UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For The Quarterly Period Ended June 30, 1999

                         Commission File Number: 1-12369

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

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


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

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

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


As of June 30, 1999, there were 10,385,399  shares of Registrant's  common stock
issued and outstanding exclusive of shares held by Registrant.



<PAGE>

                                 Form 10-Q Index
                       For The Quarter Ended June 30, 1999
                                                                       Page
                                                                      Number

PART 1  FINANCIAL INFORMATION

Item 1  Financial Statements

        Consolidated Financial Statements:
        Consolidated Balance Sheets at June 30, 1999
        (unaudited) and December 31, 1998 . .........................      3

        Unaudited Consolidated Statements of Earnings for the
        Three and Six Months Ended June 30, 1999 and 1998............    4-5

           Unaudited Consolidated Statements of Stockholders'
        Equity and Comprehensive Income for the Six Months Ended
        June 30, 1999 and 1998.......................................      6

        Unaudited Consolidated Statements of Cash Flows for the
        Six Months Ended June 30, 1999 and 1998......................      7

        Condensed Notes to Unaudited Consolidated Financial
        Statements...................................................      8

Item 2  Management's Discussion and Analysis of Financial
        Condition and Results of Operations..........................     16

PART 2  OTHER INFORMATION............................................     30

SIGNATURES...........................................................     31


NOTE:    ALL ITEMS ARE IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PER SHARE
         DATA OR UNLESS OTHERWISE NOTED.


<PAGE>

                         PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
SYMONS INTERNATIONAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS (in thousands)
<TABLE>
<CAPTION>
                                                                                        June 30,       December 31,
                                                                                          1999            1998
ASSETS                                                                                (unaudited)
<S>                                                                                    <C>               <C>
Investments
  Available for sale:
  Fixed maturities, at market                                                          $190,617          $191,002
  Equity securities, at market                                                           14,912            13,264
  Short-term investments, at amortized cost which approximates market                    17,312            15,597
Mortgage loans, at cost                                                                   2,050             2,100
Other                                                                                       998               890
                                                                                        -------           -------
         TOTAL INVESTMENTS                                                              225,889           222,853
Investment in and advances to related parties                                             1,395             3,545
Cash and cash equivalents                                                                14,860            14,800
Receivables, net of allowance for doubtful accounts                                     258,319           120,559
Reinsurance recoverable on paid and unpaid losses, net                                  103,454            71,640
Prepaid reinsurance premiums                                                            127,329            31,172
Federal income taxes recoverable                                                          8,625            12,672
Deferred policy acquisition costs                                                        16,901            16,332
Deferred income taxes                                                                     6,786             5,146
Property and equipment, net of accumulated depreciation                                  20,798            18,863
Intangible assets                                                                        44,639            45,781
Other assets                                                                              8,365             6,074
                                                                                        -------           -------
         TOTAL ASSETS                                                                  $837,360          $569,437
                                                                                        =======           =======
LIABILITIES
Losses and loss adjustment expense reserves                                             213,721          $200,972
Unearned premiums                                                                       226,482           110,664
Reinsurance payables                                                                    175,044            25,484
Notes payable                                                                            13,435            13,744
Distributions payable on preferred securities                                             4,783             4,809
Other                                                                                    20,545            16,769
                                                                                        -------           -------
         TOTAL LIABILITIES                                                              654,010           372,442
                                                                                        -------           -------
Commitments and contingencies:
Minority interest:
  Preferred securities                                                                  135,000           135,000
                                                                                        -------           -------
STOCKHOLDERS' EQUITY
Common stock                                                                             38,136            38,136
Additional paid-in capital                                                                5,851             5,851
Unrealized gain (loss) on investments                                                    (1,597)            1,261
Retained earnings                                                                         5,960            16,747
                                                                                        -------           -------
         TOTAL STOCKHOLDERS' EQUITY                                                      48,350            61,995
                                                                                        -------           -------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $837,360          $569,437
                                                                                        =======           =======
See condensed notes to consolidated financial statements
</TABLE>

                                      -3-

<PAGE>

SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                      Three Months Ended
                                                                                           June 30,
                                                                                      1999           1998

<S>                                                                                 <C>            <C>
Gross premiums written                                                              $173,870       $173,094
Less ceded premiums                                                                  (98,083)       (68,380)
                                                                                     -------        -------
Net premiums written                                                                  75,787        104,714
Change in net unearned premiums                                                       (2,877)        (5,756)
                                                                                     -------        -------
Net premiums earned                                                                   72,910         98,958
Fee income                                                                             3,092          4,901
Net investment income                                                                  3,320          3,306
Net realized gain                                                                        366            843
                                                                                     -------        -------
      Total Revenues                                                                  79,688        108,008
                                                                                     -------        -------
Loss and loss adjustment expenses                                                     70,525         72,181
Policy acquisition and general and administrative expenses                            19,652         23,088
Interest expense                                                                         105             49
Amortization of intangibles                                                              651            510
                                                                                     -------        -------
      Total Expenses                                                                  90,933         95,828
                                                                                     -------        -------
      (Loss) earnings before income taxes and minority interest                      (11,245)        12,180

(Benefit) Provision for income taxes                                                  (3,576)         4,416
                                                                                     -------        -------
      Net (loss) earnings before minority interest                                    (7,669)         7,764

Minority interest:
  Distributions on preferred securities, net of tax                                    2,096          2,096
                                                                                     -------        -------
      Net (loss) earnings                                                            $(9,765)       $ 5,668
                                                                                     =======        =======

Net (loss) earnings per share - basic                                                 $(0.94)         $0.55
                                                                                        ====           ====
Net (loss) earnings per share - fully diluted                                         $(0.94)         $0.53
                                                                                        ====           ====
Weighted average shares outstanding:
  Basic                                                                               10,385         10,392
                                                                                      ======         ======
  Fully diluted                                                                       10,389         10,704
                                                                                      ======         ======

See condensed notes to consolidated financial statements
</TABLE>

                                      -4-

<PAGE>

SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share data)
<TABLE>
<CAPTION>
                                                                                         Six Months Ended
                                                                                            June 30,
                                                                                      1999           1998

<S>                                                                                 <C>            <C>
Gross premiums written                                                              $325,892       $351,490
Less ceded premiums                                                                 (174,806)      (147,215)
                                                                                     -------        -------
Net premiums written                                                                 151,086        204,275
Change in net unearned premiums                                                      (13,839)       (36,833)
                                                                                     -------        -------
Net premiums earned                                                                  137,247        167,442
Fee income                                                                             7,555         11,390
Net investment income                                                                  6,609          6,264
Net realized (loss) gain                                                              (1,016)         2,811
                                                                                     -------        -------
      Total Revenues                                                                 150,395        187,907
                                                                                     -------        -------
Loss and loss adjustment expenses                                                    127,012        125,386
Policy acquisition and general and administrative expenses                            31,544         38,012
Interest expense                                                                         179            232
Amortization of intangibles                                                            1,256          1,021
                                                                                     -------        -------
      Total Expenses                                                                 159,991        164,651
                                                                                     -------        -------
      (Loss) earnings before income taxes and minority interest                       (9,596)        23,256

(Benefit) Provision for income taxes                                                  (2,960)         8,438
                                                                                     -------        -------
      Net (loss) earnings before minority interest                                    (6,636)        14,818

Minority interest:
  Distributions on preferred securities, net of tax                                    4,151          4,226
                                                                                     -------        -------
      Net (loss) earnings                                                           $(10,787)       $10,592
                                                                                     =======        =======

Net (loss) earnings per share - basic                                                 $(1.04)         $1.02
                                                                                        ====           ====
Net (loss) earnings per share - fully diluted                                         $(1.04)         $0.99
                                                                                        ====           ====
Weighted average shares outstanding:
  Basic                                                                               10,385         10,419
                                                                                      ======         ======
  Fully diluted                                                                       10,400         10,715
                                                                                      ======         ======

See condensed notes to consolidated financial statements
</TABLE>

                                      -5-


<PAGE>

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

                                                                        Shares           Total
                                                                        Common       Stockholders'      Retained
                                                                         Stock          Equity          Earnings

<S>                                                                   <C>               <C>             <C>
BALANCE AT DECEMBER 31, 1997                                          10,451,667        $78,363         $31,511

Comprehensive income:
   Net earnings                                                                          10,592          10,592
   Change in unrealized gains (losses) on securities                                      2,004              --
                                                                                         ------          ------
Comprehensive income                                                                     12,596          10,592
                                                                                         ------          ------

Exercise of stock options                                                  1,665             20              --

Cost of shares acquired                                                  (65,800)        (1,130)           (311)
                                                                      ----------         ------          ------

BALANCE AT JUNE 30, 1998                                              10,387,532        $89,849         $41,792
                                                                      ==========         ======          ======

BALANCE AT DECEMBER 31, 1998                                          10,385,399        $61,995         $16,747

Comprehensive income:
   Net earnings (loss)                                                                  (10,787)        (10,787)
   Change in unrealized gains (losses) on securities                                     (2,858)             --
                                                                                         ------          ------
Comprehensive income                                                                    (13,645)        (10,787)
                                                                      ----------         ------          ------

BALANCE AT JUNE 30, 1999                                              10,385,399        $48,350          $5,960
                                                                      ==========         ======           =====

