eligible active plan participants ..       1,352    1,713
       Other active plan participants ...........       3,510    3,585
       Unrecognized net gains ...................       4,275    3,528
                                                      -------  -------  
                                                      $13,001  $12,179
                                                      =======  =======

     Net postretirement benefit cost for the years ended December 31, 1996,
1995 and 1994 was $1,072,000, $1,203,000 and $1,243,000 consisting of
service cost benefits earned of $953,000, $695,000 and $813,000 and
interest on the accumulated postretirement benefit obligation of $596,000,
$612,000 and $539,000, respectively, and amortization of unrecognized net
gains of $477,000 in 1996, $104,000 in 1995 and $109,000 in 1994.

     The expected health care cost trend rate used as of December 31, 1996
was 15% for 1997 and 8.5% for 1998, decreasing linearly each year until it
reaches 5% for 2005 and future years.  At December 31, 1995 the expected
health care cost trend rates used were 9% for 1996 and 1997, ratably
reduced to 5% for 2005 and later years.  A one-percentage-point increase in
the assumed health care cost trend rate for each year would increase the
aggregate service cost and interest cost for 1996, 1995 and 1994 by
$265,000, $245,000 and $289,000, respectively, and increase the accumulated
postretirement benefit obligation as of December 31, 1996 and 1995 by
$1,075,000 and $1,304,000, respectively.  A one-percentage-point decrease
in the health care cost rate would decrease service and interest costs and
the accumulated post retirement benefit obligation by similar amounts.  The
assumed discount rate used in determining the accumulated postretirement
benefit obligation was 7.5% at December 31, 1996 and 7.0% at December 31,
1995.


                                     -77-

<PAGE>
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note O - Industry Segment Information

     The Company's industry segments are described above in Note A. 
Guaranty National's results of operations are included on a consolidated
basis for 1996 and accounted for using the equity method for 1995 and 1994. 
Identifiable assets of the Regional Operations and Special Programs
segments are primarily allocated based on the cash flows of these segments. 
Financial information for the Company's segments for 1996, 1995 and 1994 is
shown below:
<TABLE>
<CAPTION>
                                                   Earnings (Loss)
                                                   Before Federal
                                                    Income Taxes
                                                    and Minority
                            Premiums     Total         Interest     Identifiable
                             Earned     Revenues       Expense         Assets
                           ----------  ----------  ---------------  ------------
                                             (000s omitted)
<S>                        <C>         <C>           <C>             <C>     
1996:
  Regional Operations ...  $  356,809  $  402,015    $   68,371      $  910,579
  Special Programs ......     462,295     558,665        44,052       1,565,454
  Guaranty National      
    Corporation .........     481,648     529,542        35,727         921,852
  Other .................           -       3,227       (20,794)         66,472
                           ----------  ----------    ----------      ----------
    Total ...............  $1,300,752  $1,493,449    $  127,356      $3,464,357
                           ==========  ==========    ==========      ==========

1995:
  Regional Operations....  $  322,098  $  362,672    $   57,830      $  836,089
  Special Programs ......     426,905     507,834        43,241       1,460,435
  Guaranty National
    Corporation .........           -           -         4,466         106,059
  Other .................           -       3,774       (17,502)         71,005
                           ----------  ----------    ----------      ----------
    Total ...............  $  749,003  $  874,280    $   88,035      $2,473,588
                           ==========  ==========    ==========      ==========

1994: 
  Regional Operations ...  $  278,040  $  308,812    $   42,514      $  748,680
  Special Programs ......     413,183     469,158        34,117       1,213,026
  Guaranty National
    Corporation .........           -           -        11,244          89,760
  Other .................           -       2,977       (16,329)         61,295
                           ----------  ----------    ----------      ----------
    Total ...............  $  691,223  $  780,947    $   71,546      $2,112,761
                           ==========  ==========    ==========      ==========

</TABLE>

                                        -78-

<PAGE>
                    ORION CAPITAL CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note P - Selected Quarterly Financial Data (Unaudited)
<TABLE>
     Quarterly results of operations and earnings per common share for 1996 and 1995
are summarized as follows:
<CAPTION>
                                              First     Second      Third     Fourth
                                             Quarter    Quarter    Quarter    Quarter
                                             -------    -------    -------    -------
                                             (000s omitted-except for per share data)
<S>                                         <C>        <C>        <C>        <C>
1996:
  Premiums earned ......................... $302,402   $319,109   $332,936   $346,305
  Net investment income ...................   34,502     36,291     36,028     38,570
  Realized investment gains ...............    5,365      5,761      5,480      7,574
  Other income ............................    5,522      6,011      5,940      5,653
                                            --------   --------   --------   --------
      Total revenues ...................... $347,791   $367,172   $380,384   $398,102
                                            ========   ========   ========   ========
      Net earnings ........................ $ 17,887   $ 20,573   $ 24,361   $ 23,810
                                            ========   ========   ========   ========
  Net earnings per common share ........... $   1.28   $   1.49   $   1.76   $   1.72
                                            ========   ========   ========   ========

