UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For The Quarterly Period Ended March 31, 1998

                         Commission File Number: 1-12369

                        SYMONS INTERNATIONAL GROUP, INC.
             (Exact name of registrant as specified in its charter)

INDIANA                                                             35-1707115
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                              Identification No.)


                               4720 Kingsway Drive
                           Indianapolis, Indiana 46205
                    (Address of Principal Executive Offices)

Registrant's telephone number, including area code: (317) 259-6400 (U.S.)

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


As of March 31, 1998, there were 10,395,532 shares of Registrant's  common stock
issued and outstanding exclusive of shares held by Registrant.


<PAGE>



                                 Form 10-Q Index
                      For The Quarter Ended March 31, 1998
                                                                   Page
                                                                  Number

PART 1  FINANCIAL INFORMATION

Item 1  Financial Statements

        Unaudited Consolidated Financial Statements:
        Unaudited Consolidated Balance Sheets at
        March 31, 1998 and December 31, 1997 ...........................3

        Unaudited Consolidated Statements of Earnings
        for the Three Months Ended March 31, 1998 and 1997 .............4

           Unaudited Consolidated Statements of Stockholders'
        Equity .........................................................5

        Unaudited Consolidated Statements of Cash Flows
        for the Three Months Ended March 31, 1998 and 1997 .............6

        Condensed Notes to Unaudited Consolidated Financial
        Statements .....................................................7

Item 2  Management's Discussion and Analysis of Financial
        Condition and Results of Operations ............................8

PART 2  OTHER INFORMATION .............................................15


SIGNATURES ............................................................16



<PAGE>

                         PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS (in thousands)
<TABLE>
<CAPTION>

                                                                         March 31,    December 31,
ASSETS                                                                      1998          1997

<S>                                                                      <C>            <C>
Investments

  Available for sale:

  Fixed maturities, at market                                            $176,370       $169,385

  Equity securities, at market                                             40,993         35,542

  Short-term investments, at amortized cost which approximates market       9,098          8,871

Real estate, at cost                                                        3,034            450

Mortgage loans, at cost                                                     2,190          2,220

Other                                                                         400             50
                                                                          -------        -------
         TOTAL INVESTMENTS                                                232,085        216,518

Investment in and advances to related parties                               5,277            839

Cash and cash equivalents                                                  26,295         11,276

Receivables, net of allowance for doubtful accounts                       164,272         91,730

Reinsurance recoverable on paid and unpaid losses, net                     67,384         93,832

Prepaid reinsurance premiums                                               96,882         36,606

Federal income taxes recoverable                                              --           1,505

Deferred policy acquisition costs                                          17,267         10,740

Deferred income taxes                                                       4,680          4,722

Property and equipment, net of accumulated depreciation                    14,319         12,051

Intangible assets                                                          43,252         43,756

Other assets                                                                6,541          6,300
                                                                          -------        -------
         TOTAL ASSETS                                                    $678,254       $529,875
                                                                          =======        =======

LIABILITIES

Losses and loss adjustment expenses                                      $126,629       $136,772

Unearned premiums                                                         205,987        114,635

Reinsurance payables                                                       96,686         35,692

Notes payable                                                               2,569          4,182

Federal income taxes payable                                                3,981            --

Distributions payable on preferred securities                               1,559          4,801

Other                                                                      21,196         20,430
                                                                          -------        -------
         TOTAL LIABILITIES                                                458,607        316,512
                                                                          -------        -------
Minority interest:

  Preferred securities                                                    135,000        135,000
                                                                          -------        -------
STOCKHOLDERS' EQUITY

Common stock                                                               38,296         39,019

Additional paid-in capital                                                  5,946          5,925

Unrealized gain on investments                                              4,130          1,908

Retained earnings                                                          36,275         31,511
                                                                          -------        -------
         TOTAL STOCKHOLDERS' EQUITY                                        84,647         78,363
                                                                          -------        -------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                      $678,254       $529,875
                                                                          =======        =======
</TABLE>

See notes to consolidated financial statements

                                      -3-

<PAGE>



SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                                          March 31,
                                                                    1998          1997

