<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549-1004

                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

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

               For the transition period from           to
                                             -----------  ----------


                         Commission File Number: 0-29042

                        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) 259-6300

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 November 1, 2001, there were 10,385,399 shares of Registrant's no par
value common stock issued and outstanding.


                                       1
<PAGE>


                                 FORM 10-Q INDEX
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2001

<TABLE>
<CAPTION>
                                                                                                       Page
                                                                                                      Number
<S>                                                                                                    <C>
PART I     FINANCIAL INFORMATION

Item 1     Financial Statements

           Consolidated Balance Sheets at September 30, 2001
           (unaudited) and December 31, 2000.......................................................       3

           Unaudited Consolidated Statements of Operations
           for the Three Months Ended
           September 30, 2001 and 2000.............................................................       4

           Unaudited Consolidated Statements of Operations
           for the Nine Months ended
           September 30, 2001 and 2000.............................................................       5

           Unaudited Consolidated Statements of Cash Flows for the
           Nine Months Ended September 30, 2001 and 2000 ..........................................       6

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

Item 2     Management's Discussion and Analysis of Financial
           Condition and Results of Operations.....................................................       15

Item 3     Quantitative and Qualitative Disclosures about Market Risk..............................       20

PART II    OTHER INFORMATION.......................................................................       20

Item 1     Legal Proceedings.......................................................................       20

Item 2     Changes in Securities and Use of Proceeds...............................................       22

Item 3     Defaults Upon Senior Securities ........................................................       22

Item 4     Submission of Matters to a Vote of Security Holders ....................................       22

Item 5     Other Information ......................................................................       22

Item 6     Exhibits and Reports on Form 8-K........................................................       22

SIGNATURES      ...................................................................................       23
</TABLE>

                                       2
<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
SYMONS INTERNATIONAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)

<TABLE>
<CAPTION>
                                                                                  September 30,
                                                                                       2001             December 31,
                                                                                   (Unaudited)              2000
                                                                                 -----------------     ---------------
<S>                                                                                <C>                   <C>
ASSETS
  Investments:
    Available for sale:
      Fixed maturities, at market                                                     $62,279               $99,506
      Equity securities, at market                                                     12,851                16,561
      Short-term investments, at amortized cost, which approximates market             12,599                14,872
      Mortgage loans, at cost                                                               -                 1,870
      Other invested assets                                                             1,493                 1,331
                                                                                        -----                 -----
  Total investments                                                                    89,222               134,140
  Cash and cash equivalents                                                            25,600                 1,363
  Receivables,  net of  allowance  of  $1,999  and  $1,940  in 2001  and  2000,
    respectively                                                                       46,882                50,364
  Reinsurance recoverable on paid and unpaid losses                                    26,025                48,315
  Prepaid reinsurance premiums                                                         28,787                24,773
  Deferred policy acquisition costs                                                     3,536                 6,454
  Property and equipment, net of accumulated depreciation                              10,544                12,392
  Investments in and advances to related parties                                          493                   680
  Intangible assets                                                                     4,419                 4,547
  Other assets                                                                          1,537                 3,545
  Net assets of discontinued operations                                                     -                 1,384
                                                                                     --------              --------
Total Assets                                                                         $237,045              $287,957
                                                                                     ========              ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities:
  Loss and loss adjustment expense reserves                                           $86,435              $108,117
  Unearned premiums                                                                    60,502                62,386
  Reinsurance payables                                                                 43,068                62,059
  Distributions payable on preferred securities                                        29,382                18,397
  Deferred income                                                                       4,000                     -
  Other liabilities                                                                    16,735                14,443
                                                                                       ------               -------
Total Liabilities                                                                     240,122               265,402
                                                                                      -------               -------
Minority interest:
  Company-obligated  mandatory  redeemable  preferred stock of trust subsidiary
    holding solely parent debentures                                                  135,000               135,000
                                                                                      -------               -------
Stockholders' Equity (Deficit):
  Common stock, no par value,  100,000,000 shares authorized  10,385,399 shares
    issued and outstanding in both 2001 and 2000                                       38,136                38,136
  Additional paid-in capital                                                            5,851                 5,851
  Unrealized loss on investments available for sale                                    (4,149)               (3,938)
  Retained (Deficit)                                                                 (177,915)             (152,494)
                                                                                     ---------             ---------
Total Stockholders' (Deficit)                                                        (138,077)             (112,445)
                                                                                     ---------             ---------
Total Liabilities and Stockholders' (Deficit)                                        $237,045              $287,957
                                                                                     ========              ========
</TABLE>

SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       3
<PAGE>

SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                        Three Months Ended
                                                                                           September 30
                                                                                  -------------     --------------
                                                                                      2001              2000
                                                                                  -------------     --------------

<S>                                                                               <C>               <C>
Gross premiums written                                                               $27,268           $45,841

Less ceded premiums                                                                  (12,664)          (17,755)
                                                                                     --------          --------

    Net premiums written                                                             $14,604           $28,086
                                                                                     =======           =======

    Net premiums earned                                                              $22,839           $30,857

Fee income                                                                             3,799             3,356

Net investment income                                                                  1,443             2,416

Net realized capital gain (loss)                                                         793            (2,632)
                                                                                      ------            -------

    Total revenues                                                                    28,874            33,997
                                                                                      ------            ------

Expenses:

    Losses and loss adjustment expenses                                               19,072            25,629

    Policy acquisition and general and administrative expenses                        13,038            16,953

    Amortization of intangibles                                                           43               490
                                                                                      ------            ------

    Total expenses                                                                    32,153            43,072
                                                                                      ------            ------

Loss from continuing operations before income taxes and minority interest             (3,279)           (9,075)
                                                                                      -------           -------

    Total income taxes                                                                      -                 -
                                                                                      -------           -------

Loss from continuing operations before minority interest                              (3,279)           (9,075)
                                                                                      -------           -------

Minority interest:

     Distributions on preferred securities, net of tax of $0 in both 2001 and
     2000                                                                              3,545             3,454
                                                                                       -----             -----

Loss from continuing operations                                                       (6,824)          (12,529)

Discontinued operations:

     Loss from operations of discontinued segment, less applicable income taxes
     of $0 in both 2001 and 2000                                                            -          (12,387)
                                                                                     --------          --------



Net loss                                                                             $(6,824)         $(24,916)
                                                                                     ========         =========
Weighted average shares outstanding - basic and fully diluted                         10,385            10,385
                                                                                      ======            ======
Net loss from continuing operations per share - basic and fully diluted               $(0.66)           $(1.21)
                                                                                      =======           =======
Net loss of discontinued operations per share-basic and fully diluted                 $     -           $(1.19)
                                                                                      =======           =======
Net loss per share - basic and fully diluted                                          $(0.66)           $(2.40)
                                                                                      =======           =======
</TABLE>

SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       4
<PAGE>

SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                          Nine Months Ended
                                                                                            September 30
                                                                                   ------------     ---------------
                                                                                      2001               2000
                                                                                   ------------     ---------------
<S>                                                                                <C>              <C>
Gross premiums written                                                               $122,358         $135,732

Less ceded premiums                                                                   (66,305)         (57,831)
                                                                                      --------         --------

    Net premiums written                                                              $56,053          $77,901
                                                                                      =======          =======

    Net premiums earned                                                               $64,598         $111,275

Fee income                                                                             10,265           10,921

Net investment income                                                                   4,615            7,826

Net realized capital loss                                                                (263)          (3,949)
                                                                                         -----          -------

    Total revenues                                                                     79,215          126,073
                                                                                       ------          -------

Expenses:

    Losses and loss adjustment expenses                                                57,097           92,032

    Policy acquisition and general and administrative expenses                         34,269           54,290

    Amortization of intangibles                                                           128            1,470
                                                                                      -------          -------

    Total expenses                                                                     91,494          147,792
                                                                                       ------          -------

Loss from continuing operations before income taxes and minority interest             (12,279)         (21,719)
                                                                                      --------         --------

    Total income taxes                                                                      -              487
                                                                                      --------         -------

Loss from continuing operations before minority interest                              (12,279)         (22,206)
                                                                                      --------         --------

Minority interest:

     Distributions on preferred securities, net of tax of $0 in both 2001 and
     2000                                                                              10,986           10,075
                                                                                       ------           ------

Loss from continuing operations                                                       (23,265)         (32,281)

Discontinued operations:

     Loss from operations of discontinued segment, less applicable income taxes
     of $0 in both 2001 and 2000                                                       (2,156)          (5,231)
                                                                                       -------          -------

Net loss                                                                             $(25,421)        $(37,512)
                                                                                     =========        =========
Weighted average shares outstanding - basic and fully diluted                          10,385           10,385
                                                                                       ======           ======
Net loss from continuing operations per share - basic and fully diluted                $(2.24)          $(3.11)
                                                                                       =======          =======
Net loss of discontinued operations per share - basic and fully diluted                $(0.21)         $  (.50)
                                                                                       =======         ========
Net loss per share - basic and fully diluted                                           $(2.45)          $(3.61)
                                                                                       =======          =======

SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

</TABLE>

                                       5
<PAGE>

SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
                                                                                                   Nine Months
                                                                                                Ended September 30
                                                                                      ---------------------------------------
                                                                                           2001                  2000
                                                                                      ----------------     ------------------
<S>                                                                                    <C>                  <C>
Cash flows from operating activities:
    Net loss for the period                                                                $(25,421)            $(37,512)
    Adjustments to reconcile net earnings to net cash provided by (used in)
    operations:
        Depreciation and amortization                                                         1,987                5,416
        Net realized capital loss                                                               263                3,949
      Net changes in operating assets and liabilities:
      Receivables                                                                             3,482                6,448
      Reinsurance recoverable on paid and unpaid losses                                      22,290              (18,895)
      Prepaid reinsurance premiums                                                           (4,014)             (19,557)
      Deferred policy acquisition costs                                                       2,918                6,291
      Other assets and liabilities                                                            4,299               (7,968)
      Loss and loss adjustment expense reserves                                             (21,682)             (29,523)
      Unearned premiums                                                                      (1,884)             (14,031)
      Reinsurance payables                                                                  (18,991)              40,236
      Distribution payable on preferred securities                                           10,985               10,075
      Deferred income                                                                         4,000                    -
      Net assets from discontinued operations                                                 2,277               21,321
                                                                                            -------              -------
Net cash used in operations                                                                 (19,491)             (33,750)
                                                                                            --------             --------

Cash flows from investing activities, net of assets acquired:
    Net sale of short-term investments                                                        2,273                4,073
    Proceeds from sales, calls and maturities of fixed maturities                            54,594               53,898
    Purchase of fixed maturities                                                            (12,339)              (3,562)
    Proceeds from sale of equity securities                                                   9,842               14,212
    Purchase of equity securities                                                           (10,486)             (20,228)
    Proceeds from repayment of mortgage loans                                                 1,870                   90
    Purchase of property and equipment                                                       (1,216)                (950
    Net investing activities from discontinued operations                                    (1,322)                (307)
    Other                                                                                      (104)                (119)
                                                                                            --------              -------
Net cash provided by investing activities                                                    43,112               47,107
                                                                                             ------               ------


Cash flows from financing activities, net of assets acquired:
    Net financing activities from discontinued operations                                       429              (14,539)
    Repayment of related party loans                                                            187                  (65)
                                                                                             ------              --------
Net cash provided by (used in) financing activities                                             616              (14,604)
                                                                                             ------              --------


Decrease in cash and cash equivalents                                                        24,237               (1,247)
Cash and cash equivalents, beginning of period                                                1,363                2,139
                                                                                            -------             --------
Cash and cash equivalents, end of period                                                    $25,600                 $892
                                                                                            =======             ========
</TABLE>

SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       6
<PAGE>

                        SYMONS INTERNATIONAL GROUP, INC.
            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
             For the Three and Nine Months Ended September 30, 2001


1.   BASIS OF PRESENTATION
     The financial statements included in this report are the consolidated
     financial statements of Symons International Group, Inc. and its
     subsidiaries (the "Company"). The consolidated financial statements have
     been prepared pursuant to the rules and regulations of the Securities and
     Exchange Commission ("SEC"). In management's opinion, these financial
     statements include all adjustments (consisting only of normal, recurring
     adjustments) necessary for a fair presentation of the results of operations
     for the interim periods presented. Pursuant to SEC rules and regulations,
     certain information and footnote disclosures normally included in financial
     statements prepared in accordance with generally accepted accounting
     principles have been condensed or omitted from these statements, unless
     significant changes have taken place since the end of the most recent
     fiscal year. For this reason, the accompanying consolidated financial
     statements and notes thereto should be read in conjunction with the
     financial statements and notes for the year ended December 31, 2000
     included in the Company's 2000 Annual Report on Form 10-K. Results for any
     interim period are not necessarily indicative of results to be expected for
     the year.

2.   PREFERRED SECURITIES
     The preferred securities represent company-obligated mandatorily redeemable
     preferred securities of a trust subsidiary holding solely parent debentures
     which have a term of 30 years with semi-annual interest payments commencing
     February 15, 1998 (the "Preferred Securities"). The holder may redeem the
     Preferred Securities in whole or in part after 10 years. Under the terms of
     the indenture, the Company is permitted to defer the semi-annual interest
     payments for up to five years. The Company began deferring the semi-annual
     interest payments in February 2000.

     The trust indenture for the Preferred Securities contains certain
     restrictive covenants. Some of these covenants are based upon the Company's
     consolidated coverage ratio of earnings before interest, taxes,
     depreciation and amortization ("EBITDA") whereby, if the Company's EBITDA
     falls below 2.5 times consolidated interest expense (including Preferred
     Security distributions) for the most recent four quarters, the following
     restrictions become effective:

     o    The Company may not incur additional indebtedness or guarantee
          additional indebtedness.
     o    The Company may not make certain restricted payments including making
          loans or advances to affiliates, repurchasing common stock and the
          payment of dividends in excess of a stated limitation.
     o    The Company may not increase its level of non-investment grade
          securities defined as equities, mortgage loans, real estate, real
          estate loans and non-investment grade fixed income securities.

     These restrictions currently apply as the Company's consolidated coverage
     ratio was (0.85) as of September 30, 2001, and will continue to apply until
     the Company's consolidated coverage ratio exceeds the amount set forth in
     the indenture. The Company is in compliance with these additional
     restrictions.

3.   REGULATORY AFFAIRS
     Two of the Company's insurance company subsidiaries, Pafco General
     Insurance Company ("Pafco") and IGF Insurance Company ("IGF") are domiciled
     in Indiana and prepare their statutory financial statements in accordance
     with accounting practices prescribed or permitted by the Indiana Department
     of Insurance ("IDOI"). While neither Pafco nor IGF has surplus from which
     to pay dividends, statutory requirements place limitations on the amount of
     funds that can be remitted to the Company from Pafco and IGF. The Indiana
     statute allows 10% of surplus in regard to policyholders or 100% of net
     income, whichever is greater, to be paid as dividends only from earned
     surplus; however, the Consent Orders with the IDOI, described below,
     prohibit the payment of dividends by Pafco and IGF. Another insurance
     company subsidiary, Superior Insurance Company ("Superior"), and Superior's
     insurance company subsidiaries, Superior American Insurance Company and
     Superior Guaranty Insurance Company, are domiciled in Florida and prepare
     their statutory financial statements in accordance with accounting
     practices prescribed or permitted by the Florida Department of Insurance
     ("FDOI"). The Florida statute also contains limitations with regard to
     payment of dividends. Superior may pay dividends of up to 10% of surplus or
     100% of


                                       7
<PAGE>

     net income; whichever is greater, from earned surplus. Prescribed statutory
     accounting practices include a variety of publications of the National
     Association of Insurance Commissioners ("NAIC"), as well as state laws,
     regulations, and general administrative rules. Permitted statutory
     accounting practices encompass all accounting practices not so prescribed.

     As previously reported, on June 29, 2001, the IDOI and IGF entered into a
     Consent Order (the "Consent Order") relating to IGF. The entry of the
     Consent Order was a result of losses experienced by IGF in its crop
     insurance operations and followed the sale of substantially all of the crop
     insurance assets of IGF to Acceptance Insurance Companies Inc.
     ("Acceptance"). As previously reported, IGF has discontinued writing new
     business and its operations are presently in run off.

     The IDOI has continued to monitor the status of IGF. The Consent Order
     prohibits IGF from taking any of the following actions, without prior
     written consent of the IDOI: (i) sell or encumber any of its assets,
     property, or business in force; (ii) disburse funds, except to pay direct
     unaffiliated policyholder claims and normal operating expenses in the
     ordinary course of business (which does not include payment to affiliates
     except for the reimbursement of costs for running IGF by SIG, and does not
     include payments in excess of $10,000); (iii) lend its funds; (iv) make
     investments except in specified types of investments; (v) incur debts or
     obligations, except in the ordinary course of business to unaffiliated
     parties; (vi) merge or consolidate with another company; (vii) enter into
     new, or amend existing, reinsurance agreements; (viii) complete, enter into
     or amend any transaction or arrangement with an affiliate; or (ix) disburse
     funds or assets to any affiliate. The Consent Order requires IGF to provide
     the IDOI with monthly written updates and immediate notices of any material
     change regarding the status of litigation with Mutual Service Casualty
     Insurance Company and with Continental Casualty Company, statutory
     reserves, number of non-standard automobile insurance policies in-force by
     state, and reports of all non-claims related disbursements. IGF's failure
     to comply with the Consent Order could cause the IDOI to begin proceedings
     to have a rehabilitator or liquidator appointed for IGF to extend the
     provisions of the Consent Order.