1995:
  Premiums earned ......................... $175,058   $186,709   $183,902   $203,334
  Net investment income ...................   23,853     24,435     25,572     25,180
  Realized investment gains ...............    2,560        726      5,885      2,714
  Other income ............................      326        241      6,862      6,923
                                            --------   --------   --------   --------
      Total revenues ...................... $201,797   $212,111   $222,221   $238,151
                                            ========   ========   ========   ========
      Net earnings ........................ $ 17,062   $ 16,049   $ 17,257   $ 17,254
                                            ========   ========   ========   ========
  Net earnings per common share ........... $   1.20   $   1.13   $   1.21   $   1.22
                                            ========   ========   ========   ========
<FN>
     The sum of quarterly per common share amounts may not agree with the
corresponding annual amounts due to rounding or antidilution during certain
quarters.
</TABLE>
Note Q - Subsequent Events

     On January 13, 1997 Orion issued $125,000,000 of 8.73% Junior
Subordinated Debentures due January 1, 2037 to Orion Capital Trust I, a
Delaware statutory business trust sponsored by Orion.  Orion Capital Trust I
then sold $125,000,000 of 8.73% Capital Securities which mature on January 1,
2037 (the "Capital Securities") in a private placement.  The Capital
Securities are subordinate to all liabilities of the Company, and may be
redeemed without premium on or after January 1, 2007.  Orion agreed to
register the Capital Securities under the Securities Act of 1933, and has
accordingly filed a registration statement with the Securities and Exchange
Commission.

                                       -79-
<PAGE>
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE
          
          None. 

                             PART III
              
     Pursuant to General Instruction G(3) to this form, the information
required by Part III (Items 10, 11, 12 and 13) hereof is incorporated by
reference from the Company's definitive proxy statement for its Annual Meeting
to be held on May 29, 1997.  The Company intends to file the proxy material,
which involves the election of directors, not later than 120 days after the
close of the Company's fiscal year.

                               PART IV 

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
          AND REPORTS ON FORM 8-K

(a) 1   Financial Statements:
           
        The following financial statements are included in 
        Part II, Item 8. 
                                                                               
                                                                Page
                                                                ----

Report of Management.................................             50

Independent Auditors' Report.........................             51
 
Orion Capital Corporation and Subsidiaries:                       
 
     December 31, 1996 and 1995 

          Consolidated Balance Sheet.................        52 - 53

     For the years ended December 31, 1996, 1995 and
       1994

          Consolidated Statement of Earnings.........             54
          Consolidated Statement of Stockholders'                              
              Equity.................................             55           
          Consolidated Statement of Cash Flows.......        56 - 57   

     Notes to the Consolidated Financial Statements..        58 - 79
  

(a)  2. Financial Statement Schedules:

     Selected Quarterly Financial Data - for the years ended               
December 31, 1996 and 1995 - Included in Part II, Item 8.       

                                     -80-
<PAGE>                     
                                                              Page
                                                              ----             
 Schedule     I      Consolidated Summary of             
                        Investments - Other than 
                        Investments in Related 
                        Parties - December 31,                                 
                        1996............................        S-1
 
                II      Condensed Financial 
                        Information of Registrant -        S-2, S-3,
                        December 31, 1996, 1995            S-4, S-5,
                        and 1994........................   S-6                 
                                            
               III      Supplementary Insurance 
                        Information - December 31, 
                        1996, 1995 and 1994.............        S-7

                 V      Valuation and Qualifying 
                        Accounts - December 31, 1996, 
                        1995 and 1994...................        S-8
                  
                VI      Supplemental Information 
                        For Property - Casualty 
                        Insurance Underwriters -
                        December 31, 1996, 1995 and                            
                        1994............................        S-9
                  
     Schedules other than those listed above are omitted for the reason
that they are not required or are not applicable, or the required 
information is shown in the Financial Statements or notes thereto. 


   (a)    3. Exhibits:

   Exhibit 3(i)        Restated Certificate of Incorporation of Orion,         
                       as amended on June 3, 1993; filed as Exhibit
                       3(i) to the Company's Annual Report on Form 10-K
                       for 1993.
                       
   Exhibit 3(ii)       By-Laws of Orion, as amended on September 11, 1996.
                                                                               
   Exhibit 4(i)        Certificate of Designation, Preferences and             
                       Rights of Series B Junior Participating                 
                       Preferred Stock of Orion, dated September 17,           
                       1996.

   Exhibit 4(ii)       Specimen certificate representing shares of             
                       Orion's Common Stock (proof of March 27,                
                       1989); filed as Exhibit 4(xii) to the                   
                       Company's Annual Report on Form 10-K for 1988.
                    
                               
                                    -81-
<PAGE>
   Exhibit 4(iii)      Indenture, dated as of September 8, 1992, 
                       between Orion and the Connecticut National
                       Bank (now known as Shawmut Bank Connecticut,
                       National Association), as Trustee of Orion's
                       9 1/8% Senior Notes due September 1, 2002;              
                       filed as Exhibit 4(v) to the Company's Annual
                       Report on Form 10-K for 1992.

   Exhibit 4(iv)       Specimen certificate representing Orion's               
                       9 1/8% Senior Notes; filed as Exhibit 4(vi)
                       to the Company's Annual Report on Form 10-K 
                       for 1992.

   Exhibit 4(v)        Senior Debt Indenture, dated as of July 17, 1995,       
                       between Orion and the State Street Bank and Trust       
                       Company of Connecticut, National Association, as        
                       Trustee of Orion's 7 1/4% Senior Notes due July 15,     
                       2005; filed as Exhibit 4.9 to the Company's Current
                       Report on Form 8-K, filed on 7/14/95.

   Exhibit 4(vi)       First Supplemental Indenture to the Senior Debt
                       Indenture; filed as Exhibit 4.9(a) to the Company's
                       Current Report on Form 8-K, filed on 7/14/95.