<S>                                                               <C>           <C>     
Gross premiums written                                            $178,396      $129,890

Less ceded premiums                                                (78,835)      (63,101)
                                                                   -------       -------
Net premiums written                                                99,561        66,789

Change in net unearned premiums                                    (31,076)       (3,674)
                                                                    ------       -------
Net premiums earned                                                 68,485        63,115

Fee income                                                           6,487         5,038

Net investment income                                                2,958         2,438

Net realized gain                                                    1,968           942
                                                                    ------        ------
      Total Revenues                                                79,898        71,533
                                                                    ------        ------

Loss and loss adjustment expenses                                   53,205        45,268

Policy acquisition and general and administrative expenses          14,923        12,883

Interest expense                                                       183         1,371

Amortization of intangibles                                            511           129
                                                                    ------        ------
      Total Expenses                                                68,822        59,651
                                                                    ------        ------
      Earnings before income taxes and minority interest            11,076        11,882

Provision for income taxes                                           4,022         4,286
                                                                    ------        ------
      Net earnings before minority interest                          7,054         7,596

Minority interest:

  Distributions on preferred securities, net of tax                  2,130           --

  Equity in earnings of subsidiary                                     --          1,687
                                                                    ------        ------
      Net Earnings                                                 $ 4,924       $ 5,909
                                                                    ======        ======

Net earnings per share - basic                                       $0.47         $0.57
                                                                      ====          ====

Net earnings per share - fully diluted                               $0.46         $0.56
                                                                      ====          ====
Weighted average shares outstanding:

  Basic                                                             10,445        10,450
                                                                    ======        ======
  Fully diluted                                                     10,726        10,641
                                                                    ======        ======


See notes to consolidated financial statements

</TABLE>

                                      -4-

<PAGE>



SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except number of shares)
<TABLE>
<CAPTION>

                                                          Shares           Total
                                                          Common       Stockholders'     Retained
                                                           Stock          Equity         Earnings

<S>                                                      <C>              <C>            <C>    
BALANCE AT DECEMBER 31, 1996                             10,450,000       $60,900        $15,206

Comprehensive income:
   Net earnings                                                             5,909          5,909
   Change in unrealized gains (losses) on securities                         (943)            --
                                                                           ------
Comprehensive income                                                        4,966             --
                                                                           ------          -----

BALANCE AT MARCH 31, 1997                                10,450,000       $65,866        $21,115
                                                         ==========        ======         ======


BALANCE AT DECEMBER 31, 1997                             10,451,667       $78,363        $31,511

Comprehensive income:
   Net earnings                                                             4,924          4,924
   Change in unrealized gains (losses) on securities                        2,222             --
                                                                           ------          -----
Comprehensive income                                                        7,146          4,924

Exercise of stock options                                     1,665            20             --

Cost of shares acquired                                     (57,800)         (882)          (160)
                                                          ---------        ------         ------

BALANCE AT MARCH 31, 1998                                10,395,532       $84,647        $36,275
                                                         ==========        ======         ======

See notes to consolidated financial statements
</TABLE>


                                      -5-

<PAGE>



SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
                                                                                 Three Months Ended
                                                                                       March 31,
                                                                                  1998        1997

<S>                                                                             <C>         <C>  
Cash Flows from Operating Activities:

  Net earnings for the period                                                    $4,924      $5,909

  Adjustments to reconcile net earnings to net cash provided from operations:

     Equity in earnings of subsidiary                                                --       1,687

     Depreciation and amortization                                                1,117         487

     Deferred income tax expense                                                 (1,173)        226

     Net realized gain                                                           (1,968)       (942)

Net changes in operating assets and liabilities:

  Receivables                                                                   (72,542)    (49,716)

  Reinsurance recoverable on paid and unpaid losses, net                         26,448      22,846

  Prepaid reinsurance premiums                                                  (60,275)    (35,659)

  Deferred policy acquisition costs                                              (6,527)        476

  Other assets                                                                     (243)     (1,175)

  Losses and loss adjustment expenses                                           (10,143)    (15,432)

  Unearned premiums                                                              91,352      39,334

  Reinsurance payables                                                           60,994      42,973