     While IGF is prohibited from writing any new business pursuant to the
     Consent Order, the departments of insurance of Florida, Illinois,
     Minnesota, Missouri, Nebraska and Virginia have also issued orders that
     require IGF to cease writing business in those states without prior
     consent. South Carolina has also requested IGF cease writing business in
     that state. IGF has also agreed with the departments of insurance of Texas
     and Washington to stop writing business in those states.

     As a result of the Consent Order, IGF was prohibited from writing new
     non-standard automobile insurance in Pennsylvania after July 31, 2001.
     Prior to July 31, 2001, the non-standard automobile insurance policies
     written in Pennsylvania by IGF accounted for approximately 10% of the total
     gross written premiums of the Company. During the third quarter, the
     Pennsylvania Department of Insurance determined that it would not permit
     new business to be written in that state by Superior and other insurance
     company subsidiaries. Therefore, total written premiums for 2001 will be
     less than anticipated.

     On February 17, 2000, Pafco agreed to an order under which the IDOI may
     monitor more closely the ongoing operations of Pafco. Among other matters,
     Pafco must:

     o    Refrain from doing any of the following without the IDOI's prior
          written consent: (i) selling assets or business in force or
          transferring property, except in the ordinary course of business; (ii)
          disbursing funds, other than for specified purposes or for normal
          operating expenses and in the ordinary course of business (which does
          not include payments to affiliates, other than under written contracts
          previously approved by the IDOI, and does not include payments in
          excess of $10,000); (iii) lending funds; (iv) making investments,
          except in specified types of investments; (v) incurring debt, except
          in the ordinary course of business and to unaffiliated parties; (vi)
          merging or consolidating with another company; or (vii) entering into
          new, or modifying existing, reinsurance contracts.

     o    Reduce its monthly auto premium writings, or obtain additional
          statutory capital or surplus, such that the ratio of gross written
          premium to surplus and net written premium to surplus does not exceed
          4.0 and 2.4, respectively; and provide the IDOI with regular reports
          demonstrating compliance with these monthly writings limitations.


                                       8
<PAGE>

     o    Continue to comply with prior IDOI agreements and orders to correct
          business practices under which Pafco must provide monthly financial
          statements to the IDOI, obtain prior IDOI approval of reinsurance
          arrangements and affiliated party transactions, submit business plans
          to the IDOI that address levels of surplus and net premiums written,
          and consult with the IDOI on a monthly basis.

     Pafco's inability or failure to comply with any of the above could result
     in the IDOI requiring further reductions in Pafco's permitted premium
     writings or in the IDOI instituting future proceedings against Pafco.
     Restrictions on premium writings result in lower premium volume. Management
     fees payable to Superior Insurance Group, Inc. ("Superior Group") are based
     on gross written premium; therefore lower premium volume results in reduced
     management fees paid by Pafco.

     Pafco informed the Iowa Department of Insurance ("IADOI") of its decision
     to stop writing new automobile business in Iowa while Pafco reviews and
     revises its program in the state. Pafco has agreed with the IADOI that it
     will not write any new non-standard business, until such time as Pafco has
     reduced its overall non-standard automobile policy counts in the state or
     has: (i) increased surplus; or (ii) achieved a net written premium to
     surplus ratio of less than three to one; and (iii) surplus reasonable to
     its risk. Pafco has continued to service existing policyholders and renew
     policies in Iowa and provide policy count information on a monthly basis in
     conformance with IADOI requirements.

     Superior and Pafco also provide monthly financial information to the
     departments of insurance in certain states in which they write business,
     and Pafco has agreed to obtain IDOI prior approval of any new affiliated
     party transactions.

     The financial review of Superior for the year ended December 31, 1999 by
     the FDOI has been completed and the FDOI issued its draft report on July
     19, 2001. Superior believes it and the FDOI have agreed on language to be
     contained in the final report regarding the characterization of finance and
     service fee payments made by Superior to its parent. Superior anticipates
     the FDOI will issue its final report during the fourth quarter of 2001.

     As previously reported, the FDOI issued a notice of its intent to issue an
     order (the "Notice") which principally addressed certain policy and finance
     fee payments by Superior to Superior Group. A formal administrative hearing
     to review the Notice and a determination that the order contemplated by the
     Notice not be issued was held February 2001. The administrative law judge
     entered a recommended order on June 1, 2001 that was acceptable to the
     Company. On August 30, 2001 the FDOI issued its final order which the
     Company believes improperly characterized billing and policy fees paid by
     Superior to Superior Group. Superior filed an appeal of the final order to
     Florida District Court. Superior and the FDOI are presently in settlement
     discussions regarding the final order.
     Superior entered into a consent order with the Illinois Department of
     Insurance wherein Superior agreed it would not write business in that
     state. Superior also agreed to cease writing business in Texas without the
     prior approval of its department of insurance. The amount of business
     written by Superior in Illinois and Texas is not material. On October 9,
     2001 the State Corporation Commission of Virginia issued an order to take
     notice regarding an order suspending Superior's license to write business
     in that state. A hearing for a determination that the suspension order not
     be issued is set for November 29, 2001.

     The Company's operating subsidiaries, their business operations, and their
     transactions with affiliates, including the Company, are subject to
     regulation and oversight by the IDOI, the FDOI, and the insurance
     regulators of other states in which the subsidiaries write business. The
     Company is a holding company and all of its operations are conducted by its
     subsidiaries. Regulation and oversight of insurance companies and their
     transactions with affiliates is conducted by state insurance regulators
     primarily for the protection of policyholders and not for the protection of
     other creditors or of shareholders. Failure to resolve issues with the IDOI
     and the FDOI or other state insurance regulators in a mutually satisfactory
     manner could result in future regulatory actions or proceedings that
     materially and adversely affect the Company.

     The NAIC adopted the Codification of Statutory Accounting Principles
     guidance ("Codification"), which replaces the Accounting Practices and
     Procedures manual as the NAIC's primary guidance on statutory accounting
     effective January 1, 2001. The IDOI and FDOI have adopted Codification.


                                       9
<PAGE>

     The changes in statutory accounting principles resulting from Codification
     which impact the Company's insurance subsidiaries, among other things,
     limit the statutory carrying value of electronic data processing equipment
     and deferred tax assets in determining statutory surplus. The consolidated
     statutory surplus of the Company's insurance subsidiaries as of December
     31, 2000 was $39.4 million. The consolidated statutory surplus was
     approximately $38.1 million at September 30, 2001.

4.   COMMITMENTS AND CONTINGENCIES
     As previously reported, IGF had been a party to a number of pending legal
     proceedings and claims relating to agricultural production interruption
     insurance policies (the "AgPI Program") which were sold by IGF during 1998.
     Sales of this product resulted in large underwriting losses for IGF.

     Approximately $29.1 million was paid through September 30, 2001 in
     settlement of legal proceedings and claims related to the AgPI Program,
     with payments totaling approximately $359,000 in the first three quarters
     of 2001. A reserve of approximately $5.6 million remains to pay future
     claims. All of the policies of insurance, which were issued in the AgPI
     Program, were issued by and under the name of Mutual Service Casualty
     Insurance Company ("MSI"), a Minnesota corporation with its principal place
     of business located in Arden Hills, Minnesota.

     A dispute arose between MSI and IGF with respect to the funding of the
     settlements of claims made on the AgPI Program. MSI and IGF currently are
     arbitrating their dispute over responsibility for over $60 million in
     claims paid by both companies to MSI's insureds. IGF is seeking a recovery
     of the $30 million in claims which it paid, and MSI is seeking a similar
     recovery of the claims which it paid. The arbitration commenced December
     20, 2000. The parties subsequently selected an arbitration panel and had
     their first organizational meeting with the panel on May 22, 2001. At that
     meeting, MSI moved for an order requiring IGF to post pre-hearing security
     through the issuance of a letter of credit in the amount of $39 million.
     Over IGF's objection, in a two to one vote, the panel on June 9, 2001,
     ordered IGF to post the $39 million in security, which IGF was to have done
     by June 19, 2001.

     On or about June 11, 2001, IGF filed a motion in the United States District
     Court for the District of New Jersey seeking to vacate the arbitration
     panel's order requiring security. On June 19, 2001, MSI filed a motion in
     the same court for a ruling confirming that order. On July 26, 2001, the
     parties presented oral arguments on their cross-motions for vacation and
     confirmation of the order. On August 6, 2001 the court denied IGF's motion
     to vacate the arbitration panel's order. As of this date, IGF has not
     posted the required letter of credit, and it is financially incapable of
     satisfying that requirement. On November 7, 2001 the arbitration panel
     considered a petition for default judgment against IGF based on IGF's
     failure to post the pre-hearing security. In the event the arbitration
     panel orders a default judgment against IGF, IGF will appeal the order to
     the United States District Court of New Jersey.