See condensed notes to consolidated financial statements
</TABLE>

                                      -6-

<PAGE>

SYMONS INTERNATIONAL GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
                                                                                               Six Months Ended
                                                                                                   June 30,
                                                                                             1999            1998
<S>                                                                                         <C>             <C>
Cash Flows from Operating Activities:
  Net earnings (loss) for the period                                                        $(10,787)       $10,592
  Adjustments to reconcile net earnings to net cash provided
     from operations:
     Depreciation and amortization                                                             3,265          2,453
     Deferred income tax expense                                                                 (97)         1,087
     Net realized (gain) loss                                                                  1,016         (2,811)
Net changes in operating assets and liabilities:
  Receivables                                                                               (137,759)      (146,802)
  Reinsurance recoverable on paid and unpaid losses, net                                     (31,814)       (12,401)
  Prepaid reinsurance premiums                                                               (96,158)       (74,919)
  Deferred policy acquisition costs                                                             (569)        (6,878)
  Other assets                                                                                (2,027)           624
  Losses and loss adjustment expenses                                                         12,749         34,785
  Unearned premiums                                                                          115,818        111,753
  Reinsurance payables                                                                       149,560        118,872
  Distributions payable on preferred securities                                                  (26)           (18)
  Federal income taxes                                                                         4,047            523
  Other liabilities                                                                            3,513            585
                                                                                             -------        -------
NET CASH PROVIDED FROM OPERATIONS                                                             10,731         37,445
                                                                                             -------        -------
Cash flow used in investing activities:
  Net (purchases) sales of short-term investments                                             (1,715)        (2,349)
  Purchases of fixed maturities                                                             (117,539)       (94,207)
  Proceeds from sales, calls and maturities of fixed maturities                              110,935         85,536
  Purchase of equity securities                                                               (2,808)       (11,289)
  Proceeds from sales of equity securities                                                     2,491         11,409
  Purchases of property and equipment                                                         (3,682)        (6,545)
  (Purchases) sales of other investments                                                         (68)            (6)
                                                                                             -------        -------
NET CASH USED IN INVESTING ACTIVITIES                                                        (12,386)       (17,451)
                                                                                             -------        -------
Cash flow provided from/(used in) financing activities:
  Cost of shares acquired                                                                         --         (1,132)
  Payments on notes payable                                                                     (309)        (4,147)
  Loans from (repayments to) related parties                                                   2,150         (3,548)
  Other                                                                                         (126)            21
                                                                                             -------         ------
NET CASH PROVIDED FROM/(USED IN) FINANCING ACTIVITIES                                          1,715         (8,806)
                                                                                             -------        -------
Increase in cash and cash equivalents                                                             60         11,188
Cash and cash equivalents, beginning of period                                                14,800         11,276
                                                                                             -------        -------
Cash and cash equivalents, end of period                                                     $14,860        $22,464
                                                                                             =======        =======
Note: Cash payments for interest were $179 and $49 for the six months ended
June 30, 1999 and 1998, respectively.  Cash payments for taxes were $-0- and
$4,580 for first six months of 1999 and 1998, respectively.

See condensed notes to consolidated financial statements
</TABLE>

                                      -7-

<PAGE>

                        SYMONS INTERNATIONAL GROUP, INC.
            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                For The Three and Six Months Ended June 30, 1999
                                 (,000 Omitted)

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.      Basis of Presentation
        The accompanying  unaudited  consolidated financial statements have been
        prepared in  accordance  with the  instructions  to Form 10-Q and do not
        include all of the  information  and  footnotes  required  by  generally
        accepted   accounting   principles   ("GAAP")  for  complete   financial
        statements. In the opinion of management, all adjustments (consisting of
        normal recurring  accruals)  considered  necessary for fair presentation
        have been  included.  Operating  results  for  interim  periods  are not
        necessarily  indicative of the results that may be expected for the year
        ended December 31, 1999. Interim financial  statements should be read in
        conjunction with the Company's annual audited  financial  statements for
        the year ended December 31, 1998.

        The  consolidated  financial  statements  include the accounts of Symons
        International  Group,  Inc.  and  its  wholly-owned   subsidiaries  (the
        "Company").  All significant intercompany transactions and accounts have
        been eliminated.

2.      Subsequent Events
        On August 12, 1999 the Company announced that it has retained Donaldson,
        Lufkin  and  Jenrette  ("DLJ")  to advise the  Company  with  respect to
        whether it is in the best  interest  of the  shareholders  to consider a
        sale of all or part of its insurance business. This announcement follows
        the Company's announcement on June 8, 1999 that DLJ had been retained to
        advise  the  Company  with  respect  to the sale of its  crop  insurance
        business.

        The Company is exploring several options and has not identified the form
        or timing of a  possible  sale.  The sale may take the form of a sale of
        either or both of the Company's  primary  business  units, a sale of the
        entire company, or another form.

        The Company has held  preliminary  discussions  with interested  parties
        regarding  the  potential  separate  sale of the  crop  and  nonstandard
        automobile lines as well as of the Company.

        At this time the Company is unable to  estimate  the value of a sale as
        the nature of a possible sale is unknown.

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

                                      -8-

<PAGE>

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

        The Company  also  receives  from the FCIC (i) an expense  reimbursement
        payment equal to a percentage of gross premiums  written for each Buy-Up
        Coverage policy it writes ("Buy-Up Expense  Reimbursement  Payment") and
        (ii) an LAE reimbursement  payment equal to a percentage of MPCI Imputed
        Premiums  for  each  CAT  Coverage   policy  it  writes  (the  "CAT  LAE
        Reimbursement   Payment").   For  1999  and  1998,  the  Buy-Up  Expense
        Reimbursement Payment has been set at 24.5% and 27.0%, respectively,  of
        MPCI Premium. For 1999 and 1998, the LAE Reimbursement  Payment has been
        set at 11.0% and 13.0%, respectively,  of MPCI Imputed Premiums for each
        CAT Coverage policy the Company writes. The reduction in expense and LAE
        reimbursement  percentage in 1999 was due to the passing of  legislation
        by the United  States  Congress  in June,  1998.  Although  the  expense
        reimbursement  percentages were reduced,  this legislation also provided
        permanent  funding for the crop insurance  industry.  In addition,  this
        legislation  discontinued the Company's retention of a $60 fee for every
        CAT policy written. The Company retained this policy fee in 1998.

        For statement of earnings  purposes,  the Buy-Up  Expense  Reimbursement
        Payment is  treated as a  contribution  to income  and  reflected  as an
        offset  against  policy   acquisition  and  general  and  administrative
        expenses.  The  CAT LAE  Reimbursement  Payment  is,  for  statement  of
        earnings  purposes,  recorded as an offset against LAE, up to the actual
        amount of LAE incurred by the Company in respect of such  policies,  and
        the remainder of the payment, if any, is recorded as Fee Income.

4.      Intangible Assets
        Intangible  assets  include  goodwill from the  acquisition  of Superior
        Insurance Company  (Superior),  additional goodwill from the acquisition
        of the minority  interest in GGS Management  Holdings,  Inc.  (GGSH) and
        North American Crop  Underwriters  (NACU),  debt and preferred  security
        issuance costs and organizational costs.

5.      Notes Payable
        At June 30, 1999, the Company's IGF Insurance  Company  subsidiary (IGF)
        maintained a revolving bank line of credit in the amount of $12,000 with
        Brenton Bank. At December  31,1998,  March 31, 1999 and June 30,1999 the
        outstanding  balance was $12,000,$1,989 and $11,767  respectively.  This
        line  is  collateralized  by  the  crop-related   uncollected  premiums,

                                      -9-

<PAGE>

        reinsurance  recoverable on paid losses,  FCIC annual settlement,  and a
        first lien on the real estate owned by IGF.  The IGF  Revolver  contains
        certain covenants which (i) restricts IGF's ability to accumulate common
        stock;  (ii) sets minimum  standards for  investments  and  policyholder
        surplus;  and (iii)  limits  ratio of net written  premiums to statutory
        surplus.  At June 30, 1999,  IGF was in  compliance  with all  covenants
        associated with the line of credit, or had received proper waivers.  IGF
        has  received  a waiver  from the bank  with  regard to the ratio of net
        written premiums to surplus as of second quarter 1999.

        The average  interest  rate on the line of credit was 6.96%  during 1998
        and 8.63% for the six months ended June 30, 1999.

        Notes  payable  also  includes a $1,000 note due 2001 on the purchase of
        NACU at no interest.  The balance of notes  payable at December 31, 1998
        includes  three  smaller  notes  (less  than $300  each)  assumed in the
        acquisition  of NACU due 2002-2006  with  periodic  payments at interest
        rates ranging from 7% to 9.09%.

6.      Regulatory Affairs
        The  Indiana   Department  of  Insurance   (IDOI)   initiated  a  target
        examination  of  Pafco  General  Insurance  Company,  and IGF  Insurance
        Company,  on May 24, 1999. The scope of the examinations  encompass loss
        reserves,  pricing,  and reinsurance.  There has been no action taken by
        the IDOI as a result of the ongoing examination.

        The Florida  Department  of Insurance  (FDOI),  has  initiated a limited
        scope audit of Superior Insurance Company,  to begin on August 23, 1999.
        The FDOI is to evaluate the Company's Year 2000 readiness.

7.      Commitments and Contingencies
        The  Company  and its  subsidiaries  are,  at  various  times,  named as
        defendants  in lawsuits  relating to its  business.  Legal actions arise
        from claims  made  pursuant to  insurance  policies,  employment-related
        matters,  commercial  disputes,  and other matters.  Unless specifically
        stated otherwise,  the Company believes that the ultimate disposition of
        these  lawsuits will not materially  affect the Company's  operations or
        financial position.

        In 1998, IGF issued insurance policies on certain agricultural  business
        interruption  risks  ("AgPI(R)").  Please  see note 8.  Certain of these
        policyholders   have  recently   instituted   litigation  or  filed  for
        arbitration of their claim.  In each  instance,  IGF has been named as a
        defendant.  To date,  three lawsuits have been filed by a total of seven
        policyholders  and  three  policyholders  have  instituted  arbitration.
        Further,  the Company (through its IGF  subsidiary),  has instituted two
        declaratory  actions  against two  policyholders  to help  determine the
        Company's  obligations with respect to such  policyholders.  The Company
        feels it has a strong  legal  position  with  respect  to these  AgPI(R)
        lawsuits and  arbitrations.  The Company is vigorously  defending  these
        matters.