  Distributions payable on preferred securities                                  (3,242)         --

  Federal income taxes                                                            5,485       3,970

  Other liabilities                                                                 768       4,179
                                                                                 ------      ------
NET CASH PROVIDED FROM OPERATIONS                                                34,975      19,163
                                                                                 ------      ------
Cash flow used in investing activities:

  Net (purchases) sales of short-term investments                                  (227)      3,372

  Purchases of fixed maturities                                                 (41,319)    (22,892)

  Proceeds from sales, calls and maturities of fixed maturities                  34,322       1,232

  Purchase of equity securities                                                  (6,466)     (3,998)

  Proceeds from sales of equity securities                                        6,421       8,937

  Purchase of real estate                                                        (2,584)         --

  Purchases of property and equipment                                            (2,869)     (1,003)

  (Purchases) sales of other investments                                           (320)         70
                                                                                -------      ------
NET CASH USED IN INVESTING ACTIVITIES                                           (13,042)    (14,282)
                                                                                 ------      ------
Cash flow provided from/(used in) financing activities:

  Cost of shares acquired                                                          (862)         --

  Payments on notes payable                                                      (1,613)         --

  Contribution from minority interest owner                                          --       2,304

  Repayments from related parties                                                (4,439)       (481)
                                                                                 ------     -------
NET CASH PROVIDED FROM/(USED IN) FINANCING ACTIVITIES                            (6,914)      1,823
                                                                                 ------      ------
Increase in cash and cash equivalents                                            15,019       6,704

Cash and cash equivalents, beginning of period                                   11,276      13,095
                                                                                 ------      ------
Cash and cash equivalents, end of period                                        $26,295     $19,799
                                                                                 ======      ======

See notes to consolidated financial statements
</TABLE>

                                      -6-

<PAGE>



                        SYMONS INTERNATIONAL GROUP, INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                    For The Three Months Ended March 31, 1998

NOTES TO THE CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1)  The  accompanying   unaudited  condensed  financial  statements  have  been
     prepared  in  accordance  with  the  instructions  to Form  10-Q and do not
     include all of the information and footnotes required by generally accepted
     accounting principles for complete financial statements.  In the opinion of
     management,  all  adjustments  (consisting  of normal  recurring  accruals)
     considered  necessary for fair presentation  have been included.  Operating
     results  for the  interim  periods are not  necessarily  indicative  of the
     results that may be expected for the year ended December 31, 1998.  Interim
     financial  statements  should  be read in  conjunction  with the  Company's
     annual audited financial statements.

(2)  Effective January 1, 1998, the Company adopted the Financial Accounting
     Standards  Board's (FASB) Statement of Financial  Accounting  Standards No.
     130,  Reporting  Comprehensive  Income  (SFAS  130).  SFAS 130  establishes
     standards  for  reporting  and  display  of  comprehensive  income  and its
     components (revenues, expenses, gains and losses). Comprehensive income for
     the three month  periods  ended March 31, 1998 and 1997 is presented in the
     Statements of Changes in Stockholders' Equity.

     In June 1997, the FASB issued Statement of Financial  Accounting  Standards
     No.  131,   Disclosures   about  Segments  of  an  Enterprise  and  Related
     Information  (SFAS  131),  which is  effective  for years  beginning  after
     December 15, 1997. SFAS 131  established  standards for the way that public
     business  enterprises report information about operating segments in annual
     financial  statements and requires that those  enterprises  report selected
     information about operating segments in interim financial reports.  It also
     established  standards for related disclosures about products and services,
     geographic areas, and major customers.  SFAS 131 is effective for financial
     statements for fiscal years  beginning after December 15, 1997. The Company
     will adopt the new requirements effective December 31, 1998. Management has
     not  completed  its review of SFAS 131,  but does not  anticipate  that the
     adoption of this statement will have a significant  effect on the Company's
     reported segments.