   Exhibit 4(vii)      Specimen Certificate representing Orion's 7 1/4%        
                       Senior Notes; filed as Exhibit 4.9(b) to the 
                       Company's Current Report on Form 8-K, filed on
                       7/14/95.

   Exhibit 4(viii)     Indenture, dated as of January 13, 1997, between
                       Orion and the Bank of New York, as Trustee of           
                       Orion's 8.73% Junior Subordinated Deferrable
                       Interest Debentures; filed as Exhibit 4.1 to the
                       Company's Registration Statement on Form S-4 (No. 333-  
                       21205).

   Exhibit 4(ix)       Form of Exchange Debenture Certificate representing
                       Orion's 8.73% Junior Subordinated Deferrable            
                       Interest Debentures; filed as Exhibit 4.2 to the
                       Company's Registration Statement on Form S-4 (No. 333-  
                       21205), filed on February 5, 1997.

   Exhibit 4(x)        Certificate of Trust of Orion Capital Trust I, dated    
                       as of January 3, 1997; filed as Exhibit 4.3 to the
                       Company's Registration Statement on Form S-4 (No. 333-  
                       21205), filed on February 5, 1997.

   Exhibit 4(xi)       Declaration of Trust of Orion Capital Trust I, dated
                       as of January 3, 1997; filed as Exhibit 4.4 to the
                       Company's Registration Statement on Form S-4 (No. 333-  
                       21205), filed on February 5, 1997.

*Management contract or compensatory plan or arrangement.
   
                                     -82-
<PAGE>
   Exhibit 4(xii)      Amended and Restated Declaration of Trust of Orion      
                       Capital Trust I, dated as of January 13, 1997; filed    
                       as Exhibit 4.5 to the Company's Registration            
                       Statement on Form S-4 (No. 333-21205), filed on         
                       February 5, 1997.

   Exhibit 4(xiii)     Form of Certificate evidencing 8.73% Exchange           
                       Capital Securities of Orion Capital Trust I; filed      
                       as Exhibit 4.6 to the Company's Registration            
                       Statement on Form S-4 (No. 333-21205), filed on         
                       February 5, 1997.

   Exhibit 4(xiv)      Capital Securities Guarantee Agreement, dated as of
                       January 13, 1997, delivered by Orion as Guarantor       
                       and relating to the 8.73% Exchange Capital              
                       Securities; filed as Exhibit 4.7 to the Company's 
                       Registration Statement on Form S-4 (No. 333-21205),     
                       filed on February 5, 1997.
        
   Exhibit 10(i)*      Orion's Deferred Compensation Plan, as
                       amended; filed as Exhibit 10(i) to the 
                       Company's Annual Report on Form 10-K for 
                       1991.

   Exhibit 10(ii)*     Orion's 1982 Long-Term Performance Incentive            
                       Plan, as amended.
 
   Exhibit 10(iii)*    Orion's 1994 Stock Option Plan for Non-
                       Employee Directors; filed as Exhibit 10(iii)
                       to the Company's Annual Report on Form 10-K 
                       for 1994.
 
   Exhibit 10(iv)*     Employment Agreement between Alan R. Gruber
                       and Orion, dated as of March 19, 1993; filed
                       as Exhibit 10(v) to the Company's Annual Report         
                       on Form 10-K for 1992.

   Exhibit 10(v)*      Amendment to Employment Agreement between
                       Alan R. Gruber and Orion, dated as of January 1,
                       1997.

   Exhibit 10(vi)*     Employment Agreement between Robert B. Sanborn          
                       and Orion, dated as of March 19, 1993; filed            
                       as Exhibit 10(vi) to the Company's Annual Report        
                       on Form 10-K for 1992.

   Exhibit 10(vii)*    Amendment to Employment Agreement between Robert B.     
                       Sanborn and Orion, dated as of January 1, 1997.

   Exhibit 10(viii)*   Employment Agreement between Raymond W. Jacobsen
                       and Orion, as amended and restated as of December 6,    
                       1995; filed as Exhibit 10(vii) to the Company's
                       Annual Report on Form 10-K for 1995.

*Management contract or compensatory plan or arrangement.

                                     -83-

<PAGE>
   Exhibit 10(ix)*     Employment Agreement between W. Marston Becker and      
                       Orion, dated as of October 31, 1995; filed as           
                       Exhibit 10(viii) to the Company's Annual Report on      
                       Form 10-K for 1995.   

   Exhibit 10(x)*      Amendment to Employment Agreement between W. Marston    
                       Becker and Orion, dated as of January 1, 1997.
  
   Exhibit 10(xi)      Lease Agreement between Connecticut UTF, Inc.,          
                       as lessor, and Security Insurance Company of            
                       Hartford ("Security"), as lessee, dated as of           
                       December 19, 1984; filed as Exhibit 10(xxxiii)          
                       to the Company's Annual Report on Form 10-K             
                       for l984.

   Exhibit 10(xii)     Second Assignment of Lease and Agreement from           
                       Connecticut UTF, Inc. to Security, dated as of          
                       December 19, 1984; filed as Exhibit 10(xxxiv)           
                       to the Company's Annual Report on Form 10-K             
                       for 1984.
  