        These lawsuits and arbitrations have been instituted after June 30, 1999
        and, consequently,  each matter is in an early stage of development. The
        Company feels its financial reserves for these lawsuits and arbitrations
        are sufficient to cover the resulting liability,  if any, that may arise
        from  these  matters.  However,  there  can  be no  assurance  that  the
        Company's total  liability from AgPI(R)  liability that may be in excess
        of  current  AgPI(R)  financial  reserves  will not be  material  to the
        Company, taken as a whole.

        The Company  writes  nonstandard  insurance  business  through agents in
        California where some of the agents charge administration fees on top of
        the premium to these customers.  The California  Department of Insurance
        (CDOI) in early 1998 indicated that such broker fees are part of premium
        and has requested  reimbursement to the  policyholders by Superior.  The
        CDOI has  indicated  it may assess the  Company to repay fees the agents

                                      -10-

<PAGE>

        received  from the  insured.  The  Company  did not receive any of these
        broker fees and has carried on the insurance practice that is normal for
        many  of  the  insurance  companies  writing  automobile   insurance  in
        California.  The total  amount,  if CDOI  proceeds and requires all fees
        returned  with no recovery  from  agents,  is $3 million.  As a material
        adverse development is not deemed probable,  the Company has not accrued
        any  amount  in its  consolidated  financial  statements.  Although  the
        assessment  has not been  formally  made by the CDOI at this  time,  the
        Company  believes  it  will  prevail  and  will  vigorously  defend  any
        potential assessment.

        As part of an agreement by the Company to assume the  multiple-peril and
        crop hail operations of CNA Agriculture ("CNA") during 1998, the Company
        agreed  to allow  CNA to  retain a  portion  of the  administrative  and
        operating  expense  reimbursement  paid by the  Federal  Crop  Insurance
        Corporation  (FCIC)  to  CNA  under  CNA's  1998  Standard   Reinsurance
        Agreement  with FCIC.  This retention by CNA was meant to compensate CNA
        for certain direct  overhead costs incurred by CNA prior to the transfer
        of insurance operations to the Company.

        CNA has  retained  $2.7  million  of such  reimbursements.  The  Company
        disputes  this  level  of  expense   reimbursement  and  contends  CNA's
        retention  should only be $1.1 million.  Thus,  the Company  believes it
        should receive approximately $1.6 million of FCIC reimbursement proceeds
        retained by CNA.  Negotiations  are in process to settle  this  dispute.
        Given the dispute and  uncertainty  of its outcome,  the Company has not
        recorded any receivable for this matter.

8.      Losses on AgPI(R) Product
        In 1998,the  Company  within its Crop segment  (IGF),  offered a new and
        unique  crop  insurance  product  called  AgPI(R).  AgPI(R) is  business
        interruption  insurance that is primarily intended to protect businesses
        that depend  upon a steady flow of crop (or crops) to stay in  business.
        This  product  was  sold  to  a  variety  of   businesses   involved  in
        agribusiness,  including farmers,  as well as grain elevator  operators,
        produce shippers,  custom harvesters,  cotton gins, agriculture chemical
        dealers  and  other  processing   businesses  whose  income  is  heavily
        dependent on a stable  supply of raw product  (i.e.,  cotton),  or whose
        product  sales are  negatively  affected if crop  yields fall (i.e.,  ag
        chemical  dealers).

        A  large  number of policies  were written  through  a third  party
        insurance  company under a  fronting  arrangement.  The  Company
        directly wrote or reinsured 157 AgPI(R) policies written in 1998, 111 of
        which were purchased by California  policyholders  through a third party
        carrier.  The policy form requires that the county in which crops reside
        must  suffer a minimum  level of crop loss  before a loss  recovery by a
        policyholder  is possible.  After the county loss test is met,  then the
        policyholder   must  demonstrate  an  insurable   economic  loss  on  an
        individual basis under the policy.

        The Company  recognized  approximately $7.6 million in written premium
        in 1998,  of which $6  million  was  earned in 1998 with $1.6  million
        being  earned  in the  first  quarter  of 1999.  The lack of  National
        Agricultural  Statistical  Service (NASS) and policyholder  loss data,
        coupled with a Company  awareness of adverse  weather  conditions  and
        resultant  crop damage in parts of the country  with  several  AgPI(R)
        policyholders,  led the Company to establish  reserves at December 31,
        1998, equal to 100% of the AgPI(R) earned premium.

        County  loss  data, as  well  as  policyholder  loss data,  gradually
        became known starting in late April 1999. As of May 28, 1999, the filing
        date for the Company's  first quarter 1999 Form 10-Q, it became apparent
        that the Company was experiencing unexpected adverse loss development on
        these  policies  and  increased  its  incurred  losses  related  to 1998
        policies to $15 million.  As of the filing date for this second  quarter
        1999 Form 10-Q,  NASS data is  complete,  and the Company  has  received
        policyholder data on nearly all policies to determine loss liability, if
        any,  under each of the 157  AgPI(R)  policies.  Based on the  Company's
        latest analysis,  the estimated gross ultimate  incurred loss settlement
        and loss adjustment expense ("LAE") related to these policies totals $25
        million. The Company recorded $6 million, $9 million, and $10 million of
        loss and LAE in 1998,  the first  quarter  and  second  quarter of 1999,
        respectively.

        As part of a  reinsurance treaty  entered into  in the first  quarter
        of  1999, the  Company  retroceded the  majority of this  business to
        reinsurers.  The  retrocession  cover on this book of  business is 62.0%
        quota  share  reinsurance,  of  which  7.5%  is  retroceded  to  Granite
        Reinsurance  Company Ltd.,  an affiliate.  In return for ceding 62.0% of
        its gross  written  premium on these  policies  to the  reinsurers,  the
        Company  is  entitled  to a  permanent  cash  recovery  of up to 200% of
        premium  ceded  to the  reinsurers.  The  Company  is also  entitled  to
        receive,  if the loss ratio on this business exceeds 200%, an additional
        temporary  cash advance on every dollar of loss up to a 300% loss ratio.
        Any  temporary  cash advance  received must be returned over time to the
        reinsurers,  with  substantially all of the advance being repaid by July
        31, 2001.

        In  accordance  with  the terms of  the reinsurance  treaty,   the
        Company  recorded  $4,668 of ceded  gross  written  premium in the first
        quarter of 1999.  The portion of the  reinsurance  treaty  covering 1998
        AgPI(R)  written  business  was  deemed  to be  retroactive  reinsurance
        according to generally accepted accounting principles.  Accordingly,  in
        the first quarter of 1999 the Company recorded a reinsurance recovery of
        $9,336 and deferred a resulting gain of $4,668. The $4,668 deferred gain
        was recognized as income in the second quarter of 1999,  pursuant to the
        recovery  method of accounting  as  prescribed by GAAP.

        The  Company has  tendered  settlement payments to  virtually  all
        policyholders  with a demonstrable loss under the policy.  The Company
        believes that the claim payments  tendered are  consistent  with policy
        language and applicable state law. In the event that a  policyholder
        believes that the settlement offer is erroneous  or  insufficient
        according to the policy form, the policy form requires binding
        arbitration.

        As of the date of this Form 10-Q, 128 policyholders have incurred an
        indemnifiable loss according to company calculations.  As of the date of
        this Form 10-Q, 8 policyholders  have accepted  settlements  and
        released the Company from  liability,  3 policyholders  have  filed for
        arbitration,  and  7  policyholders  have  instituted  litigation
        against the Company.  The  policyholders  seeking arbitration  are
        requesting  indemnification  totaling the face amount of their policies
        plus  punitive damages.  Arbitration  hearings will  likely not begin
        until the year 2000 (See note 7).

        Less than $0.1  million of 1999 gross written AgPI(R) premiums have been
        written and assumed by the Company through June 30, 1999.  The Company
        has recorded  loss and loss adjustment expenses equaling  approximately
        200% of premium for the 1999 written  policies.

        Based  on the  information   presently  available,  the  Company
        believes  that it has  recognized,  through loss and LAE  payments and
        eserves, its  ultimate loss exposure related to  the AgPI(R) product.
        However as new information develops,  there can be no assurance that the
        Company's  ultimate  liability  for AgPI(R)  related  losses will not be
        materially greater than the $25 million in gross losses already recorded
        $19,100 in 1999, $5,900 in 1998 in the consolidated financial statements
        related to this product.

                                      -12-

<PAGE>


9.      Adverse Development on Prior Accident Year and Reserve Strengthening  on
        Current  Accident Year Auto Loss and Loss  Adjustment  Expense  Reserves
        During the second  quarter of 1999 the Company  incurred $4.1 million of
        loss and LAE on its nonstandard  auto operation for losses  occurring in
        1998.  At the end of 1998 the Company  projected its unpaid loss and LAE
        liabilities  for  nonstandard  auto,  net of  reinsurance,  to be $114.8
        million.  During the  second  quarter  of 1999 a greater  than  expected
        number  of  1998  incurred  claims  were  reported  to  the  Company  by
        policyholders.  The preponderance of those unanticipated claims involved
        bodily injury liability. In addition to strengthening reserves for older
        claims,  the Company  reexamined its  projections  for the first half of
        1999 and strengthened its reserves for the current year by $5.0 million,
        $2.5 million of which was for  accidents  occurring in the first quarter
        of 1999.  The  Company  has  identified  and is  currently  implementing
        several strategies to improve its loss ratio.

10.     Nonstandard Auto Reinsurance
        The Company is currently  exploring the  possibility  of entering into a
        quota  share  treaty,  which  would  cede a  significant  portion of the
        company's auto gross written  premiums.  This treaty,  if signed,  would
        have the impact of reducing net premiums  written and bringing the ratio
        of net premiums  written to statutory basis surplus into compliance with
        statutory guidelines.