(3)  On March 2, 1998,  the Company announced  that it had signed an agreement
     with CNA to assume its multi-peril and crop hail operations.  CNA
     wrote   approximately  $110  million  of  multi-peril  and  crop  hail
     insurance  business in 1997.  The Company  will  reinsure  100% of all
     multi-peril and crop hail premiums written by CNA during 1998 and cede
     a  small  portion  of  the  Company's  total  crop  book  of  business
     (approximately  22% MPCI and 15% crop hail) back to CNA.  Starting  in
     the year  2000,  assuming  no event of change in control as defined in
     the  agreement,  the  Company  can  purchase  the  insurance  premiums
     reinsured  to CNA  through a call  provision  or CNA can  require  the
     Company to buy the insurance premiums reinsured to CNA.  Regardless of
     the method of takeout  of CNA,  CNA must not  compete in MPCI or crop
     hail for a period of time.  There was no purchase  price.  The formula
     for the  buyout in the year  2000 is based on a  multiple  of  average
     pre-tax  earnings that CNA received from reinsuring the Company's book
     of business.
                                      -7-

<PAGE>



(4)  Basic and  diluted net income per share are  computed  by dividing  net
     income as  reported  by the  average  number of shares  outstanding  as
     follows:
<TABLE>
<CAPTION>

                                                                  Three Months Ended
                                                                        March 31,
                                                                    1998        1997

     <S>                                                         <C>            <C>   
     Basic:
      Weighted-average common shares outstanding                 10,450,000     10,450,000

     Diluted:
      Weighted-average common shares outstanding                 10,450,000     10,450,000
      Dilutive effect of stock options                              281,000        191,000
                                                                 ----------     ----------
      Average common shares outstanding assuming
        dilution                                                 10,726,000     10,641,000
                                                                 ==========     ==========
</TABLE>


ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
       RESULTS OF OPERATIONS OF THE COMPANY

The Company  underwrites and markets  nonstandard  private passenger  automobile
insurance and crop insurance.

Nonstandard Automobile Insurance Operations

The  Company,  through its wholly owned  subsidiaries,  Pafco and  Superior,  is
engaged in the writing of insurance  coverage on automobile  physical damage and
liability  policies  for  "nonstandard  risks".  Nonstandard  insureds are those
individuals who are unable to obtain insurance  coverage through standard market
carriers  due  to  factors  such  as  poor  premium  payment  history,   driving
experience,  record  of  prior  accidents  or  driving  violations,   particular
occupation or type of vehicle.  The Company  offers several  different  policies
which are  directed  towards  different  classes of risk within the  nonstandard
market.  Premium rates for nonstandard risks are higher than for standard risks.
Since it can be viewed as a residual market, the size of the nonstandard private
passenger automobile insurance market changes with the insurance environment and
grows when the standard coverage becomes more restrictive.  Nonstandard policies
have relatively short policy periods and low limits of liability. Due to the low
limits of coverage,  the period of time that elapses  between the occurrence and
settlement of losses under nonstandard policies is shorter than many other types
of  insurance.   Also,  since  the  nonstandard  automobile  insurance  business
typically   experiences  lower  rates  of  retention  than  standard  automobile
insurance,   the  number  of  new  policyholders   underwritten  by  nonstandard
automobile insurance carriers each year is substantially greater than the number
of new policyholders underwritten by standard carriers.



                                      -8-

<PAGE>



Crop Insurance Operations

The two  principal  components  of the  Company's  crop  insurance  business are
Multi-Peril Crop Insurance ("MPCI") and private named peril, primarily crop hail
insurance.  Crop  insurance  is  purchased by farmers to reduce the risk of crop
loss from adverse weather and other uncontrollable  events. Farms are subject to
drought,  floods and other  natural  disasters  that can cause  widespread  crop
losses and, in severe cases,  force farmers out of business.  Historically,  one
out of every twelve acres planted by farmers has not been  harvested  because of
adverse weather or other natural disasters.  Because many farmers rely on credit
to finance  their  purchases of such  agricultural  inputs as seed,  fertilizer,
machinery  and fuel,  the loss of a crop to a natural  disaster can reduce their
ability to repay  these loans and to find  sources of funding for the  following
year's operating expenses.

