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 September 30, 1997

                         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 November 12, 1997,  there were 10,450,000  shares of  Registrant's  common
stock issued and outstanding exclusive of shares held by Registrant.


<PAGE>



                                 Form 10-Q Index
                               September 30, 1997
                                      Page
                                     Number

PART 1  FINANCIAL INFORMATION

Item 1  Financial Statements................................................  3

        Consolidated Financial Statements:
        Consolidated Balance Sheets at September 30, 1997 and
           December 31, 1996................................................  4

        Consolidated Statements of Earnings for the Three
        and Nine Months Ended September 30, 1997 and 1996...................  5

        Consolidated Statements of Cash Flows
        for the Nine Months Ended September 30, 1997 and 1996...............  7

           Consolidated Statements of Changes in Stockholders'
           Equity...........................................................  8

        Notes to Consolidated Financial Statements..........................  9

Item 2  Management's Discussion and Analysis of Financial
        Condition and Results of Operations................................. 12

PART 2  OTHER INFORMATION................................................... 21

SIGNATURES.................................................................. 22


<PAGE>



SYMONS INTERNATIONAL GROUP, INC.
PART 1     FINANCIAL INFORMATION

Item 1     Financial Statements

In the opinion of management, the financial information reflects all adjustments
(consisting only of normal recurring adjustments) which are necessary for a fair
presentation of the financial position, results of operations and cash flows for
the interim  periods.  The results for the three and nine months ended September
30, 1997 and 1996 are not  necessarily  indicative of the results to be expected
for the entire year.

These quarterly interim financial statements are unaudited.

                                      -3-

<PAGE>



SYMONS INTERNATIONAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)

                                              September 30,      December 31,
                                                  1997              1996
ASSETS

Investments
  Available for Sale:
  Fixed Maturities, at market                    $169,086       $127,681
  Equity Securities, at market                     39,022         27,920
  Short-term investments, at amortized cost
  which approximates market                        18,298          9,565
Real Estate, at cost                                  455            466
Mortgage Loans                                      2,250          2,430
Other                                                 133             75
                                                      ---             --
Total invested assets                             229,244        168,137

Cash and cash equivalents                           9,155         13,095
Receivables, net                                  163,551         65,194
Reinsurance recoverable on paid and unpaid
losses, net                                       148,099         48,294
Prepaid reinsurance premiums                       34,363         14,983
Deferred policy acquisition costs                  11,769         12,800
Deferred income taxes                               2,128          3,329
Property and equipment                             11,100          8,137
Federal income taxes recoverable                      ---            319
Investments in and advances to related parties      1,984          1,152
Intangibles                                        44,042          4,881
Other                                               6,443          4,358
                                                    -----          -----
   Total Assets                                  $661,878       $344,679
                                                 ========       ========
LIABILITIES
Losses and loss adjustment expenses              $193,643       $101,719
Unearned premiums                                 115,497         87,285
Reinsurance payable                               109,804          6,508
Federal income tax payable                          1,558            ---
Term debt                                             ---         48,000
Other                                              24,758         18,657
                                                   ------         ------
   Total Liabilities                              445,260        262,169
                                                  -------        -------
Minority Interest:
  Preferred Securities                            135,000            ---
                                                  -------            ---
  Equity in net assets of subsidiary                  ---         21,610
                                                      ---         ------
STOCKHOLDERS' EQUITY
Common stock                                       39,019         38,969
Additional paid-in capital                          5,905          5,905
Unrealized gain on investments, net of
deferred taxes of $3,189 and $625                   5,890            820
Retained earnings                                  30,804         15,206
                                                   ------         ------
   Total Stockholders' Equity                      81,618         60,900
                                                   ------         ------
   Total Liabilities and Stockholders' Equity    $661,878       $344,679
                                                 ========       ========
See Notes to Consolidated Financial Statements

                                      -4-

<PAGE>



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

                                             For the Three Months Ending:
                                             September 30,   September 30,
                                                 1997            1996

Gross premiums written                         $103,919         $71,813
Less ceded premiums                            (37,554)         (7,383)
                                               --------         -------
Net premiums written                             66,365          64,430
Change in unearned premiums                       5,679           4,664
                                                  -----           -----
Net premiums earned                              72,044          69,094
Fee income                                        4,199           1,608
Net investment income                             2,900           2,844
Net realized capital gain/(loss)                  3,782           (834)
                                                  -----           -----
   Total Revenues                                82,925          72,712
                                                 ------          ------

Loss and loss adjustment expenses                53,903          47,942
Policy acquisition and general and
administrative expenses                          15,803          13,829
Amortization of intangibles                         393             211
Interest expense                                    540           1,688
                                                    ---           -----
   Total Expenses                                70,639          63,670
                                                 ------          ------