                                      -13-

<PAGE>


11.     Segment Disclosures
        The following tables show financial data by segment:
<TABLE>
<CAPTION>
                                                                                          For the three months ended
                                                                                                  June 30,
                                                                                             1999         1998
<S>                                                                                         <C>         <C>
NONSTANDARD AUTOMOBILE INSURANCE OPERATIONS:
  Gross premiums written                                                                    $66,072     $79,530
                                                                                             ======      ======
  Net premiums written                                                                      $64,154     $69,154
                                                                                             ======      ======
  Net premiums earned                                                                       $66,836     $70,498
  Fee income                                                                                  2,895       4,553
  Net investment income                                                                       3,296       3,133
  Net realized gain                                                                             366         673
                                                                                             ------      ------
        TOTAL REVENUES                                                                       73,393      78,857
                                                                                             ------      ------
  Losses and loss adjustment expenses                                                        61,631      53,502
  Policy acquisition and general and administrative expenses                                 23,609      18,681
                                                                                             ------      ------
        TOTAL EXPENSES                                                                       85,240      72,183
                                                                                             ------      ------
  Earnings (loss) before income taxes                                                      $(11,847)    $ 6,674
                                                                                             ======      ======
GAAP RATIOS (Nonstandard Automobile Only):
  Loss and LAE Ratio                                                                           92.2%       75.9%
  Expense ratio, net of billing fees                                                           31.0%       20.0%
                                                                                              -----        ----
  Combined ratio                                                                              123.2%       95.9%
                                                                                              =====        ====

CROP INSURANCE OPERATIONS:
  Gross premiums written(2)                                                                $107,524     $92,020
                                                                                            =======      ======
  Net premiums written                                                                      $11,633     $35,560
                                                                                             ======      ======
  Net premiums earned                                                                        $6,074     $28,460
  Fee income                                                                                    197         350
  Net investment income                                                                         (18)        112
  Net realized capital gain (loss)                                                               --         170
                                                                                             ------      ------
        TOTAL REVENUES                                                                        6,253      29,092
                                                                                             ------      ------
  Losses and loss adjustment expenses                                                         8,894      18,679
  Policy acquisition and general and administrative expenses(1)                              (4,654)      3,897
  Interest and amortization of intangibles                                                      246          50
                                                                                             ------      ------
        TOTAL EXPENSES                                                                        4,486      22,626
                                                                                             ------      ------
  Earnings before income taxes                                                              $ 1,767      $6,466
                                                                                             ======       =====
</TABLE>
(1) Negative crop expenses are caused by inclusion of MPCI expense reimbursement
    and underwriting gain.
(2) Includes premiums assumed from CNA in accordance with the Strategic
    Alliance Agreement.

                                      -14-


<PAGE>

<TABLE>
<CAPTION>
                                                                                          For the six months ended
                                                                                                 June 30,
                                                                                            1999         1998
<S>                                                                                        <C>          <C>
NONSTANDARD AUTOMOBILE INSURANCE OPERATIONS:
  Gross premiums written                                                                   $127,243     $169,506
                                                                                            =======      =======
  Net premiums written                                                                     $137,840     $151,421
                                                                                            =======      =======
  Net premiums earned                                                                      $132,233     $138,821
  Fee income                                                                                  7,417        8,708
  Net investment income                                                                       6,460        5,934
  Net realized gain (loss)                                                                   (1,016)       2,641
                                                                                            -------      -------
        TOTAL REVENUES                                                                      145,094      156,104
                                                                                            -------      -------
  Losses and loss adjustment expenses                                                       112,944      106,648
  Policy acquisition and general and administrative expenses                                 43,204       36,804
                                                                                            -------      -------
        TOTAL EXPENSES                                                                      156,148      143,452
                                                                                            -------      -------
  Earnings (loss) before income taxes                                                      $(11,054)    $ 12,652
                                                                                            =======      =======
GAAP RATIOS (Nonstandard Automobile Only):
  Loss and LAE Ratio                                                                           85.4%        76.8%
  Expense ratio, net of billing fees                                                           27.1%        20.2%
                                                                                               ----         ----
  Combined ratio                                                                              112.5%        97.0%
                                                                                              =====         ====

CROP INSURANCE OPERATIONS:
  Gross premiums written(2)                                                                $198,247     $178,195
                                                                                            =======      =======
  Net premiums written                                                                     $ 13,246     $ 52,854
                                                                                            =======      =======
  Net premiums earned                                                                        $5,014     $ 28,621
  Fee income                                                                                    138        2,682
  Net investment income                                                                          39          165
  Net realized capital gain                                                                      --          170
                                                                                            -------      -------
        TOTAL REVENUES                                                                        5,191       31,638
                                                                                            -------      -------
  Losses and loss adjustment expenses                                                        14,068       18,738
  Policy acquisition and general and administrative expenses(1)                             (12,662)         250
  Interest and amortization of intangibles                                                      416          233
                                                                                            -------      -------
        TOTAL EXPENSES                                                                        1,822       19,221
                                                                                            -------      -------
  Earnings before income taxes                                                             $  3,369     $ 12,417
                                                                                            =======      =======
</TABLE>
(1) Negative crop expenses are caused by inclusion of MPCI expense reimbursement
    and underwriting gain.
(2) Includes premiums assumed from CNA in accordance with the Strategic
    Alliance Agreement.

                                      -15-

<PAGE>

12.     Earnings Per Share
        Basic and  diluted  net  earning  (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              Six Months Ended
                                                                    June 30,                      June 30,
                                                               1999          1998           1999           1998

<S>                                                         <C>           <C>            <C>            <C>
        Basic:
        Weighted-average common shares outstanding          10,385,000    10,392,000     10,385,000     10,419,000
                                                            ==========    ==========     ==========     ==========
        Diluted:
        Weighted-average common shares outstanding          10,385,000    10,392,000     10,385,000     10,419,000
           Dilutive effect of stock options                      4,000       312,000         15,000        296,000
                                                            ----------    ----------     ----------     ----------
        Average common shares outstanding
           assuming dilution                                10,389,000    10,704,000     10,400,000     10,715,000
                                                            ==========    ==========     ==========     ==========

</TABLE>

        The Company has 1.5 million stock options  outstanding as of June 30,
        1999.  Of these,  1.4 million are  antidilutive  because the exercise
        price is below the average  market price  during the period.  For the
        three and six months  ending June 30, 1999 there are 4,000 and 15,000
        dilutive  shares based on the treasury  stock method.  Due to the net
        loss in 1999, fully diluted earnings per share is the same a basic
        earnings per share.

ITEM 2 MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS
OF OPERATIONS  OF THE COMPANY
The Company  underwrites and markets  nonstandard  private passenger  automobile
insurance and crop insurance.

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

Crop Insurance Operations
The four principal  components of the Company's crop insurance  business are (1)
Multi-Peril Crop Insurance  ("MPCI"),(2) crop hail insurance,  (3) private named
peril,  and (4)fee  based  services to farmers.  Crop  insurance is purchased by
farmers  to  reduce  the  risk  ofcrop  loss  from  adverse  weather  and  other
uncontrollable  events. Farms are subject to drought,  floods, and other natural
disasters  that can cause  widespread  crop losses and, in severe  cases,  force
farmers out of business.  Historically, one out of every twelve acres planted by
farmers  has not been  harvested  because  of adverse  weather or other  natural
disasters.  Because many farmers  rely on credit to finance  their  purchases of
such agricultural inputs as seed, fertilizer, machinery, and fuel, the loss of a

                                      -16-

<PAGE>

crop to a natural  disaster can reduce their ability to repay these loans and to
find sources of funding for the following year's operating expenses.

The Company,  like other  private  insurers  participating  in the MPCI program,
generates revenues from the MPCI program in two ways. First, it markets, issues,
and administers policies, for which it receives administrative fees; and second,
it  participates in a  profit-sharing  arrangement in which it receives from the
government a portion of the aggregate profit, or pays a portion of the aggregate
loss,  in respect of the  business it writes.  The Company  writes MPCI and crop
hail insurance through 1,625 independent agencies in 42 states.

Inaddition to MPCI,  the Company offers stand alone crop hail  insurance,  which
insures  growing  crops  against  damage  resulting  from hail  storms and which
involves no federal  participation,  as well as its  proprietary  product  which
combines the application and  underwriting  process for MPCI and hail coverages.
This  product  tends to produce less  volatile  loss ratios than the stand alone
product since the combined product  generally insures a greater number of acres,
thereby  spreading the risk of damage over a larger insured area.  Approximately
60% of the  Company's  hail  policies  are  written  in  combination  with MPCI.
Although  both crop hail and MPCI provide  coverage  against hail damage,  under
crop hail coverages farmers can receive payments for hail damage which would not
be severe enough to require a payment under an MPCI policy. The Company believes
that  offering  crop hail  insurance  enables it to sell more  policies  than it
otherwise would.

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

The fee income business is primarily  services to farmers for global positioning
grid mapping of their farm and soil  sampling to enhance the growing  conditions
of the crops.

Agricultural   Production   Interruption   Insurance   ("AgPI(R)")  is  business
interruption  insurance that is primarily  intended to protect  businesses  that
depend upon a steady flow of crop (or crops) to stay in business.  This product,
introduced in 1998, is sold to a variety of businesses involved in agribusiness,
including farmers, as well as grain elevator operators, produce shippers, custom
harvesters,  cotton  gins,  agriculture  chemical  dealers and other  processing
businesses  whose income is heavily  dependent on a stable supply of raw product
(i.e.,  cotton),  or whose product sales are negatively  affected if crop yields
fall  (i.e.,  ag  chemical  dealers).   As  discussed  later,  the  Company  has
experienced significant losses on AgPI(R) policies sold in 1998.