     On June 25, 2001, MSI filed a complaint for preliminary and permanent
     injunctive relief and damages (the "MSI Complaint") against the Company,
     IGF, IGF Holdings, Inc. ("IGFH"), Granite Reinsurance Company Ltd.
     ("Granite Re"), Goran Capital Inc. ("Goran") and certain affiliates of
     those companies, as well as certain members of the Symons family, and
     Acceptance in the United States District Court for the Southern District of
     Indiana, Indianapolis Division. The MSI Complaint alleges that the
     previously reported June 6, 2001 transfer of IGF's assets to Acceptance and
     the payments by Acceptance to the Company, Goran and Granite Re violated
     Indiana law and are voidable. In addition, the MSI Complaint alleges that
     Acceptance, the Company, Goran, IGFH and the Symons family are liable to
     MSI for the entire $39 million claim which MSI is asserting against IGF in
     arbitration proceedings on theories of successor liability and "piercing
     the corporate veil." The MSI Complaint seeks preliminary and permanent
     injunctive relief against the defendants, an order voiding the various
     transactions between and among the defendants and an order determining that
     the defendants are directly responsible to MSI for MSI's $39 million claim
     against IGF.

     On July 26, 2001, the defendants filed answers to the MSI Complaint. In
     those answers, each of the defendants denied the material allegations
     contained in the MSI Complaint and asserted certain affirmative defenses to
     that complaint. Each of those defendants also filed briefs in opposition to
     MSI's Motion for Preliminary Injunctive Relief. A hearing on MSI's Motion
     for Preliminary Injunctive Relief was held Thursday, August 2, 2001. On
     August 3, 2001, the court denied MSI preliminary injunctive relief.


                                       10
<PAGE>

     In the event MSI is successful in obtaining permanent injunctive relief
     against the Company and its affiliates, any such relief would have an
     adverse impact upon the Company and its affiliates and their respective
     assets and operations. Further, in the event MSI is successful in obtaining
     court orders voiding the various transactions between the defendants and
     determining that the defendants are directly responsible to MSI for MSI's
     $39 million claim against IGF, those orders and determinations could also
     have an adverse effect upon the Company and its affiliates and their
     respective assets and operations.

     As previously reported, the Company and two of its subsidiaries, IGFH and
     IGF, are parties to a "Strategic Alliance Agreement" dated February 28,
     1998 (the "SAA") with Continental Casualty Company ("CNA"), pursuant to
     which IGF acquired certain crop insurance operations of CNA. Through
     reinsurance agreements, CNA was to share in IGF's profits or losses on
     IGF's total crop insurance business. By letter dated January 3, 2001, CNA
     gave notice pursuant to the SAA of its exercise of the "Put Mechanism"
     under the SAA effective February 19, 2001. According to the SAA, upon
     exercise of the Put Mechanism, IGFH is obligated to pay CNA an amount equal
     to 5.85 times "Average Pre-Tax Income", an amount based in part upon
     payments made to CNA under the SAA. The SAA further provided that 30 days
     after exercise of the Put, IGF will execute a promissory note payable six
     months after the exercise of the Put in the principal amount equal to the
     amount owed, as specified by the SAA. In a letter dated March 20, 2001, CNA
     advised the Company that it calculated the principal amount due CNA to be
     in excess of $26 million. CNA also asserted a claim for amounts allegedly
     due under reinsurance agreements for the 2000 crop year.

     As previously reported, the Company believes it has claims against CNA and
     defenses to CNA's claim that may ultimately offset or reduce amounts owed
     to CNA. The Company and CNA have engaged in discussions regarding possible
     alternatives for the resolution of their respective claims against each
     other; however, those discussions ultimately proved unsuccessful.

     Following the failure of settlement discussions, on June 4, 2001, IGF, IGFH
     and the Company filed a complaint against CNA (the "IGF Complaint") in the
     United States District Court for the Southern District of Indiana,
     Indianapolis Division. The IGF Complaint asserts claims against CNA for
     fraud and constructive fraud in connection with the SAA and breach of
     contract and seeks relief against CNA for compensatory and punitive
     damages. On June 27, 2001, CNA filed its "Answer, Separate Defenses and
     Counterclaim", in which CNA generally denied the material allegations of
     the IGF Complaint and asserted various defenses to those claims.

     On June 6, 2001, CNA filed a complaint against IGF, IGFH and the Company
     (the "CNA Complaint") asserting claims based on the SAA and related
     agreements for approximately $25 million allegedly owed CNA by virtue of
     its exercise of the Put Mechanism, $3 million for amounts allegedly due
     under reinsurance agreements for the 2000 crop year, $1 million for certain
     "fronting costs," and $1 million pursuant to a note executed by IGFH to
     CNA's affiliate in connection with the acquisition by IGFH of North
     American Crop Underwriters, Inc. in 1998. CNA also asserts claims to the
     effect that the June 6, 2001 sale of IGF assets to Acceptance resulted in
     payments of funds to Goran, the Company and Granite Re, which funds
     allegedly should have been paid to IGF instead. On June 6, 2001, CNA asked
     the district court to enter a temporary restraining order preventing IGF,
     IGFH and the Company from disposing of the proceeds received by them in
     connection with the sale of IGF assets to Acceptance. In an emergency
     hearing, the court denied CNA the relief it requested, without prejudice to
     reconsideration of those issues at a future time. CNA has since amended the
     CNA Complaint to add Goran and Granite Re as defendants. CNA's counterclaim
     in response to the IGF Complaint asserts essentially the same claims
     against the same parties as the amended CNA Complaint.

     On September 20, 2001, the court ordered a consolidation of the two cases,
     and discovery is proceeding. Although the Company continues to believe that
     it has claims against CNA and defenses to CNA's claims which may offset or
     reduce amounts owing by the Company or its affiliates to CNA, there can be
     no assurance that the ultimate resolution of the claims asserted by CNA
     against the Company and its affiliates will not have a material adverse
     effect upon the Company and its affiliates financial condition or results
     of operations.

     During 2000, the discontinued crop operations sold a product that insured
     potato producers against lost revenue caused by depressed commodity prices
     for potatoes. The commodity price of potatoes at December 31, 2000 was
     lower than the expected price; therefore, the Company established a
     $4,500,000 gross loss reserve for its unpaid loss obligations on this
     product during the second quarter of 2001. As of September 30, 2001, the
     Company had settled substantially all of the policyholder claims and no
     reserve remains.

                                       11
<PAGE>

     As previously reported, a complaint for a class action alleging violations
     of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 was
     filed against the Company and certain of its officers and directors in the
     United States District Court for the Southern District of Indiana. The
     Company intends to vigorously defend the claims brought against it. No
     material developments have occurred since last reported in the June 30,
     2001 Form 10-Q.

     On June 29, 2001, the California Department of Insurance ("CDOI") filed a
     Notice of Non-Compliance against Superior, which alleges that broker fees
     were charged by independent brokers in violation of California law. The
     Company and the CDOI are presently engaged in settlement discussions, and
     the Company expects to settle with the CDOI during the fourth quarter of
     2001. Although the ultimate outcome of the settlement discussions is
     unknown, the Company believes it will not owe more than $200,000 and has
     reserved this amount in its consolidated financial statements.

     Superior is a defendant in a case filed on May 8, 2001 in the United States
     District Court for the Southern District of Florida entitled The
     Chiropractic Centre, Inc. v. Superior Insurance Company which purports to
     be brought on behalf of a class consisting of healthcare providers
     allegedly paid improperly discounted rates on services to patients based
     upon a preferred provider contract with a third party. The plaintiff
     alleges that Superior breached a third party beneficiary contract,
     committed fraud and engaged in racketeering activity in violation of
     federal and Florida law by obtaining discounted rates offered by a third
     party with whom the plaintiff contracted directly. Superior believes that
     the allegations of wrongdoing as alleged in the complaint are without merit
     and intends to vigorously defend the claims brought against it.

     As previously reported, actions have been brought in Florida against
     Superior Guaranty Insurance Company (a subsidiary of Superior) purporting
     to be brought on behalf of a class of persons allegedly charged service
     charges or finance charges in violation of Florida law. No other material
     developments have occurred since last reported in the June 30, 2001 Form
     10-Q.

     As previously reported, an action has been brought in Florida alleging that
     Superior improperly reduced medical benefits payable and improperly
     calculated interest in violation of Florida law. The case was brought on
     behalf of a purported class consisting of (i) healthcare providers that
     rendered treatment to Superior insureds and claimants of Superior insureds
     and (ii) such insureds and claimants. The Company believes the claim is
     without merit and intends to vigorously defend the charges brought against
     it. No other material developments have occurred since last reported in the
     June 30, 2001 Form 10-Q.