The Company,  like other  private  insurers  participating  in the MPCI program,
generates revenues from the MPCI program in two ways. First, it markets,  issues
and administers policies, for which it receives administrative fees; and second,
it  participates in a  profit-sharing  arrangement in which it receives from the
government a portion of the aggregate profit, or pays a portion of the aggregate
loss,  in respect of the  business it writes.  The Company  writes MPCI and crop
hail insurance through approximately 925 independent agencies in 42 states.

MPCI is a  government-sponsored  program with accounting treatment which differs
in certain  respects from the more traditional  property and casualty  insurance
lines.  For  income  statement  purposes  under  generally  accepted  accounting
principles,  gross  premiums  written  consist of the  aggregate  amount of MPCI
premiums  paid by farmers for buy-up  coverage  (MPCI  coverage in excess of CAT
Coverage),  and any related federal premium  subsidies,  but do not include MPCI
premium on CAT  Coverage  (the minimum  available  level of MPCI  Coverage).  By
contrast,  net premiums  written do not include any MPCI  premiums or subsidies,
all of which are deemed to be ceded to the FCIC as a  reinsurer.  The  Company's
profit or loss from its MPCI business is  determined  after the crop season ends
on the basis of a complex  profit  sharing  formula  established  by law and the
FCIC. For generally accepted  accounting  principles income statement  purposes,
any such profit or loss  sharing  earned or payable by the Company is treated as
an adjustment to commission  expense and is included in policy  acquisition  and
general and administrative expenses.

The Company also  receives  from the FCIC (i) an expense  reimbursement  payment
equal to a percentage of gross premiums  written for each Buy-Up Coverage policy
it writes ("Buy-Up Expense  Reimbursement  Payment"),  (ii) an LAE reimbursement
payment equal to 13.0% of MPCI Imputed  Premiums for each CAT Coverage policy it
writes  (the "CAT LAE  Reimbursement  Payment"),  and (iii) a small  excess  LAE
reimbursement  payment of two hundredths of one percent (.02%) of MPCI Retention
(as defined  herein) to the extent the Company's MPCI loss ratios on a per state
basis exceed certain levels (the "MPCI Excess LAE Reimbursement  Payment").  For
1998 and 1997, the Buy-Up Expense  Reimbursement Payment has been set at 27% and
29%,  respectively,   of  the  MPCI  Premium.  For  generally  accepted  account
principles income statement purposes,  the Buy-Up Expense  Reimbursement Payment
is treated as a contribution to income and reflected as an offset against policy
acquisition and general and administrative  expenses.  The CAT LAE Reimbursement
Payment and the MPCI Excess LAE Reimbursement  Payment are, for income statement
purposes,  recorded as an offset  against  LAE,  up to the actual  amount of LAE
incurred by the Company in respect of such  policies,  and the  remainder of the
payment, if any, is recorded as Other Income.

                                      -9-

<PAGE>




In addition to MPCI, the Company offers stand alone crop hail  insurance,  which
insures  growing  crops  against  damage  resulting  from hail  storms and which
involves no federal  participation,  as well as its  proprietary  product  which
combines the application and  underwriting  process for MPCI and hail coverages.
This  product  tends to produce less  volatile  loss ratios than the stand alone
product since the combined product  generally insures a greater number of acres,
thereby  spreading the risk of damage over a larger insured area.  Approximately
half of the  Company's  hail  policies  are  written in  combination  with MPCI.
Although  both crop hail and MPCI provide  coverage  against hail damage,  under
crop hail coverages farmers can receive payments for hail damage which would not
be severe enough to require a payment under an MPCI policy. The Company believes
that  offering  crop hail  insurance  enables it to sell more  policies  than it
otherwise would.

In addition to crop hail  insurance,  the Company  also sells a small  volume of
insurance  against crop damage from other specific named perils.  These products
cover specific crops and are generally written on terms that are specific to the
kind of crop and farming  practice  involved  and the amount of  actuarial  data
available.  The Company plans to seek  potential  growth  opportunities  in this
niche market by  developing  basic  policies on a diverse  number of named crops
grown in a variety of geographic areas and to offer these policies  primarily to
large producers through certain select agents.