   Exhibit 10(xiii)    Purchase Money Second Mortgage from                     
                       Connecticut UTF, Inc., as mortgagor, to                 
                       Security, as mortgagee, dated as of                     
                       December 19, 1984; filed as Exhibit 10(xxxvi)           
                       to the Company's Annual Report on Form 10-K             
                       for 1984.

   Exhibit 10(xiv)     Purchase Money Note, in the face amount of              
                       $2,800,000, from Connecticut UTF, Inc. to               
                       Security, dated December 19, 1984; filed as             
                       Exhibit 10(xxxvi) to the Company's Annual               
                       Report on Form 10-K for l984.

   Exhibit 10(xv)      Guarantee from Orion to Connecticut UTF, Inc.,          
                       dated as of December 19, 1984, guaranteeing             
                       the performance of Security under its lease             
                       with Connecticut UTF, Inc.; filed as Exhibit            
                       10(xxxvii) to the Company's Annual Report on            
                       Form 10-K for 1984.

   Exhibit 10(xvi)     Form of Indemnification Agreement, dated as of          
                       June 3, 1987, between Orion and each of its             
                       Directors and Executive Officers; filed as              
                       Exhibit 10(xl) to the Company's Annual Report           
                       on Form 10-K for l987.
       
   Exhibit 10(xvii)    Rights Agreement, dated as of September 11, 1996        
                       between Orion and ChaseMellon Shareholder Services,     
                       L.L.C., as Rights Agent; filed as Exhibit 1             
                       to the Company's Form 8-A filed on September 20,        
                       1996.

*Management contract or compensatory plan or arrangement.

                                     -84-
<PAGE>
   Exhibit 10(xviii)*  Retirement Plan for Directors of Orion,
                       as amended (September, 1994); filed as Exhibit          
                       10(xvi) to the Company's Annual Report on Form 10-K     
                       for 1994.

   Exhibit 10(xix)*    Orion Supplemental Benefits Plan, filed as              
                       Exhibit 10(xxv) to the Company's Annual Report
                       on Form 10-K for 1991.

   Exhibit 10(xx)      Orion's Equity Incentive Plan, dated September 11,      
                       1996.

   Exhibit 10(xxi)     Shareholder Agreement, dated as of November 7,          
                       1991 by and among the Company, Guaranty                 
                       National Corporation and certain wholly-owned           
                       subsidiaries of the Company; filed as Exhibit
                       10(xxv) to the Company's Annual Report on
                       Form 10-K for 1991.
    
   Exhibit 10(xxii)    Amendments to the Shareholder Agreement by and
                       among the Company, Guaranty National Corporation
                       and certain wholly-owned subsidiaries of the
                       Company made as of February 2, 1994 and March 2,        
                       1995; filed as Exhibit 10(xix) to the Company's         
                       Annual Report on Form 10-K for 1994.

   Exhibit 10(xxiii)   Letter Agreement, dated September 13, 1993, by          
                       and between Orion and Intercargo Corporation;           
                       filed as Exhibit 10(xxii) to the Company's   
                       Annual Report on Form 10-K for 1993.

   Exhibit 10(xxiv)    Amendment, dated February 14, 1995, to the Letter
                       Agreement by and between Orion Capital Corporation
                       and Intercargo Corporation; filed as Exhibit            
                       10(xxiii) to the Company's Annual Report on Form        
                       10-K for 1994.

   Exhibit 10(xxv)     Purchase Agreement by and between Sun Alliance USA      
                       Inc. and Orion, dated as of June 30, 1995; filed as
                       Exhibit 10(xxv) to the Company's Annual Report on
                       Form 10-K for 1995. 

   Exhibit 11          Statement re:  computation of earnings
                       per common share.

   Exhibit 21          Subsidiaries of Orion.
                             
   Exhibit 23          Consents of Deloitte & Touche LLP

   Exhibit 27          Financial Data Schedule.
    
 *Management contract or compensatory plan or arrangement.

                                     -85-


<PAGE>
     Copies of exhibits may be obtained upon payment of a $.50 per page fee. 
Such requests should be made in writing to: Corporate Secretary, Orion Capital
Corporation, 600 Fifth Avenue, New York, New York 10020.

   (b)  Reports on Form 8-K:
                       
        None.
 
   (c)  Filed exhibits:

        See Exhibit Index 
    







                                   
































                                     -86-


 <PAGE>

                                   SIGNATURES


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

                            ORION CAPITAL CORPORATION


 
By: /s/ W. Marston Becker                             March 27, 1997
    ----------------------
        W. Marston Becker    Chairman of the Board    
                             (Principal Executive                              
                             Officer)


By: /s/ Daniel L. Barry                               March 27, 1997
    ----------------------
        Daniel L. Barry      Senior Vice President and       
                             Chief Financial Officer
                             (Principal Accounting and 
                              Financial Officer)




























                                    -87-
<PAGE>
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons (including a majority of
the members of the Board of Directors of the Registrant) in the capacities and
on the dates indicated:             


  Signature and Title                                    Date 
--------------------------                          --------------


/s/ W. Marston Becker                               March 27, 1997
--------------------------
    W. Marston Becker
    Chairman of the Board


/s/ Gordon F. Cheesbrough                           March 27, 1997
--------------------------
    Gordon F. Cheesbrough
       Director



--------------------------
    Bertram J. Cohn
       Director


/s/ John C. Colman                                  March 27, 1997
--------------------------
    John C. Colman
       Director


/s/ Victoria R. Fash                                March 27, 1997
--------------------------
    Victoria R. Fash
       Director