Geo AgPLUS(TM)  provides to the farmer  measuring,  gridding,  and soil sampling
services  combined with fertility maps and the software that is necessary to run
precision  farming  programs.  Grid soil sampling,  when combined with precision
farming  technology,  allows  the  farmer  to apply  just the  right  amount  of
fertilization, thus balancing soil nutrients for a maximum crop yield. Precision
farming  technology  increases  the  yield to the  farmer,  reduces  the cost of
unnecessary  fertilization and enhances the environment by reducing overflows of
fertilization  into the ecosystem.  Geo  AgPLUS(TM) is an IGF Insurance  Company
trademarked  precision  farming  division  that is now  marketing  its fee based
services to the farmer.

                                      -17-

<PAGE>

REVIEW OF CONSOLIDATED OPERATIONS

Net Earnings (Loss)
For the three and six months  ended June 30,  1999,  the Company  recorded a net
loss of ($9,765) and ($10,787),  or ($0.94) and ($1.04) per share (basic).  This
is a decrease from net earnings for the three and six months ended June 30, 1998
of $5,668 and $10,592 or $0.55 and $1.02 per share (basic).

Income  before  taxes  and   distributions  on  preferred   securities  for  the
nonstandard  automobile segment showed a loss of ($11,847) and ($11,054) for the
three and six months  ended June 30,  1999  compared  to  earnings of $6,674 and
$12,652  for the three and six months  ended June 30,  1998.  These  losses were
driven  primarily  by an increase in loss and loss  adjustment  expense  ("LAE")
reserves.

Income before taxes and distributions on preferred  securities for the three and
six months  ended June 30, 1999 in the crop  segment was $1,767 and $3,369 which
compares to $6,466 and $12,417 for the same periods in 1998.  The primary reason
for the decrease in 1999 as compared to 1998 was an adverse loss  development on
AgPI(R) policies written in 1998 in the Crop Segment (See note 8).

Losses before tax and  distributions  on preferred  securities for the corporate
segment are comparable to prior year, at ($1,165) and ($1,911) for the three and
six months  ended June 30, 1999 and ($960) and  ($1,813)  for the same period in
1998. These losses consist  primarily of amortization of intangibles and general
and administrative expenses.

Gross Premiums Written
Gross premiums written for the nonstandard  automobile  segment  decreased 16.9%
and 24.9% for the three and six months ended June 30, 1999 compared to the three
and six months ended June 30, 1998.  This represents a 5.2% decrease in premiums
in the first half of 1999 from the  average  premium  volume in the last half of
1998. The primary  reasons for this decline in volume has been the downsizing by
the  Company of its  nonstandard  automobile  business  in  certain  competitive
markets,  and the  slowing  of new  business  due to  poor  service  during  the
conversion  by  the  Company  to a new  operating  computer  system.  Management
believes that service has subsequently improved.

Gross premiums  written for the crop segment  increased  16.8% and 11.3% for the
three and six months ended June 30, 1999 compared to comparable periods in 1998.
Such increase was due to internal growth. Crop premiums (expressed in thousands)
for the three and six months ended June 30 are as follows:

<TABLE>
<CAPTION>
                                                            Three Months                      Six Months
                                                            Ended June 30,                   Ended June 30,
                                                        1999             1998             1999            1998
                                                        ----             ----             ----            ----

<S>                                                   <C>              <C>               <C>             <C>
CAT imputed                                           $14,470          $16,319           $30,782         $32,638
MPCI                                                   78,748           46,654           141,028         107,297
Crop hail and named perils                             28,776           37,873            57,123          63,365
AgPI(R)                                                  --              7,493                96           7,533
                                                      ------           -------           -------         -------
                                                      121,994          108,339           229,028         210,833
Less: CAT imputed                                     (14,470)         (16,319)          (30,782)        (32,638)
                                                      -------          -------           -------         -------

                                                     $107,524          $92,020          $198,247        $178,195
                                                      =======           ======           =======         =======

</TABLE>

Remaining other gross written  premiums not reflected in nonstandard  automobile
or crop  segments  represent  commercial  business  which  is  ceded  100% to an
affiliate,  Granite  Reinsurance  Company Ltd. Other gross written premiums were
$274 and $402 for the three and six  months  ended  June 30,  1999  compared  to
$1,544 and $3,789 for the same periods in 1998.

                                      -18-

<PAGE>

Net Premiums Written
MPCI  premiums are  considered  to be 100% ceded to the federal  government  for
accounting purposes.  Quota share cession rates for other lines of insurance for
the three and six months ended June 30 are as follows:

                                                  1999         1998
                                                  ----         ----

Nonstandard automobile                              0%          10%
Crop hail                                          67%          25%
Named peril                                        50%          50%
AgPI(R)                                            62%           0%


Fee Income
Fee income decreased 36.9% and 33.7% for the three and six months ended June 30,
1999 as compared to the  corresponding  periods of the prior year.  The decrease
was  primarily  due to the federal  government  retaining  the CAT policy fee in
1999, versus Company retention of this fee in 1998. Fee income has also decrease
in the  nonstandard  auto  segment due to  decreases  in gross  written  premium
volume.

Net Investment Income
Net investment income increased 0.4% and 5.5% for the three and six months ended
June 30, 1999 as compared to the  corresponding  periods of the prior year. Such
increase was due primarily to higher yields on invested assets caused by a shift
out of equity securities and into fixed income investments.

Loss and Loss Adjustment Expense
The loss  ratio for the  nonstandard  automobile  segment  for the three and six
months  ended  June 30,  1999 was  92.2%  and  85.4% of net  premiums  earned as
compared  to 75.9% and 76.8% in 1998.  During  the  second  quarter  of 1999 the
Company  incurred  $4.1  million  of loss and  loss  adjustment  expense  on its
nonstandard  auto operation for losses occurring in 1998. At the end of 1998 the
Company  projected its unpaid loss and loss adjustment  expense  liabilities for
nonstandard  auto, net of reinsurance,  to be $114.8 million.  During the second
quarter of 1999 a greater  number of claims that occurred prior to year-end 1998
were  reported  than  anticipated  by the Company.  The  preponderance  of those
unanticipated   claims  involved  bodily  injury   liability.   In  addition  to
strengthening  reserves for older claims, the Company reexamined its projections
for the first half of 1999 and strengthened its reserves for the current year by
$5.0  million,  $2.5 million of which was for  accidents  occurring in the first
quarter of 1999.

As noted in note 8 to the unaudited  consolidated  financial  statements for the
six months ended June 30, 1999, in 1998 the Company sustained significant losses
on its AgPI(R) product,  the  quantification  of which became known in 1999. In
1998,  within the crop segment the Company  directly sold and also reinsured the
underwriting  risk on a new and unique crop insurance  product  called  AgPI(R).
AgPI(R) is business interruption insurance that is primarily intended to protect
businesses  that  depend  upon a  steady  flow of  crop  (or  crops)  to stay in
business.  This  product  was  sold  to a  variety  of  businesses  involved  in
agribusiness,  including farmers, as well as grain elevator  operators,  produce
shippers, custom harvesters, cotton gins, agriculture chemical dealers and other
processing  businesses  whose income is heavily  dependent on a stable supply of
raw product (i.e.,  cotton),  or whose product sales are negatively  affected if
crop yields fall (i.e., ag chemical dealers).

A large number of policies were written through a third party insurance  company
under a fronting  arrangement.  The  Company  directly  wrote or  reinsured  157
AgPI(R)  policies  written in 1998,  111 of which were  purchased by  California
policyholders  through a third party carrier.  The policy form requires that the
county in which crops  reside must suffer a minimum  level of crop loss before a
loss recovery by a policyholder is even possible.  After the county loss test is
met, then the  policyholder  must  demonstrate an insurable  economic loss on an
individual basis under the policy.

                                      -19-

<PAGE>

The Company recognized approximately $7.6 million in written premium in 1998, of
which $6 million was earned in 1998 with $1.6 million  being earned in the first
quarter of 1999.  The lack of NASS and  policyholder  loss data,  coupled with a
Company  awareness of adverse  weather  conditions  and resultant crop damage in
parts of the country  with  several  AgPI(R)  policyholders,  led the Company to
establish  reserves at December  31, 1998,  equal to 100% of the AgPI(R)  earned
premium.

County loss data,  as well as  policyholder  loss data,  gradually  became known
starting  in late  April,  1999.  As of May 28,  1999,  the filing  date for the
Company's  first quarter,  1999,  Form 10-Q, it became apparent that the Company
was  experiencing  unexpected  adverse loss  development on these policies,  and
increased its incurred losses related to 1998 policies to $15 million. As of the
filing  date for this  second  quarter  1999  Form  10-Q,  county  loss  data is
complete,  and the Company has received policyholder data on nearly all policies
to determine loss  liability,  if any,  under each of the 157 AgPI(R)  policies.
Based on the Company's  latest analysis,  the estimated gross ultimate  incurred
loss  settlement and loss  adjustment  expense ("LAE") related to these policies
totals $25 million. The Company recorded $6 million, $9 million, and $10 million
of loss  and LAE in  1998,  the  first  quarter  and  second  quarter  of  1999,
respectively.  Losses for second quarter were partially  offset by the recording
of a net gain of $4.67 million on a reinsurance treaty.

The Company  believes that it has recognized,  through loss and LAE payments and
reserves,  its ultimate loss exposure related to the AgPI(R)  product.  However,
there can be no assurance  that the  Company's  ultimate  liability  for AgPI(R)
related  losses  will not be  materially  greater  than the $25 million in gross
losses already recorded related to this product.

Policy Acquisition and General and Administrative Expenses
Policy acquisition and general and administrative  expenses decreased to $19,652
and  $31,544  or 27.0% and  23.0% of net  premium  earned  for the three and six
months ended June 30, 1999 compared to $23,088 and $38,012 or 23.3% and 22.7% of
net premium earned in the corresponding periods of 1998. Overall expenses in the
first six  months of 1999  versus  the first  six  months of 1998  decreased  by
$6,468.   Within  this  decrease  crop  expenses   decreased  by  $12,912  while
nonstandard auto expenses increased by $6,400.