In order to reduce the Company's potential loss exposure under the MPCI program,
in  addition  to  reinsurance  obtained  from the FCIC,  the  Company  purchases
stop-loss  reinsurance from other private  reinsurers.  Such private reinsurance
would not eliminate the Company's  potential  liability in the event a reinsurer
was unable to pay or losses exceeded the limits of the stop-loss  coverage.  For
crop hail  insurance,  the Company  has in effect  various  layers of  stop-loss
reinsurance.

Certain other  conditions of the Company's crop business may effect  comparisons
of the  Company's  results and  operating  ratios  with that of other  insurers,
including: (i) the seasonal nature of the business whereby profits are generally
recognized  predominantly  in the second half of the year,  (ii) the  short-term
nature of crop business whereby losses are known within a short time period, and
(iii) the limited amount of investment income associated with crop business.  In
addition,  cash flows from the crop business differ from cash flows from certain
more traditional lines.

In 1996, the Company instituted a policy of recognizing (i) 35% of its estimated
MPCI gross premiums written for each of the first and second  quarters,  20% for
the third quarter and 10% for the fourth quarter,  (ii) commission  expense at a
rate of 16% of MPCI gross premiums  written  recognized and (iii) Buy-Up Expense
Reimbursement at the applicable rate of MPCI gross premiums  written  recognized
along with  normal  operating  expenses  incurred  in  connection  with  premium
writings.  In the third quarter, if a sufficient volume of policyholder  acreage
reports have been received and processed by the Company, the Company's policy is
to recognize  MPCI gross  premiums  written for the first nine months based on a
re-estimate  which takes into account  actual gross  premiums  processed.  If an
insufficient  volume of policies has been processed,  the Company's policy is to
recognize  in the third  quarter  20% of its full year  estimate  of MPCI  gross
premiums written,  unless other circumstances require a different approach.  The
remaining  amount of gross premiums written is recognized in the fourth quarter,
when  all  amounts  are  reconciled.   The  Company  also  recognizes  the  MPCI
underwriting  gain or loss during each quarter,  reflecting  the Company's  best
estimate of the amount of such gain or loss to be recognized  for the full year,
based on, among other

                                      -10-

<PAGE>



things,  historical results, plus a provision for adverse  developments.  In the
third  and  fourth  quarters,  a  reconciliation  amount is  recognized  for the
underwriting gain or loss based on final premium and loss information.

Results of Operations

For the three months ended March 31, 1998, the Company  recorded net earnings of
$4,923,000 or $0.47 per share (basic).  This is  approximately  a 16.7% decrease
from 1997  comparable  amounts of  $5,909,000 or $0.57 per share  (basic).  This
resulted  from  lower  earnings  in both  the  nonstandard  automobile  and crop
segments.  However,  earnings  in the first  quarter  of 1998 were at  consensus
expectations.  Increases  in  nonstandard  automobile  premiums  contributed  to
lowering the expense ratio which was offset by a higher loss ratio. However, the
first quarter 1998 loss ratio  improved  from the fourth  quarter of 1997 due to
the effects of certain  rate  increases.  Lower crop results  reflect  increased
commission rates due to competition and a lower expense  reimbursement  from the
federal  government offset by significant  volume growth created  internally and
through the transaction with CNA.


                                      -11-

<PAGE>



<TABLE>
<CAPTION>

                                                                        For the three months
                                                                            ended March 31,
                                                                           1998        1997

NONSTANDARD AUTOMOBILE INSURANCE OPERATIONS:

<S>                                                                      <C>           <C>    
  Gross premiums written                                                 $89,976     $75,066
                                                                          ======      ======
  Net premiums written                                                   $82,267     $59,588
                                                                          ======      ======
  Net premiums earned                                                    $68,323     $63,105

  Fee income                                                               4,155       2,899

  Net investment income                                                    2,801       2,338

  Net realized gain                                                        1,968         942
                                                                          ------      ------
        TOTAL REVENUES                                                    77,247      69,284
                                                                          ------      ------

  Losses and loss adjustment expenses                                     53,146      45,268

  Policy acquisition and general and administrative expenses              18,123      17,124
                                                                          ------      ------
        TOTAL EXPENSES                                                    71,269      62,392
                                                                          ------      ------
  Earnings before income taxes                                            $5,978      $6,892
                                                                           =====       =====
GAAP RATIOS (Nonstandard Automobile Only):