       
/s/ Alan R. Gruber                                  March 27, 1997
--------------------------
    Alan R. Gruber 
       Director


/s/ Robert H. Jeffrey                               March 27, 1997
--------------------------
    Robert H. Jeffrey
       Director


/s/ Warren R. Lyons                                 March 27, 1997
--------------------------
    Warren R. Lyons
       Director


/s/ James K. McWilliams                             March 27, 1997
--------------------------
    James K. McWilliams
       Director
   

                                      -88-
<PAGE>          

  Signature and Title                                     Date 
--------------------------                           --------------


/s/ Ronald W. Moore                                  March 27, 1997
--------------------------
    Ronald W. Moore
       Director



--------------------------
    Robert B. Sanborn 
       Director


/s/ William J. Shepherd                             March 27, 1997
--------------------------
    William J. Shepherd
       Director


/s/ John R. Thorne                                  March 27, 1997
--------------------------
    John R. Thorne
       Director


/s/ Roger B. Ware                                   March 27, 1997
--------------------------
    Roger B. Ware
       Director


                                        





















                                     -89-

<PAGE>
                                  EXHIBIT INDEX



   Exhibit 3(ii)       By-Laws of Orion, as amended on September 11, 1996.

   Exhibit 4(i)        Certificate of Designation, Preferences and             
                       Rights of Series B Junior Participating                 
                       Preferred Stock of Orion, dated September 17,           
                       1996.

   Exhibit 10(ii)      Orion's 1982 Long-Term Performance Incentive            
                       Plan, as amended.

   Exhibit 10(v)       Amendment to Employment Agreement between
                       Alan R. Gruber and Orion, dated as of January 1,
                       1997.

   Exhibit 10(vii)     Amendment to Employment Agreement between Robert B.     
                       Sanborn and Orion, dated as of January 1, 1997.

   Exhibit 10(x)       Amendment to Employment Agreement between W. Marston    
                       Becker and Orion, dated as of January 1, 1997.

   Exhibit 10(xx)      Orion's Equity Incentive Plan, dated September 11,      
                       1996.

   Exhibit 11          Statement re:  computation of earnings              
                       per common share.

   Exhibit 21          Subsidiaries of Orion.       

   Exhibit 23          Consents of Deloitte & Touche LLP.

   Exhibit 27          Financial Data Schedule.
                                                           
              















                                   -90-
<PAGE>
<TABLE>
<CAPTION>
                                                                    SCHEDULE I
                 ORION CAPITAL CORPORATION AND SUBSIDIARIES
               CONSOLIDATED SUMMARY OF INVESTMENTS-OTHER THAN
                       INVESTMENTS IN RELATED PARTIES
                              December 31, 1996
                               (000s omitted)
==============================================================================
              Column A               Column B        Column C        Column D
              --------               --------        --------        --------
                                                                  Amount Shown 
                                                                         on
Balance
          Type of Investment            Cost         Value            Sheet
______________________________________________________________________________
<S>                                 <C>             <C>             <C>
Fixed maturities held-to-maturity:
  Bonds -
    United States Government and 
      government agencies and 
      authorities ...............   $  119,058      $  119,844      $  119,058
    States, municipalities and
      political subdivisions ....      179,465         185,566         179,465
    Foreign governments .........           50              50              50
    All other corporate bonds ...       28,268          29,295          28,268
                                    ----------      ----------      ----------
                                       326,841         334,755         326,841
                                    ----------      ==========      ----------

Fixed maturities available-for-sale:
  Bonds -
    United States Government and 
      government agencies and 
      authorities ...............      321,087         326,670         326,670
    States, municipalities and
      political subdivisions ....      395,732         414,854         414,854
    Foreign governments .........        5,855           6,533           6,533
    Public utilities ............       15,679          16,350          16,350
    All other corporate bonds ...      312,016         323,166         323,166
  Redeemable preferred stocks ...      119,443         117,735         117,735
                                    ----------      ----------      ----------
                                     1,169,812       1,205,308       1,205,308

                                    ----------      ==========      ----------

Equity securities:
  Common stocks -
    Public utilities ............        8,624          10,614          10,614
    Banks, trusts and insurance
      companies .................       35,883          78,812          78,812
    Industrial, miscellaneous and
      all other .................       92,124         119,855         119,855
  Non-redeemable preferred stocks      151,439         152,312         152,312
                                    ----------      ----------      ----------
                                       288,070         361,593         361,593
                                    ----------      ==========      ----------

Mortgage loans on real estate ...        1,187                           1,187
Other long-term investments .....       88,942                          88,942
Short-term investments ..........      325,896                         325,896
                                    ----------                      ----------
      Total investments .........   $2,200,748                      $2,309,767
                                    ==========                      ==========
                                       S-1

<PAGE>
<CAPTION>
                                                                   SCHEDULE II
                ORION CAPITAL CORPORATION AND SUBSIDIARIES
              CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                        ORION CAPITAL CORPORATION
                              BALANCE SHEET
                              (000s omitted)
  
                                  ASSETS

                                                             December 31,
                                                         --------------------
                                                           1996        1995
                                                           ----        ----
<S>                                                      <C>         <C>
Fixed maturities held at market (cost $347 - 1996 and
  $666 - 1995) ........................................  $    347    $    666 