Earnings before income taxes, minority
interest and extraordinary item                  12,286           9,042
Provision for income taxes                        4,271           3,133
                                                  -----           -----
Earnings before minority interest and
extraordinary item                                8,015           5,909
Minority Interest:
   Distributions on preferred securities,
   net of tax                                     1,025             ---
   Equity in earnings of subsidiary                 264           1,320
                                                    ---           -----
Earnings before extraordinary item                6,726           4,589
Extraordinary item, net of tax ($0.07 per
share)                                              713             ---
                                                    ---             ---
   Net Earnings                                  $6,013          $4,589
                                                 ======          ======

Primary Earnings Per Share                        $0.56           $0.66
Fully Diluted Earnings Per Share                  $0.55           $0.66
Weighted Average Shares Outstanding
   Primary                                       10,773           7,000
                                                 ======           =====
   Fully Diluted                                 10,843           7,000
                                                 ======           =====

See notes to consolidated financial statements

                                      -5-

<PAGE>



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



                                                For the Nine Months Ending:

                                                September 30,    September 30,
                                                     1997             1996


Gross premiums written                               $382,984         $218,763
Less ceded premiums                                 (166,096)         (77,291)
                                                    ---------         --------
Net premiums written                                  216,888          141,472
Change in unearned premiums                           (8,832)         (13,312)
                                                      -------         --------
Net premiums earned                                   208,056          128,160
Fee income                                             14,990            5,670
Net investment income                                   8,176            4,377
Net realized capital gain (loss)                        5,466            (606)
                                                        -----            -----
   Total Revenues                                     236,688          137,601
                                                      -------          -------

Loss and loss adjustment expenses                     157,196           93,217
Policy acquisition and general and
administrative expenses                                46,200           26,112
Amortization of intangibles                               687              211
Interest expense                                        2,991            2,949
                                                        -----            -----
   Total Expenses                                     207,074          122,489
                                                      -------          -------

Earnings before income taxes, minority
interest and extraordinary item                        29,614           15,112
                                                                        ======
Provision for income taxes                             10,454            4,987
                                                       ------            -----
Earnings before minority interest and
extraordinary item                                     19,160           10,125
Minority Interest: 
   Distributions on preferred securities                1,025              ---
   Equity on earnings of subsidiary                     1,824            1,232
                                                        -----            -----
Earnings before extraordinary item                     16,311            8,893
Extraordinary item ($0.07 per share)                      713              ---
                                                      -------           ------
   Net Earnings                                       $15,598           $8,893
                                                      =======           ======

Primary Earnings Per Share                              $1.46            $1.27
Fully Diluted Earnings Per Share                        $1.46            $1.27
Weighted Average Shares Outstanding
   Primary                                             10,669            7,000
                                                       ======            =====
   Fully Diluted                                       10,705            7,000
                                                       ======            =====

See notes to consolidated financial statements

                                      -6-

<PAGE>




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

                                                    For the Nine Months Ending
                                                   September 30,   September 30,
                                                        1997            1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Earnings For The Period                            $15,598        $8,893
Adjustments to reconcile Net Earnings to Net Cash
provided from Operations:
  Equity in earnings of subsidiary                       1,824         1,232
  Depreciation and Amortization                          1,192           257
  Deferred income tax expense                          (1,074)         (166)
  Net realized capital(gain)/loss                      (5,466)           606
Net changes in operating assets and liabilities:
  Receivables                                         (98,357)      (47,940)
  Reinsurance recoverable on paid and unpaid
  losses, net                                         (99,805)      (35,101)
  Prepaid reinsurance premiums                        (19,380)       (7,180)
  Deferred policy acquisition costs                      1,031       (1,982)
  Other assets                                           (276)       (3,722)
  Losses and loss adjustment expenses                   91,924        28,255
  Unearned premiums                                     28,212        18,449
  Reinsurance payables                                 103,296        44,862
  Federal income taxes recoverable/(payable)             1,877         1,626
  Other liabilities                                         14         3,968
                                                            --         -----
Net Cash Provided From Operations                       20,610        12,057
                                                        ------        ------