     As previously reported, an action has been brought in Florida against
     Superior on behalf of a purported class consisting of healthcare providers
     that rendered treatment to Superior insureds and obtained a valid
     assignment of benefits from Superior. The plaintiff alleges that Superior
     reduced or denied claims for medical expenses payable to the plaintiff
     without first obtaining a written report in violation of Florida law. The
     plaintiff also alleges that Superior inappropriately reduced the amount of
     benefits payable to the plaintiff in breach of Superior's contractual
     obligations to the plaintiff. Superior believes the allegations of
     wrongdoing in violation of law are without merit and intends to vigorously
     defend the claims brought against it. No material developments have
     occurred since last reported in the June 30, 2001 Form 10-Q.

     The Company is a 50% owner in a limited corporation ("LLC") established to
     provide business services to the Company and an unrelated, third party. The
     debt of the LLC exceeds the fair market value of its operating assets by
     approximately $2 million at September 20, 2001.

     The Company and its subsidiaries are named as defendants in various other
     lawsuits relating to their business. Legal actions arise from claims made
     under insurance policies issued by the Company's subsidiaries. The Company
     in establishing its loss reserves has considered these actions. The Company
     believes that the ultimate disposition of these lawsuits will not
     materially affect the Company's operations or financial position.

5.   LOSS DEVELOPMENT ON PRIOR ACCIDENT YEARS
     During the third quarter of 2001, the Company experienced unfavorable
     development on its year-end 2000 loss and LAE reserves in the amount of
     $1.0 million. This increased the loss and loss adjustment expense ratio for
     the quarter by 4.0 percentage points.

                                       12
<PAGE>

6.   RECLASSIFICATIONS
     Certain prior period amounts have been reclassified to conform to the
current year presentation.

7.   EARNINGS PER SHARE
     Basic and diluted net earnings (loss) per share are computed by dividing
     net earnings (loss) as reported by the average number of shares outstanding
     as follows:

<TABLE>
<CAPTION>
                                                                              Three Months Ended
                                                                                 September 30
                                                                          ----------------------------
         (in thousands)                                                      2001            2000
                                                                          ------------    ------------
<S>                                                                         <C>             <C>
         Basic:
           Weighted-average common shares outstanding                          10,385          10,385
                                                                               ======          ======

         Diluted:
           Weighted-average common shares outstanding                          10,385          10,385
                                                                               ======          ======
</TABLE>

     The Company has 1,890,000 stock options outstanding as of November 8, 2001.
     Common stock equivalents are anti-dilutive; therefore, fully diluted
     earnings per share are the same as basic earnings per share.

8.   DISCONTINUED OPERATIONS
     In December 2000, the Company initiated the divestiture of its crop
     insurance segment. This business was predominantly written through IGF. The
     transaction was completed in June 2001 and transferred ownership of
     substantially all of the crop insurance assets of the Company and IGF,
     effective with the 2001 crop cycle, to Acceptance. Upon completion of the
     sale, the net assets of the discontinued operations were reduced to zero.
     IGF and its affiliates received approximately $27.4 million at closing and
     Acceptance assumed all of the crop insurance in-force policies for the 2001
     crop year. For agreeing not to compete in the crop insurance industry for a
     period of three years from the date of sale, the Company received $4.5
     million at closing that is being amortized to income on a straight-line
     basis over three years. An additional $9.0 million in reinsurance premium
     is payable to Granite Re under a multi-year reinsurance treaty whereby
     Granite Re has agreed to reinsure a portion of the crop insurance business
     of Acceptance and provide an indemnity on behalf of IGF. The results of the
     crop insurance segment have been reflected as "Discontinued Operations" in
     the accompanying unaudited consolidated financial statements in accordance
     with Accounting Principles Board Opinion No. 30 "Reporting the Results of
     Operations --- Reporting the Effects of Disposal of a Segment of a
     Business, and Extraordinary, Unusual and Infrequently Occurring Events and
     Transactions."

     Summarized results of operations for discontinued operations were as
follows:


                                       13
<PAGE>

<TABLE>
<CAPTION>

         STATEMENTS OF OPERATIONS:
         (in thousands)
                                                                            Three Months Ended
                                                                               September 30
                                                                     ---------------------------------
                                                                          2001               2000
                                                                     ---------------     -------------

<S>                                                                   <C>                 <C>
Gross premiums written                                                   $56,236             $34,337
                                                                         =======             =======
Net premiums written                                                        $154              $8,942
                                                                            ====              ======

     Net premiums earned                                                    $154             $14,155
     Net investment and fee income                                           (26)                372
     Net realized capital gain                                                (6)                  -
                                                                              ---             ------
Total revenues                                                               122              14,527
                                                                             ---              ------

     Loss and loss adjustment expenses                                    (1,546)             20,803
     Policy acquisition and general and administrative expenses            1,424               5,812
     Interest and amortization expense                                         -                 299
                                                                          ------               -----
Total expenses                                                              (122)             26,914
                                                                            -----             ------

Loss before income taxes                                                       -             (12,387)

Income tax expense                                                             -                   -
                                                                        --------            --------

Net loss from discontinued operations                                   $      -            $(12,387)
                                                                        ========            =========

<CAPTION>

         STATEMENTS OF OPERATIONS:
         (in thousands)
                                                                             Nine Months Ended
                                                                                September 30
                                                                     ----------------------------------
                                                                          2001               2000
                                                                     ---------------     -------------
<S>                                                                  <C>                 <C>
Gross premiums written                                                  $239,195            $219,915
                                                                        ========            ========
Net premiums written                                                       $(172)            $26,891
                                                                           ======            =======

     Net premiums earned                                                   $(172)            $23,589
     Net investment and fee income                                           961                 493
     Net realized capital gain                                               636                   1
                                                                             ---               -----
Total revenues                                                             1,425              24,083
                                                                           -----              ------

     Loss and loss adjustment expenses                                     5,238              31,137
     Policy acquisition and general and administrative expenses             (300)             (2,634)
     Interest and amortization expense                                    (1,357)                811
                                                                          -------             ------
Total expenses                                                             3,581              29,314
                                                                           -----              ------

Loss before income taxes                                                  (2,156)             (5,231)

Income tax expense                                                             -                   -
                                                                         -------             --------

Net loss from discontinued operations                                    $(2,156)            $(5,231)
                                                                         ========            ========
</TABLE>

                                       14
<PAGE>


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

OVERVIEW OF THE COMPANY
Symons International Group, Inc. (the "Company") owns insurance companies that
underwrite and market non-standard private passenger automobile insurance. The
Company's principal insurance company subsidiaries are Pafco General Insurance
Company ("Pafco"), Superior Insurance Company ("Superior") and IGF Insurance
Company ("IGF"). The Company is a 73% owned subsidiary of Goran Capital Inc.
("Goran").

As previously announced, the Company completed the sale of its crop insurance
operations in June 2001.

Pafco, Superior, Superior Guaranty Insurance Company ("Superior Guaranty") and
Superior American Insurance Company ("Superior American") are engaged in the
writing of insurance coverage for automobile physical damage and liability
policies for non-standard risks. Non-standard risk 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
or violations, particular occupation or type of vehicle. The Company offers
several different policies that are directed to different classes of risk within
the non-standard market. Premium rates for non-standard risks are higher than
for standard risks. Since it can be viewed as a residual market, the size of the
non-standard private passenger automobile insurance market changes with the
insurance environment and grows when the standard carriers become more
restrictive. Non-standard 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 non-standard
policies is shorter than many other types of insurance. Also, since the
non-standard automobile insurance business typically experiences lower rates of
retention than standard automobile insurance, the number of new policyholders
underwritten by non-standard automobile insurance carriers each year is
substantially greater than the number of new policyholders underwritten by
standard carriers.

FORWARD LOOKING STATEMENTS AND CERTAIN RISKS
All statements, trend analyses, and other information herein contained, relative
to markets for the Company's products and/or trends in the Company's operations
or financial results, as well as other statements including words such as
"anticipate," "could," "feel(s)," "believe," "believes," "plan," "estimate,"
"expect," "should," "intend," "will," and other similar expressions, constitute
forward-looking statements under the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to known and unknown risks;
uncertainties and other factors which may cause actual results to be materially
different from those contemplated by the forward-looking statements. Such
factors include, among other things: (i) general economic conditions, including
prevailing interest rate levels and stock market performance; (ii) factors
affecting the Company's non-standard automobile operations such as rate increase
approval, policy renewals, new business written, and premium volume; and (iii)
the factors described in this section and elsewhere in this report.

SIGNIFICANT LOSSES HAVE BEEN REPORTED AND ARE LIKELY TO CONTINUE
For the three months ended September 30, 2001, losses from continuing operations
were $(6,824,000) compared to losses of $(12,529,000) in the comparable period
of 2000. For the nine months ended September 30, 2001, losses from continuing
operations were $(23,265,000) compared to losses of $(32,281,000) for the same
period of 2000. The Company previously reported losses from continuing
operations of $(71,384,000) for the entire year 2000 compared to losses from
continuing operations of $(65,443,000) for 1999. The 2000 loss includes a
one-time charge for the write-off of goodwill of $33.5 million. The Company is
continuing to seek and implement rate increases and other underwriting actions
to achieve profitability. A number of systems have been automated and service
problems have been eliminated or significantly reduced. Although the Company has
taken a number of actions to address factors contributing to these past losses,
there can be no assurance that operating losses will not continue.