Short-term investments ................................    32,653      55,425
      
Cash ..................................................       320           3
        
Notes receivable and other assets .....................     7,232       4,476 
        
Deferred federal income taxes .........................    23,544       8,739
             
Investment in subsidiaries ............................   729,476     651,781
             
Excess of cost over fair value of net assets acquired..    47,120      48,987
                                                         --------    --------

  Total assets ........................................  $840,692    $770,077
                                                         ========    ========

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Other liabilities .....................................  $ 35,902    $ 50,344

Due to affiliates .....................................    18,841      19,682

Notes payable .........................................   209,216     209,148
                                                         --------    --------

  Total liabilities ...................................   263,959     279,174
            
Stockholders' equity ..................................   576,733     490,903
                                                         --------    --------

  Total liabilities and stockholders' equity ..........  $840,692    $770,077
                                                         ========    ========
<FN>                                                           
          See Notes to Condensed Financial Information of Registrant


                                      S-2

<PAGE>
<CAPTION>
                                                                  SCHEDULE II

                 ORION CAPITAL CORPORATION AND SUBSIDIARIES
               CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                         ORION CAPITAL CORPORATION
                           STATEMENT OF EARNINGS
                              (000s omitted)

                                                    Year Ended December 31,  
                                                 ----------------------------
                                                   1996      1995      1994
                                                   ----      ----      ----
<S>                                              <C>       <C>       <C>
Revenues:
  Net investment income .......................  $  1,898  $  1,770  $    396
  Realized investment losses ..................      (319)     (800)        -
  Other income ................................       650       595       550
                                                 --------  --------  --------
                                                    2,229     1,565       946
                                                 --------  --------  --------
Expenses:
  Interest ....................................    17,835    15,537    13,190
  General and administrative ..................     3,671     3,106     3,676  
  Amortization of excess of cost over fair           
    value of net assets acquired ..............     1,867     1,470     1,110
                                                 --------  --------  --------  
                                                   23,373    20,113    17,976
                                                 --------  --------  --------  
                      
Loss before federal income taxes and equity in
  net earnings of subsidiaries ................   (21,144)  (18,548)  (17,030)
Federal income taxes ..........................    30,059    20,284    16,301
                                                 --------  --------  --------
Loss before equity in net earnings of 
  subsidiaries ................................   (51,203)  (38,832)  (33,331)
Equity in net earnings of subsidiaries ........   137,834   106,454    88,576 
                                                 --------  --------  --------
Net earnings ..................................  $ 86,631  $ 67,622  $ 55,245 
                                                 ========  ========  ========












<FN>

           See Notes to Condensed Financial Information of Registrant

                                      S-3

<PAGE>
<CAPTION>
                                                                  SCHEDULE II
                  ORION CAPITAL CORPORATION AND SUBSIDIARIES
                CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                          ORION CAPITAL CORPORATION
                           STATEMENT OF CASH FLOWS
                               (000s omitted)

                                                   Year Ended December 31, 
                                               ------------------------------
                                                 1996       1995       1994
                                                 ----       ----       ----
<S>                                            <C>        <C>        <C>
Cash flows from operating activities:
  Dividends received from subsidiaries ......  $ 35,286   $ 30,546   $ 30,013
  Net investment income collected ...........     1,919      1,737        212
  Federal income taxes received from
    subsidiaries ............................     7,455      4,500      6,000
  Interest paid .............................   (17,254)   (12,123)   (12,524)
  Other expenses paid .......................    (2,046)    (2,276)    (2,454)
  Other receipts ............................       903      1,268      3,230 
                                               --------   --------   --------
   Net cash provided by operating activities.    26,263     23,652     24,477
                                               --------   --------   --------
Cash flows from investing activities:
  Purchase of fixed maturities ..............         -          -     (1,344)
  Net sales (purchases) of short-term 
    investments .............................    22,770    (42,587)    (4,313)
  Investments in subsidiaries ...............         -      4,476        763
  Purchase of Guaranty National common stock.   (20,709)         -          -
  Acquisition of McGee ......................         -    (22,355)         - 
  Other payments ............................    (2,588)       (99)      (795)
                                               --------   --------   --------
    Net cash used in investing activities ...      (527)   (60,565)    (5,689)
                                               --------   --------   --------
Cash flows from financing activities:
  Proceeds from issuance of notes payable ...         -    110,413          -
  Proceeds from exercise of stock options ...        42        246        598 
  Repayment of notes payable ................         -    (54,500)    (8,000)
  Dividends paid to stockholders ............   (14,886)   (12,717)   (11,263)
  Purchases of common stock .................   (10,558)    (6,689)       (38)
  Other payments ............................       (17)       (17)      (351)
                                               --------   --------   --------
    Net cash provided by (used in) financing 
      activities ............................   (25,419)    36,736    (19,054)
                                               --------   --------   --------
    Net increase (decrease) in cash .........       317       (177)      (266)
  Cash balance, beginning of year ...........         3        180        446 
                                               --------   --------   --------
  Cash balance, end of year .................  $    320   $      3   $    180
                                               ========   ========   ========

<FN>


           See Notes to Condensed Financial Statements of Registrant

                                       S-4

<PAGE>
<CAPTION>
                                                                  SCHEDULE II

                   ORION CAPITAL CORPORATION AND SUBSIDIARIES
                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                           ORION CAPITAL CORPORATION
                     STATEMENT OF CASH FLOWS - (Continued)
                                (000s omitted)