The expense ratio for the  nonstandard  auto segment was 31.0% and 27.1% for the
second quarter and  year-to-date in 1999 as compared to 20.0% and 20.2% in 1998.
The expense ratio  increased  primarily due to a reduction in ceding  commission
income and increased salary expense.  The reduction in ceding  commission income
was due to the  elimination of this income due to a commutation of a quota share
treaty.  This ceding  commission  income was netted against auto expenses in the
prior year which reduced auto expenses in 1998. Salary and benefit expenses were
higher  in 1999 in part due to  increased  use of  temporary  help and  contract
labor.

Crop segment expenses include agent commissions, stop loss reinsurance costs and
operating  expenses  which are offset by MPCI  Expense  Reimbursements  and MPCI
Underwriting  Gain. The underwriting gain is an estimate until later in the year
when crops are harvested and losses are known.  The estimated  year to date gain
ratio in 1999 was 14% on gross premium; compared to 9% in 1998. The underwriting
gain  increased in 1999 due to the fact that the crops  covered by MPCI policies
are  estimated  to have  average to above  average  yields  this  year.  The 14%
estimate is in line with actual annual results over the past four years.  The 9%
gain  ratio for crop in the prior  year was  lower due to lower  estimated  crop
yields.

Interest Expense
Interest Expense  primarily  represents  interest  incurred by the Company's IGF
Insurance  Company  Subsidiary (IGF) since December 31, 1998 on a revolving bank
line of credit  and three  smaller  notes  assumed in the  acquisition  of North
American Crop Underwriters ("NACU").

                                      -20-

Interest  expense on the revolving bank line of credit was $105 and $148 for the
three and six months  ended June 30,  1999.  The balance of the $12,000  line of
credit was paid down for a large portion of the first six months. The balance of
the line of credit was $1,959 and $11,767 as of March 31, 1999 and June 30, 1999
respectively.  The average  interest rate on the line of credit was 6.83% during
the six months ended June 30, 1999.

The average  balance of the other three interest  bearing notes payable was $632
for the quarter.  Other  interest of $32 pertained to the other notes.  Interest
rates on the three notes range from 7% to 9.9%.  Total interest expense was $105
and $179 for the three and six months ended June 30, 1999.

Amortization of Intangibles
Amortization of intangibles  includes goodwill from the acquisition of Superior,
additional  goodwill from the acquisition of the minority  interest  position in
GGS  Management  Holdings  Inc.  ("GGSH") and NACU,  debt or preferred  security
issuance  costs and  organizational  costs.  The  increase in 1999  reflects the
effects of the goodwill associated with the July 1998 acquisition of NACU.

Provision (Benefit) for Income Taxes
Income tax expense  was 31.8% and 30.8% of pre-tax  income for the three and six
months ended June 30, 1999 compared to 36.3% in 1998.  The  decreased  effective
tax  rate at  June  30,  1999 is due to a  combination  of  estimated  permanent
differences,  of $1,138, between book and taxable income, coupled with a year to
date pre-tax loss rather than a pre-tax gain.

REVIEW OF CONSOLIDATED FINANCIAL CONDITION

Investments
Total  investments  as of June 30, 1999 and December 31, 1998 were  $225,889 and
$222,853  respectively.  Composition of investments is comparable  between these
periods.

Cash and cash equivalents
Total cash and cash  equivalent  balances as of June 30, 1999 and  December  31,
1998 were $14,860 and $14,800 respectively.

Investments in and Advances to Related Parties
Investments in and advances to related parties decreased from $3,545 at December
31, 1998,  to $1,395 at June 30,  1999.  The decrease was caused by repayment of
certain  loans by company  officers.  The  balance  at June 30,  1999 is made up
primarily of a $1.3 million loan of securities to an affiliate, Granite Re.

Accounts Receivable net of Allowance For Doubtful Accounts
Receivables  net of  allowances  for  doubtful  accounts as of June 30, 1999 and
December  31,  1998 were  $258,319  and  $120,559  respectively.  June 30,  1999
receivables  are more  effectively  compared  to the June 30,  1998  receivables
balance of $238,532.  Receivable balances are impacted by the cyclical nature of
the crop  business and normally  crop/hail  receivables  are high as of June 30.
Crop/hail  receivables  do not start to become due for payment  until July.  The
crop  portion of  receivable  balances as of June 30, 1999 and June 30, 1998 was
$199,732 and $170,296  respectively.  Crop  Receivables  increased  17% which is
expected  due to an increase in year to date crop  premiums  written of 11% over
the prior year to date.

Nonstandard auto receivable  balances net of allowance for doubtful accounts was
$58,587 and $68,236  respectively  as of June 30,  1999 and June 30,  1998.  The
balance of nonstandard auto receivables  decreased 14% from the prior year. This
is expected due to a corresponding  decrease in nonstandard net premiums written
year to date of 9% from the prior year to date.

                                      -21-

<PAGE>

Reinsurance Recoverables and Prepaid Reinsurance Premiums
Reinsurance  recoverables  were  $103,454  and  $71,640 as of June 30,  1999 and
December 31, 1998 respectively.  However the reinsurance  recoverable balance is
more  effectively  compared to the June 30, 1998  balance of  $106,233.  This is
primarily  due  to the  cyclical  nature  of the  crop  business.  Of the  total
reinsurance  recoverable balance,  $88,560 and $62,041 pertain to crop business
as of June 30, 1999 and 1998,  respectively.  Reinsurance recoverables are up in
1999 due to an increased  percentage of ceded  business in 1999 with regard to a
quota share treaty.  Reinsurance recoverables on nonstandard auto decreased from
$44,193 to $14,894 for the period from June 30, 1998 to the current year to date
due to the commutation of a quota share treaty.

Prepaid  reinsurance  premiums were $127,329 and $31,172 as of June 30, 1999 and
December  31,  1998  respectively.  This  prepaid  balance  is more  effectively
compared to the June 30, 1998 prepaid  reinsurance  balance of $111,526.  The
prepaid  reinsurance balance is affected also by the cyclical nature of the crop
business  reinsured so prepaid  balances are higher at June 30. Crop reinsurance
premiums   totaled   $126,341  and  $90,253  as  of  June  30,  1999  and  1998,
respectively.  Prepaid  reinsurance  premiums on nonstandard auto decreased from
$21,273 at June 30,  1998 to $988 at June 30, 1999 due to the  commutation  of a
quota share treaty arrangement in the second half of 1998.

Deferred Policy Acquisition Costs
Deferred policy  acquisition  costs were $16,901 and $16,332 as of June 30, 1999
and December 31, 1998  respectively.  Although these costs are  comparable,  the
Company feels the ratio of DAC to net unearned  premium would be more comparable
using prior year to date comparisons.  Deferred acquisition costs as of June 30,
1998 were  $17,618.  Deferred  acquisition  costs  were  primarily  composed  of
deferred   acquisition   costs  on  nonstandard  auto  of  $15,255  and  $15,668
respectively at June 30, 1999 and June 30, 1998,  respectively.  Deferred policy
acquisition costs for nonstandard auto as compared with nonstandard net unearned
premiums  of $89,354  and  $90,625  were  17.1% and 17.3% as of the above  dates
respectively.  Deferred  acquisition  costs  for crop  were  $1,646  and  $4,066
respectively  at June 30, 1999 and 1998.  Deferred  policy  acquisition  costs
for crop as compared with net unearned  premiums of $9,799 and $24,237 as of the
above dates were 16.8% and 16.8% respectively.  As of June 30, 1999 and June 30,
1998 ceded  deferred  acquisition  costs were $-0- and  $2,116  respectively  on
nonstandard  auto. The ceded deferred costs are no longer applicable in 1999 due
to commutation of a quota share treaty.

Federal Income Taxes
Federal  income  taxes  recoverable  of $8,625 and  $12,672 at June 30, 1999 and
December  31, 1998 are based on amounts  recoverable  from the 1996 and 1997 tax
year due to tax losses generated in 1998 and through June 30, 1999.

The  deferred  income  tax  asset  balance  of  $6,786  as of June 30,  1999 has
increased  from $2,565 at June 30, 1998 and $5,164 at December  31, 1998 because
of  higher  unearned  premiums,  changes  in the  unrealized  gain  or  loss  in
investments and an increase in loss reserve.

Fixed Assets
Property and Equipment,  net of accumulated  depreciation  has increased  $1,935
over year end 1998.  This  increase is primarily  due to the  capitalization  of
various systems  implementation and hardware costs, primarily in the nonstandard
auto segment.

Intangible Assets
The balance in the  Intangible  Assets has  decreased  from year end 1998 due to
amortization expense. Intangible assets include goodwill from the acquisition of
Superior,  additional  goodwill from the acquisition of the minority interest in
GGSH and NACU,  debt or preferred  security  issuance  costs and  organizational
costs.

                                      -22-

<PAGE>

Loss and Loss Adjustment Expense Reserves
Total loss and loss adjustment  expense  reserves  increased from $200,972 as of
December 31, 1998, to $213,721 as of June 30, 1999.  The total  increase in loss
and loss adjustment expense reserves is approximately $12.7 million.

Nonstandard auto reserves  increased $12.5 million during 1999. Of that increase
$5.3 million  represented  strengthening  of prior year reserves.  The remaining
$7.2 million  increase in nonstandard  auto reserves  results from the fact that
accident year 1999 loss ratio is estimated to be approximately  2.0% higher than
for accident year 1998.  Reserves for 1998 AgPI(R)  losses  increased  from $5.9
million as of December 31, 1998 to $17.0  million as of June 30, 1999, as county
loss data and  policyholder  loss data gradually  became known paid losses equal
$8.0 million for a total incurred of $25.0 million.  These  increases are offset
by a decrease in reserves for crop  insurance,  other than  AgPI(R),  reflecting
normal seasonal variation of crop insurance losses.