  Loss and LAE Ratio                                                        77.8%       71.7%
 
  Expense ratio, net of billing fees                                        20.4        22.5
                                                                            ----        ----
  Combined ratio                                                            98.2%       94.2%
                                                                            ====        ====
CROP INSURANCE OPERATIONS:

  Gross premiums written(2)                                              $86,175     $51,709
                                                                          ======      ======
  Net premiums written                                                   $17,294      $7,201
                                                                          ======       =====
  Net premiums earned                                                       $161         $10

  Fee income                                                               2,332       2,139

  Net investment income                                                       53          49
                                                                           -----       -----
        TOTAL REVENUES                                                     2,546       2,198
                                                                           -----       -----
  Losses and loss adjustment expenses                                         59          --

  Policy acquisition and general and administrative expenses(1)           (3,647)     (4,766)

  Interest expense                                                           183          11
                                                                           -----      ------
        TOTAL EXPENSES                                                    (3,405)     (4,755)
                                                                           -----       -----
  Earnings before income taxes                                            $5,951      $6,953
                                                                           =====       =====
</TABLE>

(1) Negative crop expenses are caused by inclusion of MPCI expense reimbursement
and underwriting gain.
(2) Includes premiums assumed from CNA in accordance with
the Strategic Alliance Agreement.

Consolidated  gross premiums  written  increased 37.4% due to growth in both the
nonstandard auto and crop segments.

Gross premiums  written for the nonstandard auto segment  increased 19.9%.  Such
increase was due primarily to continued  introduction of multi-tiered  products,
introduction of two new states and increased market share penetration.


                                      -12-

<PAGE>



Gross premiums written for the crop segment  increased 66.7%.  Such increase was
due to the  transactions  with CNA and internal growth.  Premium  increases were
noted in all lines of crop  insurance.  Crop premiums for the three months ended
March 31 are as follows:

<TABLE>
<CAPTION>
                                     1998         1997
                                     ----         ----

<S>                                <C>           <C>    
CAT imputed                        $16,319       $13,032
MPCI                                60,743        39,777
Crop hail and named perils          25,431        11,932
                                    ------        ------
                                   102,493        64,741
Less: CAT imputed                  (16,318)      (13,032)
                                    ------        ------
                                   $86,175       $51,709
                                    ======        ======

</TABLE>
Remaining gross written premiums  represent  commercial  business which is ceded
100% to an affiliate, Granite Reinsurance Company Ltd.

MPCI  premiums are  considered  to be 100% ceded to the federal  government  for
accounting purposes.  Quota share cession rates for other lines of insurance for
the three months ended March 31 are as follows:

<TABLE>
<CAPTION>
                                     1998         1997
                                     ----         ----
<S>                                   <C>          <C>

Nonstandard automobile                10%          20%
Crop hail                             30%          40%
Named peril                           50%          50%

</TABLE>
Fee income increased 28.8% for the three months ended March 31, 1998 as compared
to the corresponding  period of the prior year. Such increase was due to greater
installment billings on nonstandard  automobile  policies,  which averaged 4.62%
and  3.86%  of  gross  written  premiums  in 1998 and  1997,  respectively,  and
additional CAT fees on crop business due to growth in volume.

Net investment  income increased 21.3% for the three months ended March 31, 1998
as compared to the corresponding period of the prior year. Such increase was due
primarily to greater invested assets and a stable yield.

The loss  ratio  for the  nonstandard  automobile  segment  in 1998 was 77.8% as
compared to 71.7% in 1997. The increase in the loss ratio in 1998 from the first
quarter of 1997  reflects  increased  severity  costs and the effects of certain
pending rate  increases.  However,  this loss ratio has improved from the fourth
quarter of 1997 which was 79.4%, excluding the effects of certain fourth quarter
adjustments,  due to the effects of recent rate increases. Crop hail loss ratios
in the first quarter do not have significant impact on consolidated earnings.