Cash Flow Used In Investing Activities:
  Cash paid for Superior, net of cash required             ---      (66,389)
  Cash paid for Minority Interest                     (61,000)           ---
  Net (Purchases)/Sales of short-term investments      (8,733)         5,953
  Purchases of fixed maturities                      (198,314)        42,375
  Proceeds from sales, calls and maturities            162,132
  of fixed maturities                                                 28,611
  Purchase of equity securities                       (26,676)      (72,562)
  Proceeds from sales of equity securities              22,256        58,624
  Proceeds from sale of real estate                        ---            15
  Proceeds from repayment of mortgage loans                180           420
  Purchases of property and equipment                  (3,807)         (862)
                                                       -------         -----
Net Cash Used In Investing Activities                (113,962)      (88,565)
                                                     ---------      --------
Cash Flow Provided From Financing Activities:
  Net proceeds from line of credit and notes payable     6,206         8,769
  Proceeds/(payment) related to long-term debt        (48,000)        48,000
  Contribution from minority interest owner              2,304        21,200
  Proceeds from preferred securities, net              130,100           ---
  Loans to related parties                             (1,198)         1,821
                                                       -------         -----
Net Cash Provided From Financing Activities             89,412        79,790
                                                        ------        ------
Increase/(Decrease) In Cash And Cash Equivalents       (3,940)         3,282
Cash and Cash Equivalents, Beginning of Period          13,095         2,311
                                                        ------         -----
Cash and Cash Equivalents, End of Period                $9,155        $5,593
                                                        ======        ======

See Notes to Consolidated Financial Statements

                                      -7-

<PAGE>

<TABLE>
<CAPTION>

SYMONS INTERNATIONAL GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)

<S>                      <C>        <C>           <C>           <C>         <C>    

                         Common     Additional    Unrealized    Retained    Total
                          Stock      Paid-In      Gain (Loss)   Earnings    Stockholders'
                                     Capital      on                        Equity
                                                  Investments
Balance at                $1,000        $3,130        $(45)      $5,450       $9,535
December 31, 1995
Sale of subsidiary           ---         2,788          ---         ---        2,788
stock
Change in                    ---           ---          433         ---          433
unrealized loss on
investments, net
of deferred taxes
Net Earnings                 ---           ---          ---       8,893        8,893
                             ---           ---          ---       -----        -----
Balance at
September 30, 1996        $1,000        $5,918         $388     $14,343     $121,649
                          ======        ======         ====     =======     ========
Balance at
December 31, 1995         $1,000        $3,130        $(45)      $5,450       $9,535
Sale of subsidiary           ---         (614)          ---         ---        (614)
stock
Change in                    ---           ---          336         ---          336
unrealized loss on
investments, net
of deferred taxes
Issuance of common        37,969           ---          ---         ---       37,969
stock
Dividend to parent           ---           ---          ---     (3,500)      (3,500)
Net Earnings                 ---           ---          ---       8,952        8,952
                             ---           ---          ---       -----        -----
Balance at                38,969         5,905          820      15,206       60,900
December 31, 1996
Adjustment of
offering costs                50           ---          ---         ---           50
Change in
unrealized gain on
investments, net
of deferred taxes            ---           ---        5,070         ---        5,070
Net Earnings                 ---           ---          ---      15,598       15,598
                             ---           ---          ---      ------       ------
Balance at               $39,019       $ 5,905      $ 5,890     $30,804      $81,618
                         =======       =======      =======     =======      =======
September 30, 1997

See Notes to Consolidated Financial Statements

                                      -8-
</TABLE>

<PAGE>



                        SYMONS INTERNATIONAL GROUP, INC.
            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
             For The Three and Nine Months Ended September 30, 1997

NOTE 1 - BASIS OF PRESENTATION

The  foregoing   consolidated  condensed  financial  statements  are  unaudited.
However,  in the opinion of  management,  all  adjustments  necessary for a fair
presentation of the results of the interim period  presented have been included.
All  adjustments are of a normal and recurring  nature.  Results for any interim
period are not  necessarily  indicative  of results to be expected for the year.
The   consolidated   financial   statements   include  the  accounts  of  Symons
International  Group,  Inc.,  ("SIG"  and  the  "Company")and  its  wholly-owned
subsidiaries,  IGF Insurance  Company  ("IGF"),  GGS Management  Holdings,  Inc.
("GGSH"),  which owns 100% of Pafco  General  Insurance  Company  ("Pafco")  and
Superior  Insurance Company  ("Superior").  Prior to August 12, 1997, GGSH was a
52% owned  subsidiary of the Company.  The Company is a 67% owned  subsidiary of
Goran Capital Inc.  ("Goran").  The  consolidated  condensed  interim  financial
statements  have been  prepared in accordance  with Article 3 of Regulation  S-X
and,  therefore,  do not include all information and footnotes normally shown in
full annual financial statements.

These unaudited  consolidated  condensed financial statements have been prepared
by the Company in accordance with generally accepted accounting principles.  All
material intercompany amounts have been eliminated.