 
                                                   Year Ended December 31,
                                               ------------------------------
                                                 1996       1995      1994
                                                 ----       ----      ----
<S>                                            <C>        <C>        <C>
Reconciliation of net earnings to net cash 
  provided by operating activities:
Net earnings ................................  $ 86,631   $ 67,622   $ 55,245 
                                               --------   --------   --------
Adjustments:
  Equity in net earnings of subsidiaries ....  (137,834)  (106,454)   (88,576)
  Consolidating elimination of subsidiaries
    income taxes ............................    35,530     30,941     10,576
  Dividends received from subsidiaries ......    35,286     30,546     30,013
  Depreciation and amortization .............     3,016      2,594      2,064
  Deferred federal income taxes (benefit) ...    10,022     (3,881)     9,906
  Realized investment losses ................       319        800          -
  Amortization of discount on debt ..........        68         36         10 

Change in assets and liabilities:
  Decrease (increase) in notes receivable and
    other assets ............................    (2,235)        90       (520)
  Increase (decrease) in taxes payable and 
    other liabilities .......................    (3,746)     7,799     (1,668)
  Increase (decrease) in due to affiliates ..      (794)    (6,441)     7,427 
                                               --------   --------   --------  
    Total adjustments and changes ...........   (60,368)   (43,970)   (30,768)
                                               --------   --------   -------- 
  Net cash provided by operating activities..  $ 26,263   $ 23,652   $ 24,477
                                               ========   ========   ========
<FN> 










          See Notes to Condensed Financial Information of Registrant

                                      S-5                                    

 </TABLE>

<PAGE>
                                                                  SCHEDULE II

                  ORION CAPITAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                 Years Ended December 31, 1996, 1995 and 1994

Note A - Notes Payable

     Notes payable consist of the following:
<TABLE>                                                
<CAPTION>
                                                                  Estimated
                                           Carrying Value       Market Value
                                          -----------------  -----------------
          December 31,                      1996     1995      1996     1995
          ------------                      ----     ----      ----     ----
                                                     (000s omitted)
<S>                                       <C>      <C>       <C>      <C>
$110,000,000 face amount, 9 1/8% Senior 
  Notes, due September 1, 2002 .......... $109,906 $109,894  $120,703 $125,642
$100,000,000 face amount, 7 1/4% Senior
  Notes, due July 15, 2005 ..............   99,310   99,254    97,660  104,160
                                          -------- --------  -------- -------- 
                                          $209,216 $209,148  $218,363 $229,802
                                          ======== ========  ======== ========
</TABLE>                                               
     As of December 31, 1996, $110,000,000 of the Registrant's debt is
scheduled to be repaid on September 1, 2002 and the remaining $100,000,000 is
due on July 15, 2005.

Note B - Expense Reimbursement and Management Fees

     During 1994 through 1996, the Registrant was reimbursed for payroll,
office rental and other expenses incurred by it to support the operations of
its insurance subsidiaries.  This reimbursement of $7,410,000, $6,232,000 and
$5,735,000 in 1996, 1995 and 1994, respectively, is accounted for as a
reduction of general and administrative expenses.  The Registrant received an
investment management fee from Guaranty National of $650,000 in 1996, $595,000
in 1995 and $550,000 in 1994.












                                      S-6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
                                                                                                                       SCHEDULE III
                                             ORION CAPITAL CORPORATION AND SUBSIDIARIES
                                                 SUPPLEMENTARY INSURANCE INFORMATION
                                                           (000s omitted)
-----------------------------------------------------------------------------------------------------------------------------------
  Column A      Column B   Column C   Column D  Column E  Column F   Column G   Column H    Column I  Column J  Column J  Column K
  --------      --------   --------   --------  --------  --------   --------   --------    --------  --------  --------  --------
                           Reserve                                                                           
                          For Unpaid           Dividends                                  Amortization   
               Deferred     Losses              Payable                          Losses   of Deferred           Policy- 
                Policy     and Loss               to                   Net      and Loss    Policy      Other   holders'
              Acquisition Adjustment  Unearned  Policy-   Premiums  Investment Adjustment Acquisition Insurance Dividend  Premiums
  Segment        Costs     Expenses   Premiums  holders    Earned     Income    Expenses     Costs    Expenses  Expenses  Written
                                                                       (a)
___________________________________________________________________________________________________________________________________
<S>             <C>       <C>         <C>       <C>      <C>         <C>        <C>         <C>        <C>      <C>      <C>
1996:                                                                                                                          
Regional                                                                                                                       
  Operations .. $ 33,160  $  466,022  $ 83,920  $20,489  $  356,809  $ 38,226   $209,705    $ 91,991   $11,244  $18,523  $  353,041
Special
  Programs ....   58,552     955,706   258,103    2,000     462,295    62,646    335,503     137,625     6,246    5,111     489,848
Guaranty
  National ....   44,456     363,936   154,226        -     481,648    39,439    337,784     133,931    10,422        -     491,232
Other .........        -           -         -        -           -     5,080          -           -         -        -           -
                --------  ----------  --------  -------  ----------  --------   --------    --------   -------  -------  ----------
                $136,168  $1,785,664  $496,249  $22,489  $1,300,752  $145,391   $882,992    $363,547   $27,912  $23,634  $1,334,121
                ========  ==========  ========  =======  ==========  ========   ========    ========   =======  =======  ==========
1995:
Regional
  Operations .. $ 29,516  $  460,597  $ 84,360  $16,799  $  322,098  $ 35,750   $201,054    $ 73,544   $11,302  $17,231  $  332,598
Special
  Programs ....   48,157     814,385   217,745    2,147     426,905    59,584    311,179     121,937    10,260    4,559     424,838
Other .........        -           -         -        -           -     3,706          -           -         -        -           -
                --------  ----------  --------  -------  ----------  --------   --------    --------   -------  -------  ----------
                $ 77,673  $1,274,982  $302,105  $18,946  $  749,003  $ 99,040   $512,233    $195,481   $21,562  $21,790  $  757,436
                ========  ==========  ========  =======  ==========  ========   ========    ========   =======  =======  ==========
1994:
Regional
  Operations .. $ 21,313  $  463,360  $ 62,431  $11,179  $  278,040  $ 29,287   $186,437    $ 55,986   $ 9,871  $12,404  $  279,738
Special
  Programs ....   48,824     717,969   194,424    1,472     413,183    53,209    311,686     109,122    11,590    2,432     432,317
Other .........        -           -         -        -           -     2,419          -           -         -        -           -
                --------  ----------  --------  -------  ----------  --------   --------    --------   -------  -------  ----------
                $ 70,137  $1,181,329  $256,855  $12,651  $  691,223  $ 84,915   $498,123    $165,108   $21,461  $14,836  $  712,055
                ========  ==========  ========  =======  ==========  ========   ========    ========   =======  =======  ==========
<FN>
(a)  Net investment income for Regional Operations and Special Programs is allocated on the basis of cash flow.
                                                                       S-7
<PAGE>
<CAPTION>
                                                                    SCHEDULE V