                                       15
<PAGE>

RECENT AND FURTHER REGULATORY ACTIONS MAY ADVERSELY AFFECT THE COMPANY'S FUTURE
OPERATIONS
The Company's insurance company subsidiaries, their business operations, and
their transactions with affiliates, including the Company, are subject to
extensive regulation and oversight by the Indiana Department of Insurance
("IDOI"), the Florida Department of Insurance ("FDOI"), and the insurance
regulators of other states in which the insurance company subsidiaries write
business. Moreover, the insurance company subsidiaries' losses, adverse trends
and uncertainties discussed in this report have been and continue to be matters
of concern to the domiciliary and other insurance regulators of the Company's
insurance company subsidiaries and have resulted in enhanced scrutiny,
suspensions, orders and other regulatory actions by several regulators. The
primary purpose of insurance regulation is the protection of policyholders
rather than stockholders. Failure to resolve issues with the IDOI, FDOI, and
other regulators, in a manner satisfactory to the Company could impair the
Company's ability to execute its business strategies or result in future
regulatory actions or proceedings that could have a material adverse effect on
the Company's operations.

THE COMPANY IS SUBJECT TO A NUMBER OF PENDING LEGAL PROCEEDINGS
The Company is involved in a number of pending legal proceedings. The Company
intends to vigorously defend all of the claims brought against it. Although the
Company believes that it has claims and defenses that may offset or reduce
potential liability and that many of these actions are without merit, there can
be no assurance that such proceedings will not have a material adverse effect on
the Company's operations.

THE TERMS OF THE TRUST PREFERRED SECURITIES MAY RESTRICT THE COMPANY'S ABILITY
TO ACT
The Company has issued, through a wholly owned trust subsidiary, $135 million
aggregate principal amount in Trust Originated Preferred Securities (the
"Preferred Securities"). The Preferred Securities have a term of 30 years with
annual interest payments of 9.5% paid semi-annually. The obligations of the
Preferred Securities are funded from the Company's non-standard automobile
management company. The Company began deferring the semi-annual interest
payments in February 2000 and may continue to defer such payments for up to five
years as permitted by the indenture for the Preferred Securities. Although there
is no present event of default under the indenture that would accelerate the
payment of the Preferred Securities, the indenture contains a number of
covenants that restrict the Company's ability to act in the future. These
covenants include restrictions on the Company's ability to: incur or guarantee
debt; make payments to affiliates; repurchase its common stock; pay dividends on
common stock; and increase its level of certain investments in other than
investment grade, fixed income securities. There can be no assurance that
compliance with these restrictions and other provisions of the indenture for the
Preferred Securities will not adversely affect the cash flow of the Company.

REVIEW OF CONSOLIDATED OPERATIONS

NET LOSS
The net loss for the three months ended September 30, 2001 was $(6,824,000) or
$(.66) per share (basic and diluted). This is a decrease of $18,092,000 or $1.74
per share from the net loss for the same period of 2000. The decreased net loss
is due primarily to the loss from operations of the discontinued crop insurance
segment of $(12,387,000) realized in the third quarter of 2000 as well as
improvement in realized capital gains, loss and loss adjustment expenses, and
policy acquisition and general and administrative expenses. The loss on
discontinued operations in 2000 also decreased the net loss for the nine months
ended September 30, 2001 over the same period in 2000 by $12,091,000 or $1.16
per share. Refer to Note 8. "Discontinued Operations" of the Condensed Notes to
Consolidated Financial Statements for additional information.

The loss from continuing operations before taxes and distributions on preferred
securities was $(3,279,000) for the three months ended September 30, 2001
compared to a loss of $(9,075,000) for the comparable period in 2000, an
improvement of $5,796,000. For the nine months ended September 30, 2001, the
loss from continuing operations before taxes and distributions on preferred
securities improved by $9,440,000.

GROSS PREMIUMS WRITTEN
Gross premiums written decreased 41% for the third quarter of 2001 as compared
to the third quarter of 2000. Gross premiums written in the third quarter of
2000 declined 16% from the third quarter of 1999. Both yearly declines resulted
from the Company exiting certain highly competitive markets and instituting
other underwriting initiatives intended to increase profitability, as well as,
being limited by regulatory action from writing in certain states and general
surplus


                                       16
<PAGE>

levels. For the first nine months of 2001, gross premium written
decreased 10% over the same period in 2000, due primarily to the aforementioned
rate increases and a reduction in policies in force.

NET PREMIUMS WRITTEN
Net premiums written represent the portion of premiums that are being retained
by the Company after consideration for risk sharing through reinsurance
contracts. As a result of losses in the Company's insurance subsidiaries and to
manage overall risk retention, the Company entered into a reinsurance agreement
to cede a portion of its gross written premiums to a third party. In the third
quarter of 2001, the Company ceded approximately 46% of its gross written
premiums under a quota share reinsurance contract that was effective January 1,
2000. For the first nine months of 2001, approximately 54% of gross premiums
written were ceded to the reinsurer.

NET PREMIUMS EARNED
Net premiums earned have decreased 26% and 42% for the three and nine months
ended September 30, 2001, respectively, as compared to the same periods in 2000.
Premiums are earned ratably over the term of the underlying insurance contracts
and the reduction in net premiums earned is a result of the decrease in written
premium and the increase in ceded premiums.

FEE INCOME
Fee income is derived from installment billings and other services provided to
policyholders. In the third quarter of 2001, fee income was 13% higher than in
2000, while fee income for the nine months of 2001 was 6% lower than in 2000.
The addition of new fee types, including insufficient funds (NSF),
reinstatement, and cancellation fees, as well as the earned portion of service
and finance fees, accounts for the third quarter increase. The approximate
overall decline in fee income of 10% equates to the overall decline in written
premium in the first nine months of 2001.

NET INVESTMENT INCOME
Net investment income decreased 40% and 41% for the three and nine months ended
September 30, 2001 compared to the same periods in 2000. This decrease is
reflective of the decline in invested assets during a period of declining
premiums and the payout of prior year losses settled in 2001.

NET REALIZED CAPITAL GAINS AND (LOSSES)
Net realized capital gains/(losses) were $793,000 and $(263,000) for the three
and nine months ended September 30, 2001 respectively, as compared to net
realized capital losses of $(2,632,000) and $(3,949,000) in the comparable
periods of 2000. Capital gains resulted from the liquidation of longer duration
fixed income securities in the third quarter of 2001in order to rebalance the
portfolio. These transactions resulted in a higher cash balance at September 30,
2001 that was reinvested in the fourth quarter in shorter maturities. Capital
losses were realized due to the continued liquidation of investments to fund
operations and claim payments under unfavorable market conditions.

LOSSES AND LOSS ADJUSTMENT EXPENSES
The loss and loss adjustment expense (LAE) ratio for the Company for the three
and nine months ending September 30, 2001, was 83.5% and 88.4% of net premiums
earned respectively, as compared to 83.1% and 82.7% for the similar period of
2000, and to 82.3% for the entire year of 2000. A portion of LAE, unallocated
loss adjustment expenses (ULAE), is not ceded as part of the quota share
reinsurance contract mentioned above and accounts for the increased percentages.

During the 3rd quarter of 2001 the Company experienced unfavorable development
on its year-end 2000 loss and LAE reserves in the amount of $1.0 million. This
increased the loss and loss adjustment expense ratio for the quarter by 4.0
percentage points.

POLICY ACQUISITION AND GENERAL AND ADMINISTRATIVE EXPENSE
Policy acquisition and general and administrative expenses for the three and
nine months ended September 30, 2001 declined to $13,038,000 and $34,269,000,
respectively, from the comparable periods of 2000. A reduction for the third
quarter and first nine months of 2001 of 23% and 37%, respectively, over the
same periods in 2000. This reflects an increase in ceding commissions associated
with the quota share reinsurance contract and overall operating expense
reductions.


                                       17
<PAGE>

As a percentage of gross premiums written, the Company experienced an increase
in its 2001 expense ratio of 11% over 2000 for the three months ended September
30, 2001. This increase is the result of a true-up of ceding commissions earned
between the second and third quarters, as year-to-date ceding percentages equal
54%, while only 46% of written premium was ceded in the third quarter. For the
nine months ended September 30, 2001, the decrease in the expense ratio of 12%
is the result of reduced operating expenses, the effect of increased operating
expenses allocated to LAE, and an increase in ceding commissions earned under
the quota share reinsurance contract over 2000.