Unearned Premium
The unearned premium reserve increased by $115,818 from December 31,1998 to June
30,1999.  Gross  unearned  premium was $226,482 and $110,664 as of June 30, 1999
and  December  31,  1998.  However,   this  unearned  premium  balance  is  more
effectively  compared  to the June  30,  1998  balance  of  $226,388  due to the
cyclical nature of the crop business. Unearned for the crop business is impacted
by the income recognition of crop/hail, which is based upon a 9 month life cycle
from January to October. Crop unearned as of June 30, 1999 and June 30, 1998 was
$136,141 and $114,490 respectively.  Crop unearned increased by $21,651 or 18.9%
from June 30, 1998 to June 30, 1999.  This was  primarily  due to an increase in
written  premium of 11.2 % for the same  period.  Unearned on  nonstandard  auto
decreased  $21,556 or 19.3% for the same  period.  This was  primarily  due to a
decrease in nonstandard premiums written of 26.3% for the same period.  Unearned
for  nonstandard  auto was $90,341 and $111,897 as of June 30, 1999 and June 30,
1998.

Reinsurance Payables
Reinsurance  payables  increased by $149,560  from December 31, 1998 to June 30,
1999. Due to the cyclical nature of the crop business reinsurance payables as of
June 30, 1999 of  $175,044  are more  effectively  compared to the June 30, 1998
balance of $154,564.  Of the total  reinsurance  payables  balance  $175,011 and
$123,418  pertain to the crop  business  as of June 30,  1999 and June 30,  1998
respectively.  Reinsurance  payables on the nonstandard auto business  decreased
from $31,146 to $32 between  June 30, 1998 and June 30, 1999 due to  commutation
of a quota share reinsurance treaty.

Notes Payable
At June 30, 1999,  IGF  maintained a revolving bank line of credit in the amount
of  $12,000.  At  December  31,  1998,  March 31,  1999,  and June 30,  1999 the
outstanding balance was $12,000, $1,959, and $11,767 respectively.  This line is
collateralized by the crop-related uncollected premiums, reinsurance recoverable
on paid losses, Federal Crop Insurance Corporation (FCIC) annual settlement, and
a first lien on the real estate owned by IGF. The IGF Revolver  contains certain
covenants  which (i) restricts  IGF's ability to accumulate  common stock;  (ii)
sets minimum  standards for  investments  and  policyholder  surplus;  and (iii)
limits ratio of net written  premiums to surplus.  At June 30, 1998,  IGF was in
compliance  with all covenants  associated  with the line or had received proper
waivers.

The average  interest rate on the line of credit was 6.96% during 1998 and 6.83%
for the six months ended June 30, 1999.

Notes payable also includes a $1,000 note due 2001 on the purchase of NACU at no
interest.  The balance of notes  payable at December  31,  1998  includes  three
smaller  notes  (less than $300 each)  assumed  in the  acquisition  of NACU due
2002-2006 with periodic payments at interest rates ranging from 7% to 9.09%.

                                      -23-

<PAGE>

Other Liabilities
Other  liabilities  increased by $3,776 from December 31, 1998 to June 30, 1999.
However,  payables as of June 30, 1998 of $21,015 are  comparable to payables of
$20,545 as of June 30, 1999.  The  payables  tend to be higher at June 30 due to
cyclical nature of the crop business and the related overall effect on cash flow
in the consolidated business.

Shareholders' Equity
Stockholders' Equity has decreased $13,645 from December 31, 1998. This decrease
is the result of a net loss of $10,787  for the six months  ended June 30,  1999
and the increase in unrealized losses on investments,  net of deferred taxes, of
$2,858.

LIQUIDITY AND CAPITAL RESOURCES
The Company's  consolidated  total assets of $837,360 at June 30, 1999 increased
$267,923  from  $569,437 as of December  31, 1998.  The primary  reason for this
increase  was an  increase  in  receivable  balances  which are  impacted by the
cyclical nature of the crop/hail business.  Typically crop/hail  receivables are
high as of June 30. Crop/hail receivables do not start to become due until July.

Net cash provided by operating  activities  decreased $26,714 to $10,731 for the
first six months of 1999 when  compared  to the same  period in the prior  year,
driven partially by a $21,379 decrease in net earnings. Cash and cash equivalent
increased  slightly from the end of 1998 to $14,860.  Repayment of officer loans
as well as cash generated from  operations was used for the purchase of invested
assets as well as  additional  computer  equipment  and related  software in the
Company's non-standard auto operations.

Overall,  operating  cash flow  combined  with the  availability  of short  term
investments continues to be adequate to meet policyholders needs for claims.

As of June 30,  1999,  the  company  had $17  million of short term  investments
available to meet short term operating cash needs.  This was an increase of $1.4
million and $5.8 million  over the December 31, 1998 and June 30, 1998  balances
of short term investments.

The crop  segment also has the ability to retain MPCI  premium  funds  collected
October  through  December of 1999 till March of 2000 at a 15% interest  rate if
needed.

YEAR 2000 COMPLIANCE

General
In the next year, many companies will face potentially  serious risks associated
with the  inability  of  existing  data  processing  hardware  and  software  to
appropriately recognize calendar dates beginning in the year 2000. Many computer
programs that can only  distinguish the final two digits of the year entered may
read entries for the year 2000 as the year 1900 and compute payments,  interest,
premiums, commissions,  delinquencies and other matters based on the wrong date.
If a company's critical internal systems do not correctly  recognize and process
data information  beyond the year 1999, there could be a material adverse impact
on a company's business and operation.

The Company has four primary  locations  where Y2K issues have the  potential to
significantly impact the Company's operations. These locations are Indianapolis,
Indiana;  Atlanta,  Georgia;  Tampa,  Florida,  and Des Moines,  Iowa. Given the
nature of the Company  structure,  the issues  relating to Tampa will be grouped
together with those of the Company's Atlanta  operations and will be referred to
as "Atlanta" issues.

The Company's location in Des Moines,  Iowa primarily  administers the Company's
crop insurance business which, on a premium volume basis, represents roughly 50%
of the Company's total business. The Company's corporate headquarters is located
in Indianapolis and the Company's Indianapolis location also houses non-standard

                                      -24-

<PAGE>

automobile  business  operations  which, on a premium volume basis,  account for
roughly 25% of the Company's  non-standard  automobile  business.  The Company's
Atlanta location  (including Tampa),  administers the remainder of the Company's
non-standard automobile business.

The Year 2000 Project  ("Project")  addresses the inability of various  computer
software and hardware (both internal and external to the Company) to distinguish
between  the year 1900 and the year 2000.  In 1996,  the  Company  initiated  an
effort to replace its  hardware  and  software  systems to reap the  operational
efficiencies  of state of the art  processing  systems.  This  effort  came as a
result of the Company's decision to replace the mainframe system in Indianapolis
and wean the Company from a third party  contractor  processing  arrangement  in
Atlanta.  As the Company  began to prepare for Y2K issues during the time it was
in the midst of its operating  systems  conversion and upgrade,  the Company set
forth on a course to identify Y2K items and issues,  assign a priority for those
items identified, test solutions, and design contingency plans.

Readiness

                          Corporate Wide Infrastructure
The Company  relies on third party  vendors  for many  things,  such as electric
utility  supply,  water,   telephone  service,   banking  services,   investment
management, and reinsurance,  among other things. The Company began inquiring of
such third party  infrastructure  vendors regarding their Y2K readiness in July,
1998.  These inquiries took the form of written requests for responses from such
third party vendors which would detail their Y2K  preparedness.  The Company has
received written assurance from each of its material third party  infrastructure
vendors that their respective Y2K preparations are complete and that the Company
should not anticipate a material  disruption in service from such infrastructure
vendors.

Further,  the Company has  examined its internal  infrastructure  systems  (e.g.
telephone system,  HVAC,  security  systems) and has successfully  completed the
necessary remediation of such internal infrastructure systems.

The Company has also prepared and implemented  documented standards with respect
to all new  equipment  purchases  and the  Company  now  receives  a  letter  of
certification  from the  manufacturers of such equipment that their products are
Y2K compliant.

                                   Des Moines
The  Company's  Des  Moines  location  has  completed  its Y2K  Project  and its
preparation is now complete.

                                     Atlanta
The  Company  has  replaced  its policy  administration  and  claims  systems by
converting to Y2K compliant systems.  These new policy administration and claims
systems are currently  operational for all new business written by the Company's
Atlanta facility.  There are, however,  approximately  24,000 insurance policies
which are currently  maintained  on a non-Y2K  compliant  policy  administration
system  provided by an unrelated  third party.  The policies  maintained on this
non-Y2K  compliant  system  represent  approximately  18%  of the  policy  count
currently administered by the Company's Atlanta operations.  Given the nature of
the policy term of these  24,000  insurance  policies,  the Company  expects the
policies to be beyond their term as of December 31, 1999 and it is the Company's
intention  that if such  policies  are quoted for  renewals,  if any,  that such
renewals  will be processed on Atlanta's  Y2K  compliant  policy  administration
system.  As an interim step, the Company has arranged for such  unrelated  third
party to store inactive  policy data while  providing the Company access to such
data on a fee basis.  A data  warehouse  is  currently  being  developed  by the
Company for such inactive policy data, with an expected  completion date of June
1,  2000.  Ongoing  operations  of  the  Company  will  not be  affected  by the
warehousing of such inactive policy data. Further, there are approximately 6,100

                                      -25-

<PAGE>

claims which are currently  being  administered on Atlanta's  non-Y2K  compliant
claims system.  The claims which are currently  being  administered on Atlanta's
non-Y2K  compliant claims system represent  approximately 60% of Atlanta's total
pending claim count, which will decrease during the balance of 1999.