                   ORION CAPITAL CORPORATION AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS

                                 (000s omitted)


===============================================================================
    Column A          Column B           Column C          Column D   Column E
    --------          --------           --------          --------   --------  
                                         Additions
                                  ----------------------
                                      (1)        (2)
                     Balance at   Charged to  Charged to             Balance at
                    Beginning of   Costs and    Other     Deductions   End of
  Description          Period      Expenses    Accounts      (a)       Period
_______________________________________________________________________________
<S>                    <C>          <C>         <C>         <C>        <C>       
1996:
Allowance for 
  doubtful accounts-
  Accounts and notes
    receivable         $3,212
    Consolidation of
      Guaranty 
      National            374
                       ------
                       $3,586       $1,517      $    -      $1,407     $3,696
                       ======       ======      ======      ======     ======

1995:
Allowance for 
  doubtful accounts-
  Accounts and notes
    receivable         $1,954       $1,689      $    -      $  431     $3,212
                       ======       ======      ======      ======     ======

1994:
Allowance for 
  doubtful accounts-
  Accounts and notes
    receivable         $1,859       $1,030      $    -      $  935     $1,954
                       ======       ======      ======      ======     ======

<FN>
     (a)  Accounts written off







                                      S-8
<PAGE>
<CAPTION>
                                                                                                                         SCHEDULE VI
                                                            ORION CAPITAL CORPORATION AND SUBSIDIARIES
                                               SUPPLEMENTAL INFORMATION FOR PROPERTY-CASUALTY INSURANCE UNDERWRITERS
                                                                          (000s omitted)
====================================================================================================================================
   Column A      Column B   Column C   Column D Column E  Column F   Column G      Column H         Column I    Column J   Column K
   --------      --------   --------   -------- --------  --------   --------      --------         --------    --------   --------
                             Reserve                                              Losses and              
                               for                                              Loss Adjustment                    
                             Unpaid                                            Expenses Incurred  Amortization    Paid          
                 Deferred    Losses    Discount                                    Related to     of Deferred    Losses 
  Affiliation     Policy    and Loss   Deducted                        Net        (1)      (2)       Policy     and Loss 
     with      Acquisition Adjustment in Column Unearned  Premiums  Investment  Current   Prior   Acquisition  Adjustment  Premiums
  Registrant      Costs     Expenses     (C)    Premiums   Earned     Income     Year     Year       Costs      Expenses   Written
                                         (a)                                                                                    
____________________________________________________________________________________________________________________________________
<S>                 <C>       <C>         <C>      <C>      <C>         <C>       <C>       <C>       <C>         <C>       <C>
1996 (b):                                                                                                                    
 Consolidated                                                                                                                
  property and                                                                                                              
  casualty                                                                                                                
  entities       $136,168  $1,785,664   $4,100  $496,249 $1,300,752  $140,311  $874,123  $ 8,869    $363,547    $794,889  $1,334,121
                 ========  ==========   ======  ======== ==========  ========  ========  =======    ========    ========  ==========
1995:
 Consolidated
  property and                                              
  casualty 
  entities       $ 77,673  $1,274,982   $4,100  $302,105 $  749,003  $ 95,334  $500,514  $11,719    $195,481    $409,797  $  757,436
                 ========  ==========   ======  ======== ==========  ========  ========  =======    ========    ========  ==========

1994:
 Consolidated 
  property and 
  casualty 
  entities       $ 70,137  $1,181,329   $4,100  $256,855 $  691,223  $ 82,496  $480,826  $17,297    $165,108    $437,386  $  712,055
                 ========  ==========   ======  ======== ==========  ========  ========  =======    ========    ========  ==========

<FN>
(a)  Discount deducted in Column C is computed using a statutory interest rate of 3.5% for certain workers compensation losses.
(b)  1996 amounts include Guaranty National Corporation on a consolidated basis.

                                                                     S-9
</TABLE>