PROVISION (BENEFIT) FOR INCOME TAXES
At September 30, 2001, the Company's net tax assets are fully offset by a 100%
valuation allowance that resulted in no tax benefit for either the three or nine
months ended September 30, 2001.


REVIEW OF CONSOLIDATED FINANCIAL CONDITION

CASH AND INVESTMENTS
Total investments at September 30, 2001 and December 31, 2000 were $89.2 million
and $134.1 million, respectively. The decline in invested assets results from
continued liquidations to fund claim payments and operating expenses as well as
the portfolio rebalancing mentioned above. Composition of investments is
comparable between these periods and the Company's market risk exposure has not
changed materially since December 31, 2000. Refer to "Net Realized Capital Gains
and (Losses)" above for a discussion of other changes in cash and investment
balances.

REINSURANCE RECEIVABLES AND PAYABLES
The Company negotiated a third-party quota share reinsurance agreement that
became effective January 1, 2000. Under the quota share agreement, the Company
may cede a portion of its non-standard automobile insurance premiums and related
losses based on a variable percentage of up to 75% of Superior's and up to 90%
of Pafco's earned premiums in 2001. The average ceding percentage over the year
2000 was 33%, with 41% being ceded in the fourth quarter of 2000. In aggregate,
the Company's ceding percentage for 2001 was increased to approximately 54%. The
increase in the amount of premiums and losses ceded under this contract directly
affect reinsurance balances due and payable on the face of the financial
statements.

RECEIVABLES
The receivables have decreased by $3,482,000 or 7% from December 31, 2000. This
decrease is attributable to the collection of premiums from periods in which
written premiums were higher and the general decline in premium volume in 2001.

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES
Total loss and loss adjustment expense reserves decreased from $108,117,000 as
of December 31, 2000 to $86,435,000 as of September 30, 2001, a reduction of
approximately $21.7 million. This decrease is consistent with the Company's
declining volume of business.

UNEARNED PREMIUMS
At September 30, 2001, unearned premiums were $60,502,000, a decrease of
$1,884,000 from December 31, 2000, consistent with the decrease in written
premiums discussed above.

DEFERRED INCOME
In connection with the sale of the crop insurance book of business to Acceptance
on June 6, 2001, the Company received a payment of $4.5 million for agreeing not
to engage in the crop insurance business for three years from the sale date. The
payment is being amortized to income on a straight-line basis over the
three-year period with four months of amortization taken ($500,000) through
September 30, 2001.

STOCKHOLDERS' (DEFICIT)
Stockholders' (deficit) and the increase in the realized loss on investment of
$(211,000) has increased by $(25,632,000) from December 31, 2000. This increase
is the result of the net loss of $(25,421,000) for the nine months ended
September 30, 2001.


                                       18
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES
The primary source of funds available to the management and holding companies
are fees from policyholders, management fees and dividends from its primary
subsidiaries.

The Company collects billing fees charged to policyholders that elect to make
their premium payments in installments and also receives management fees
pursuant to a management agreement between Superior Insurance Group, Inc.
("Superior Group") and Superior Insurance Company ("Superior"). Superior may pay
dividends of up to 10% of surplus or 100% of net income, whichever is greater,
from earned surplus as permitted by Florida statute. During 2000 and 2001
Superior has had no net income from which to pay dividends. As a result of
regulatory actions taken by the Indiana Department of Insurance ("IDOI") with
respect to Pafco and IGF, those subsidiaries may not pay dividends without prior
approval by the IDOI. Extraordinary dividends, within the meaning of the Indiana
Insurance Code, cannot be paid by Pafco without the prior approval of the
Indiana Insurance Commissioner. The management fees charged to Pafco, IGF and
Superior are subject to review by the IDOI and FDOI.

The non-standard automobile insurance subsidiaries' primary sources of funds are
premiums, investment income and proceeds from the maturity or sale of invested
assets. Such funds are used principally for the payment of claims, payment of
claims settlement costs, operating expenses (primarily management fees),
commissions to independent agents, premium taxes, dividends and the purchase of
investments. There is variability to cash outflows because of uncertainties
regarding settlement dates for liabilities for unpaid losses. Accordingly, the
Company maintains investment programs intended to provide adequate funds to pay
claims. During the third quarter of both 2001 and 2000, due to reduced premium
volume, the Company has liquidated investments to pay claims. The Company
historically has tried to maintain duration averages of 3.5 years. However, the
reduction in new funds due to lower premium volume has and will cause the
Company to shorten duration. The Company may incur the cost of selling longer
bonds to pay claims as claim payments tend to lag premium receipts. Due to the
decline in premium volume, the Company has experienced a reduction in its
investment portfolio, but to date has not experienced any problems meeting its
obligations for claims payments.

On August 12, 1997, the Company issued through a wholly owned trust subsidiary
$135 million aggregate principal amount in Trust Originated Preferred Securities
("Preferred Securities"). The Preferred Securities have a term of 30 years with
annual interest payments of $6.5 million, which commenced February 15, 1998. The
Preferred Securities may be redeemed in whole or in part after 10 years.

The Company began deferring the semi annual interest payments in February 2000.
The Company may continue to defer interest payments in accordance with the terms
of the trust indenture for up to five years. The unpaid interest installment
amounts accrue interest at 9.5%. The Company last deferred the interest payment
due in August 2001.

The trust indenture contains certain restrictive covenants. These covenants are
based upon the Company's consolidated coverage ratio of earnings before
interest, taxes, depreciation and amortization (EBITDA) whereby if the Company's
EBITDA falls below 2.5 times consolidated interest expense (including Preferred
Security distributions) for the most recent four quarters, the following
restrictions become effective:

o    The Company may not incur additional indebtedness or guarantee additional
     indebtedness.
o    The Company may not make certain restricted payments including making loans
     or advances to affiliates, repurchasing common stock and the payment of
     dividends in excess of a stated limitation.
o    The Company may not increase its level of non-investment grade securities
     defined as equities, mortgage loans, real estate, real estate loans and
     non-investment grade fixed income securities.

These restrictions currently apply as the Company's consolidated coverage ratio
was .86 at September 30, 2001, and will continue to apply until the Company's
consolidated coverage ratio is in compliance with the terms of the trust
indenture. The Company is in compliance with these additional restrictions.

Net cash used in operating activities in the first nine months of 2001
aggregated $(19.5) million compared to cash used of $(33.8) million in the
comparable period of 2000.

Management believes cash flows from premiums, investment income, billing fees
and the liquidation of investments, as necessary, in the non-standard automobile
operations will be sufficient to meet obligations to policyholders and operating


                                       19
<PAGE>

expenses for the foreseeable future. This is due primarily to the lag time
between receipt of premiums and claims payments. Accordingly, while there can be
no assurance as to the sufficiency of the Company's cash flow in future periods,
the Company believes that its cash flow will be sufficient to meet all of the
Company's operating expenses and operating debt service (not including the
Preferred Securities) for the foreseeable future.

GAAP stockholders' equity reflected a deficit of $(138,077,000) at September 30,
2001, which does not reflect the statutory equity upon which the Company
conducts its various insurance operations. The Company's insurance subsidiaries,
after the effects of Codification (See Note 3 to the consolidated financial
statements), had statutory surplus of approximately $38.1 million at September
30, 2001.

ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Information related to Qualitative and Quantitative Disclosures about Market
Risk was included under Item 1. Business in the December 31, 2000 Form 10-K. No
material changes have occurred in market risk since this information was
disclosed in the December 31, 2000 Form 10-K.

PART II -         OTHER INFORMATION
ITEM 1.  LEGAL PROCEEDINGS

As previously reported, IGF, which is a wholly owned subsidiary of the Company,
had been a party to a number of pending legal proceedings and claims relating to
agricultural production interruption insurance policies (the "AgPI Program")
which were sold during 1998. Sales of this product resulted in large
underwriting losses by IGF.

Approximately $29,147,278 was paid through September 30, 2001 in settlement of
legal proceedings and claims related to the AgPI Program, with payments totaling
approximately $359,114 for the first three quarters of 2001. A reserve of
approximately $5,635,079 remains to pay future claims. All of the policies of
insurance, which were issued in the AgPI Program, were issued by and under the
name of Mutual Service Casualty Insurance Company ("MSI"), a Minnesota
corporation with its principal place of business located in Arden Hills,
Minnesota.

A dispute arose between MSI and IGF with respect to the funding of the
settlements of claims made on the AgPI Program. MSI and IGF currently are
arbitrating their dispute over responsibility for over $60 million in claims
paid by both companies to MSI's insureds. IGF is seeking a recovery of the $30
million in claims which it paid, and MSI is seeking a similar recovery of the
claims which it paid. The arbitration commenced on December 20, 2000. The
parties subsequently selected an arbitration panel and had their first,
organizational meeting with the panel on May 22, 2001. At that meeting, MSI
moved for an order requiring IGF to post pre-hearing security through the
issuance of a letter of credit in the amount of $39 million. Over IGF's
objection, in a two to one vote, the panel on June 9, 2001, ordered IGF to post
the $39 million in security, which IGF was to have done by June 19, 2001.