The Company's  Atlanta  operation  must migrate data from its non-Y2K  compliant
legacy systems (policy  administration  and claims) and the Company is currently
in the process of writing the program which will allow this conversion. The data
requirements  of both the legacy  system  and the  Company's  new Y2K  compliant
policy  administration  and  claims  system  have been  identified  and the data
differences  between  such  systems  have also been  identified.  The Company is
currently  developing  the program logic to move claims  information  to its Y2K
compliant  platform.  The Company must complete the transfer logic and then test
and correct the results and output.  The Company estimates that it will complete
the development of the data conversion logic by October 15, 1999 and the Company
has  established an aggressive  goal of completing  the data  conversion for the
Company's  claims  system to its Y2K  compliant  platform by November  30, 1999.
However,  there can be no  assurance  that the Company  will meet this target or
will have  completed  the Atlanta data  conversion  by December  31,  1999.  The
ability of the Company to complete  this  conversion  is dependent  upon,  among
other things,  the availability of external resources which are primarily in the
form of third party programmers.

                                  Indianapolis
The Company  anticipated  that the  conversion of its non-Y2K  compliant  policy
administration  system would be completed  by June 30, 1999.  However,  in early
June,  1999,  the  Company  determined  that it would  reap  significant  future
operational  efficiencies  by installing  the  Company's  Y2K  compliant  policy
administration  system from its Atlanta operations in Indianapolis.  In addition
to significant  operational  efficiencies,  the Company determined that it would
reap significant benefits from having all of its automobile insurance operations
on the same policy administration system.  Therefore, the Company's prior effort
with respect to conversion of its Indianapolis policy  administration system was
discontinued.

Given the fact that the  Company's  Indianapolis  and Atlanta  locations  do not
service the same states, for the necessary policy administration  conversions to
occur,  variations  which are unique to each  state with which the  Indianapolis
location  deals must be  separately  programmed  into the Y2K  compliant  policy
administration  system  being  imported  from the  Company's  Atlanta  location.
Currently,   programming   is  underway   to  add  the  various   state-specific
requirements of those states with which the  Indianapolis  location  deals.  The
Company anticipates that, as soon as each states'  programming is completed,  it
will be  brought  on-line  while  programming  continues  on other  Indianapolis
states.  The  Company  believes  that such state  specific  programming  will be
completed  (including  testing) by October 31, 1999. The hardware  necessary for
the Company's  Indianapolis policy  administration  conversion has been acquired
and is Y2K compliant.

The Company has  completed  installation  of its Y2K  compliant  Atlanta  claims
system in its Indianapolis location and, as of August, 1998, began administering
all new claims in its  Indianapolis  location on this new Y2K compliant  system.
The Company has also  developed a program to allow its new Y2K compliant  claims
system to access policy data from its non-Y2K  compliant  policy  administration
system (which is in the process of being replaced). This program is currently in
the test phase. The Company believes that the program  currently being tested to
allow the new Y2K  compliant  claims  system to access old  policy  data will be
operational by September 30, 1999. There are currently  approximately 2,300 open
claims out of a total of  approximately  6,850 open  claims  that are  currently
being administered by the Company's non-Y2K compliant Indianapolis legacy claims
system.  Further,  the Company is in the  process of  completing  the  necessary
programming  to allow its new Y2K compliant  claims  system to administer  those
claims which are currently being administered on the Company's non-Y2K compliant
claims system.  The Company  estimates that this  programming  will be completed
(including testing) by September 30, 1999.

                                      -26-

<PAGE>

The Company  recognizes the challenges it faces  regarding the completion of the
installation of the Atlanta policy  administration  system in Indianapolis,  the
conversion of the  Indianapolis  policy  administration  data to a Y2K compliant
platform and the conversion of those claims which are currently  maintained on a
non-Y2K  compliant  platform to the Company's new Y2K compliant  claims  system.
Recognizing those challenges, the Company is developing an alternative plan with
respect to its legacy  systems,  which  includes the  upgrading of its hardware,
operating  software  and  completing  the  remediation  of  its  current  policy
administration   software.   The  Company  is  currently   proceeding  with  the
development both of its primary effort as well as this alternative.  The Company
estimates that this alternative will be complete and operational by November 30,
1999. There can,  however,  be no assurance that the Company will have completed
any of the steps  outlined  with  respect  to the  Indianapolis  portion  of the
Project  by the  dates  noted  or that  it will  have  completed  the  necessary
Indianapolis Project by December 31, 1999.

Year 2000 Costs
The Company considers the costs associated with the Project to be material.  The
Company estimates that, to date, it has spent approximately $7.0 Million towards
completion of the Project.  Further,  the Company  estimates that  approximately
$2.0 Million of additional  funds will be required to complete the Project.  The
Company anticipates that it will pay for these costs from current funds.

Risks
Given its  state of  preparedness,  the  Company  does not feel  that  there are
material Y2K related risks with respect to either its Des Moines facility or the
services  to be provided by third party  infrastructure  vendors.  Further,  the
Company  does  not  feel  that  there  is a  material  risk to its  business  or
operations from Y2K issues associated with internal infrastructure.

                                     Atlanta
With respect to Atlanta,  the most  reasonably  likely worst case scenario would
have the Company  failing to complete the  necessary  data  conversion  from its
legacy  claims  systems to its Y2K  compliant  claims  systems.  If this were to
occur, this would require that the claims payments be handled manually and would
require a small addition to staff.

                                  Indianapolis
The  most  reasonably  likely  worst  case  scenario   involving  the  Company's
Indianapolis   operations  is  that  the  Company  is  unable  to  complete  the
installation  of its Y2K  compliant  policy  administration  system  and fail to
successfully  convert  policy  administration  and claims  data from its non-Y2K
compliant  legacy policy  administration  and claims systems,  which the company
does not consider to be the case.  If this were to occur,  the Company  would be
unable to process roughly 25% of its non-standard  automobile insurance business
and it would lose the ability to  administer  existing  policies in an automated
environment.

                                     General
In the event that the Company's efforts are unsuccessful and/or that one or more
of the Company's critical internal systems should not properly recognize January
1, 2000 and subsequent dates, the following could occur, any of which could have
a material adverse impact on the operations of the Company;

        Service to the Company's customers in the Indianapolis operations could
        deteriorate  to the  point  that a  substantial  number  of the
        Company's customers move their business to another company;

        The Company may be unable to process its new business in the
        Indianapolis operations or pay certain older claims in a cost
        effective manner;

                                      -27-

<PAGE>

        The Company may be unable to fulfill, on a timely basis, its obligations
        to its customers, regulatory authorities, and or contingencies;

        The Company may be unable to fulfill, on a timely basis, various
        contractual obligations; and

        The Company may suffer  unintended,  indirect  consequences in that
        efforts to deal with  issues  caused by the failure to complete the
        Project may divert  resources from other areas or phases of the
        Company's operations.

Contingency Plans

                                     Atlanta
The Company is currently  assessing the feasibility of other alternatives to its
stated plan and is developing a contingency plan.

                                  Indianapolis
The Company is currently  assessing the feasibility of other alternatives and is
developing a contingency plan.

FORWARD LOOKING STATEMENTS
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"  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 crop operations such as  weather-related  events,  final
harvest  results,  commodity price levels,  governmental  program  changes,  new
product  acceptance  and  commission  levels paid to agents;  and (iii)  factors
affecting  the  Company's  nonstandard  automobile  operations  such as  premium
volume,  levels of operating  expenses as compared to premium  volume,  ultimate
development  of loss  reserves and  implementation  of the  Company's  operating
system.

                                      -28-

<PAGE>

PART II -        OTHER INFORMATION

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

                 (A) In 1998,  the Company's IGF  Insurance  Company  subsidiary
                 issued  insurance  policies  on certain  agricultural  business
                 interruption risks  ("AgPI(R)").  Please see note 8. Certain of
                 these policy  holders have  recently  instituted  litigation or
                 filed for  arbitration of their claim.  In each  instance,  the
                 Company's IGF Insurance Company  subsidiary has been named as a
                 defendant.  To date,  three lawsuits have been filed by a total
                 of seven  policyholders and three policyholders have instituted
                 arbitration. Further, the Company (through its IGF subsidiary),
                 has   instituted   two   declaratory    actions   against   two
                 policyholders to help determine the Company's  obligations with
                 respect  to such  policyholders.  The  Company  feels  it has a
                 strong legal  position with respect to these  AgPI(R)  lawsuits
                 and arbitrations and the Company is vigorously  defending these
                 matters.

                 These lawsuits and arbitrations have been instituted after June
                 30, 1999 and, consequently, each matter is in an early stage of
                 development. The Company feels its financial reserves for these
                 lawsuits and arbitrations are sufficient to cover the resulting
                 liability, if any, that may arise from these matters.  However,
                 there can be no assurance  that the Company's  total  liability
                 from AgPI(R) liability that may be in excess of current AgPI(R)
                 financial  reserves will not be material to the Company,  taken
                 as a whole.

ITEM 2.          CHANGES IN SECURITIES
                 None

ITEM 3.          DEFAULTS UPON SENIOR SECURITIES
                 None

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

ITEM 5.          OTHER INFORMATION
                 None

ITEM 6.          EXHIBITS AND REPORTS ON FORM 8-K
                 The Company filed an 8-K on June 1, 1999  regarding  changes in
                 registrants certifying accountants after the Company filed it's
                 1998  annual  report on Form  10-K.  An 8-K/A was also filed on
                 June 1, 1999 regarding additional  information on the Company's
                 changes in  registrants  certifying  accountants.  The  Company
                 filed an 8-K on August  20,  1999  regarding  the  filing of an
                 amended 10-Q for the quarterly period ended March 31, 1999.


                                      -29-

<PAGE>

                                   SIGNATURES



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



Dated: August 20, 1999                   By: /s/ Alan G. Symons
                                         Alan G. Symons
                                         Chief Executive Officer



Dated: August 20, 1999                   By: /s/ Thomas R. Kaehr
                                         Thomas R. Kaehr
                                         Vice President, Treasurer and
                                         Chief Financial Officer