Policy acquisition and general and  administrative  expenses have increased as a
result of the  increased  volume of  business  produced by the  Company.  Policy
acquisition and general and administrative expenses rose to $14,923,000 or 21.8%
of net premium  earned for the three  months  ended  March 31, 1998  compared to
$12,883,000 or 20.4% of net premium earned in the corresponding  period of 1997.
The  increase  in the expense  ratio in the first  quarter of 1998 is due to the
effects  of higher  commissions  and lower  expense  reimbursements  in the crop
segment.  However,  the  consolidated  expense  ratio has been  reduced from the
fourth  quarter  1997 rate of 25.8%.  The  expense  ratio,  for the  nonstandard
segment improved to 20.4% in 1998 as compared to 22.5% in 1997, due primarily

                                      -13-

<PAGE>



to reduced expenses from the Indianapolis  operations  (Pafco General  Insurance
Company)  resulting from lower  commissions on  multi-tiered  products and other
efficiency implementations as well as higher billing fee rates.

Crop segment expenses include agent commissions, stop loss reinsurance costs and
operating  expenses  which are offset by MPCI  Expense  Reimbursements  and MPCI
Underwriting  Gain. The negative expense results primarily from the inclusion of
the MPCI Underwriting Gain. The increase in expenses results primarily from a 2%
lower MPCI Expense Reimbursement for 1998 versus 1997 and higher commissions due
to competition  offset by a higher MPCI  Underwriting  Gain due to volume.  This
gain is an estimate  until later in the year when crops are harvested and losses
are known.  The gain ratio in the first quarter of 1998 was consistent  with the
first quarter of 1997 at 10%.

Amortization of intangibles  includes goodwill from the acquisition of Superior,
additional  goodwill from the acquisition of the minority  interest  position in
GGSH, debt or preferred  security issuance costs and  organizational  costs. The
increase in the first  quarter of 1998  reflects  the  effects of the  Preferred
Securities Offering in late 1997.

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

Income tax  expense was 36.3% and 36.1% of pre-tax  income for the three  months
ended March 31, 1998 and 1997.

Distributions  on Preferred  Securities  are calculated at a rate of 9.5% net of
federal income taxes.

Financial Condition

The  Company's  total  assets  of  $678,254,000  at  March  31,  1998  increased
$148,378,000  from $529,875,000 as of December 31, 1997. The primary reasons for
this increase were an increase of $30,585,000 in cash and invested assets due to
continued growth in premiums and the normal receipt of crop funds from the FCIC.
The  remaining  increase is due to increases in  receivables  from  insureds and
reinsurers due to continued  growth in volume and growth in prepaid  reinsurance
in crop operations due to the accounting for MPCI with the FCIC.

Net cash provided by operating  activities  improved to $34,975,000 in 1998 from
$19,163,000  in 1997 due to continued  premium growth and normal receipt of crop
funds from the FCIC.  This  additional  cash flow was used to increase  invested
assets. Financing activities included normal activities on the Company's line of
credit for crop operations. Loans to related parties is primarily a $3.3 million
loan to an  affiliate,  Granite  Re,  for  reinsurance  activities  and  certain
short-term  officer loans. In the first quarter of 1998, the Company bought back
57,800 treasury shares as part of an announced buy back program.


                                      -14-

<PAGE>



PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS
          The Company's insurance subsidiaries are parties to litigation arising
in the  ordinary  course of  business.  The Company  believes  that the ultimate
resolution  of these  lawsuits  will not have a material  adverse  effect on its
financial  condition or results of operations.  The Company,  through its claims
reserves,  reserves for both the amount of  estimated  damages  attributable  to
these lawsuits and the estimated costs of litigation.

ITEM 2.   CHANGES IN SECURITIES
          None

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES
          None

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

ITEM 5.   OTHER INFORMATION
          None

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
          None


                                      -15-

<PAGE>


                                   SIGNATURES



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



Dated:  May 8, 1998                 By:______________________
                                    Alan G. Symons
                                    Chief Executive Officer



Dated:  May 8, 1998                 By:______________________
                                    Gary P. Hutchcraft
                                    Vice President, Treasurer and
                                    Chief Financial Officer



                                      -16-

<PAGE>