On or about June 11, 2001, IGF filed a motion in the United States District
Court for the District of New Jersey seeking to vacate the arbitration panel's
order requiring security. On June 19, 2001, MSI filed a motion in the same court
for a ruling confirming that order. On July 26, 2001, the parties presented oral
arguments on their cross-motions for vacation and confirmation of the order. On
August 6, 2001 the court denied IGF's motion to vacate the arbitration panel's
order. As of this date, IGF has not posted the required letter of credit, and it
is financially incapable of satisfying that requirement. On November 7, 2001 the
arbitration panel considered a petition for default judgment against IGF based
on IGF's failure to post the pre-hearing security. In the event the arbitration
panel orders a default judgment against IGF, IGF will appeal the order to the
United States District Court of New Jersey.

On June 25, 2001, MSI filed a complaint for preliminary and permanent injunctive
relief and damage (the "MSI Complaint") against the Company, IGF, IGFH, Granite
Re, Goran and certain affiliates of those companies, as well as certain members
of the Symons family, and Acceptance in the United States District Court for the
Southern District of Indiana, Indianapolis Division. The MSI Complaint alleges
that the previously reported June 6, 2001 transfer of IGF's assets to Acceptance
and the payments by Acceptance to the Company, Goran and Granite Re violated
Indiana law and are avoidable. In addition, the MSI Complaint alleges that
Acceptance, the Company, Goran, IGFH and the Symons Family are liable to MSI for
the entire $39 million claim which MSI is asserting against IGF in arbitration
proceedings


                                       20
<PAGE>

on theories of successor liability and "piercing the corporate veil." The MSI
Complaint seeks preliminary and permanent injunctive relief against the
defendants, an order voiding the various transactions between and among the
defendants and an order determining that the defendants are directly responsible
to MSI for MSI's $39 million claim against IGF.


July 26, 2001, the defendants filed answers to the MSI Complaint. In those
answers, each of the defendants denied the material allegations contained in the
MSI Complaint and asserted certain affirmative defenses to that complaint. Each
of those defendants also filed briefs in opposition to MSI's Motion for
Preliminary Injunctive Relief. A hearing on MSI's Motion for Preliminary
Injunctive Relief was held Thursday, August 2, 2001. On August 3, 2001, the
court denied MSI preliminary injunctive relief.

In the event MSI is successful in obtaining permanent injunctive relief against
the Company and its affiliates, any such relief would have an adverse impact
upon the Company and its affiliates and their respective assets and operations.
Further, in the event MSI is successful in obtaining court orders voiding the
various transactions between the defendants and determining that the defendants
are directly responsible to MSI for MSI's $39 million claim against IGF, those
orders and determinations also could have an adverse effect upon the Company and
its affiliates and their respective assets and operations.

As previously reported, the Company and two of its subsidiaries, IGFH and IGF,
are parties to a "Strategic Alliance Agreement" dated February 28, 1998 (the
"SAA") with Continental Casualty Company ("CNA"), pursuant to which IGF acquired
certain crop insurance operations of CNA. Through reinsurance agreements, CNA
was to share in IGF's profits or losses on IGF's total crop insurance business.
By letter dated January 3, 2001, CNA gave notice pursuant to the SAA of its
exercise of the "Put Mechanism" under the SAA effective February 19, 2001.
According to the SAA, upon exercise of the Put Mechanism, IGFH is obligated to
pay CNA an amount equal to 5.85 times "Average Pre-Tax Income", an amount based
in part upon payments made to CNA under the SAA. The SAA further provided that
30 days after exercise of the Put, IGF will execute a promissory note payable
six months after the exercise of the Put in the principal amount equal to the
amount owed, as specified by the SAA. In a letter dated March 20, 2001CNA also
asserted a claim for amounts allegedly due under reinsurance agreements for the
2000 crop year.

Also, as previously reported, the Company believes it has claims against CNA and
defenses to CNA's claim that may ultimately offset or reduce amounts owed to
CNA. The Company and CNA engaged in discussions regarding possible alternatives
for the resolution of their respective claims against each other. However, those
discussions ultimately proved to be unsuccessful.

Following the failure of settlement discussions, on June 4, 2001, IGF, IGFH and
the Company filed a complaint against CNA (the "IGF Complaint") in the United
States District Court for the Southern District of Indiana, Indianapolis
Division. The IGF Complaint asserts claims against CNA for fraud and
constructive fraud in connection with the SAA and breach of contract and seeks
relief against CNA for compensatory and punitive damages. On June 27, 2001, CNA
filed its "Answer, Separate Defenses and Counterclaim", in which CNA generally
denied the material allegations of the IGF Complaint and asserted various
defenses to those claims.

On June 6, 2001, CNA filed a complaint against IGF, IGFH and the Company (the
"CNA complaint") asserting claims based on the SAA and related agreements for
approximately $25 million allegedly owed CNA by virtue of its exercise of the
Put Mechanism, $3 million for amounts allegedly due under reinsurance agreements
for the 2000 crop year, $1 million for certain "fronting costs," and $1 million
pursuant to a note executed by IGFH to CNA's affiliate in connection with the
acquisition by IGFH of North American Crop Underwriters, Inc. in 1998. CNA also
asserted claims to the effect that the June 6, 2001 sale of IGF assets to
Acceptance resulted in payments of funds to Goran, the Company and Granite Re,
which funds allegedly should have been paid to IGF instead. On June 6, 2001, CNA
asked the district court to enter a temporary restraining order preventing IGF,
IGFH and the Company from disposing of the proceeds received by them in
connection with the sale of IGF assets to Acceptance. In an emergency hearing,
the court denied CNA the relief it requested, without prejudice to
reconsideration of those issues at a future time. CNA has since amended the CNA
Complaint to add Goran and Granite Re as defendants. CNA's counterclaim in
response to the IGF Complaint asserts essentially the same claims against the
same parties as the amended CNA Complaint.

On September 20, 2001, the court ordered a consolidation of the two cases.
Discovery in the case is proceeding.


                                       21
<PAGE>

Although the Company continues to believe that it has claims against CNA and
defenses to CNA's claims which may offset or reduce amounts owing by the Company
of its affiliates to CNA, there can be no assurance that the ultimate resolution
of the claims asserted by CNA against the Company and its affiliates will not
have a material adverse effect upon the Company and its affiliates financial
condition or results of operations.

As previously reported, the California Department of Insurance ("CDOI") filed a
Notice of Non-Compliance against Superior on June 29, 2001, which alleges that
broker fees were charged by independent brokers in violation of California law.
The Company and the CDOI are presently in settlement discussions, and the
Company expects to settle with the CDOI during the fourth quarter. Although the
ultimate outcome of the settlement discussions is unknown, the Company believes
it will settle for an amount less than $200,000 and therefore has accrued this
amount in its consolidated financial statements.

Superior is a defendant in a case filed on May 8, 2001 in the United States
District Court for the Southern District of Florida entitled The Chiropractic
Centre, Inc. v. Superior Insurance Company which purports to be brought on
behalf of a class consisting of healthcare providers improperly paid discounted
rates on services to patients based upon a preferred provider contract with a
third party. The plaintiff alleges that Superior breached a third party
beneficiary contract, committed fraud and engaged in racketeering activity in
violation of federal and Florida law by obtaining discounted rates offered by an
third party with whom the plaintiff contracted directly. Superior believes that
the allegations of wrongdoing as alleged in the complaint are without merit and
intends to vigorously defend the claims brought against it.

See footnote 4, "Commitment and Contingencies", and footnote 3, "Regulatory
Affairs", to the Company's consolidated financial statements in Part I of this
report, incorporated herein by reference, for additional legal matters.

Except as set forth above, there have been no other material developments in any
of the pending legal proceedings previously reported by the Company in the June
30, 2001 Form 10-Q.

The Company's insurance subsidiaries are parties to other 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 estimate costs of litigation.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS
         None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
         None

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

ITEM 5.  OTHER INFORMATION
         None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
         EXHIBITS
         Employment agreement by and between the Company and Mark A. Paul dated
         July 30, 2001.

         REPORTS ON FORM 8-K
         On August 2, 2001 the Company filed a Form 8-K describing recent legal
         proceedings and regulatory actions regarding the Registrant and its
         affiliates as discussed above under "Legal Proceedings," "Commitments
         and Contingencies," and "Regulatory Affairs."


                                       22
<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 on November 12, 2001.



                                        By: /s/ Douglas H. Symons
                                            ---------------------
                                        Douglas H. Symons
                                        Chief Executive Officer



                                        By: /s/ Mark A. Paul
                                            --------------------------
                                        Mark A. Paul
                                        Vice President, Chief Financial Officer,
                                        and Treasurer






                                       23