NOTE 2 - REINSURANCE

In order to reduce risk and  increase  its  underwriting  capacity,  the Company
purchases reinsurance.  Reinsurance does not relieve the Company of its ultimate
liability  to its  insureds  for the risks  ceded to  reinsurers.  As such,  the
Company is  subject to credit  risk with  respect to risks  ceded to  reinsurers
should a reinsurer  fail.  Effective  January 1, 1996  reinsurance was placed as
follows: For the nonstandard automobile segment, the Company purchases excess of
loss and  catastrophic  protections  which  result in minimum  ceded  premium in
proportion  to  gross  written  premiums.  For the  crop  segment,  the  Company
reinsures to the Federal Crop Insurance  Corporation  ("FCIC"), an agency of the
United States Department of Agriculture,  all of its Multi- Peril Crop Insurance
("MPCI")  business which has an underwriting  gain or loss feature.  The Company
reinsures  stop-loss  protection to affiliates and third party reinsurers on its
MPCI and crop hail  business.  Regarding  the crop hail  line of  business,  the
Company also carries an excess of loss  (stop-loss)  protection with third party
reinsurers.  Effective  January 1, 1997,  the  Company  ceded 20% of its new and
renewal nonstandard  automobile business,  40% of its crop hail business and 50%
of its crop named peril business under certain quota share  arrangements.  Third
party reinsurers  receive 90% and Granite Re, an affiliate,  is a participant in
the 20% quota share treaty,  receiving 10% of the ceded  nonstandard  automobile
business.  Effective October 1, 1997, the nonstandard automobile 20% quota share
treaty was  reduced to 10% due to  increased  surplus  and  capital at Pafco and
Superior.  Granite  Reinsurance  Company  Ltd.  is  also  a  participant  in the
stop-loss protection on MPCI and crop hail business.

The effects of reinsurance are as follows:

                                      -9-

<PAGE>



NOTE 2 (continued)
SYMONS INTERNATIONAL GROUP, INC.
Analysis of Effects of Reinsurance
(in thousands)




                     For the three months       For the nine months
                           ended                      ended
                    Sept. 30,   Sept. 30,      Sept.30,    Sept.30,
                      1997        1996           1997        1996
Premiums Written
  Gross              $103,919     $71,813      $382,984    $218,763
  Ceded              (37,554)     (7,383)     (166,096)    (77,291)
                     --------     -------     ---------    --------
  Net                 $66,365     $64,430      $216,888    $141,472
                      =======     =======      ========    ========
Premiums Earned
  Gross              $149,162     $80,409      $354,772    $207,186
  Ceded              (77,118)    (11,315)     (146,716)    (79,026)
                     --------    --------     ---------    --------
  Net                 $72,044     $69,094      $208,056    $128,160
                      =======     =======      ========    ========
Losses and LAE
Incurred
  Gross              $155,192     $60,090      $309,538    $127,253
  Ceded             (101,289)    (12,148)     (152,342)    (34,036)
                    ---------    --------     ---------    --------
  Net                 $53,903     $47,942      $157,196     $93,217
                      =======     =======      ========     =======



                    September 30, 1997  December 31, 1996
Unearned Premiums
  Gross                $115,497              $87,285
  Ceded                 (34,363)             (14,983)
                       --------             --------
  Net                   $81,134              $72,302
                        =======              =======
Outstanding Claims
  Gross                $193,643             $101,719
  Ceded               (110,132)             (29,459)
                      ---------             --------
  Net                   $83,511              $72,260
                        =======              =======

NOTE 3 - CONTINGENT LIABILITY

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

IGF  instituted  litigation  against  the FCIC on March 23,  1995 in the  United
States District Court for the Southern  District of Iowa seeking $4.3 Million as
reimbursement

                                      -10-

<PAGE>



for  certain  expenses.  IGF  alleges  the FCIC  wrongfully  sought  to hold IGF
responsible for these expenses.  The FCIC  counterclaimed for approximately $1.2
Million in claims payments for which the FCIC contends IGF is responsible for as
successor to the run-off book of business.  On October 27, 1997,  IGF reached an
agreement  with the FCIC to settle the case,  with both parties  dismissing  all
claims  against one another which were subject to the  litigation.  The FCIC has
agreed to pay IGF a lump sum payment of $60,000.

NOTE 4 - EARNINGS PER SHARE

Primary  and fully  diluted  earnings  per  share for the three and nine  months
ending   September  30,  1997  were  computed  using  weighted   average  shares
outstanding,  which are based upon  actual  outstanding  shares  during  1997 of
10,450,000.  Weighted average shares outstanding for 1996 was based on 7,000,000
shares actually outstanding.

NOTE 5 - PREFERRED SECURITY OFFERING

On August  12,  1997,  the  Company  issued  $135  million  in Trust  Originated
Preferred Securities ("Preferred  Securities").  These Preferred Securities were
offered through a wholly-owned trust subsidiary of the Company and are backed by
Senior  Subordinated  Notes to the  Trust  from  the  Company.  These  Preferred
Securities were offered under Rule 144A of the SEC ("Offering") and, pursuant to
the Registration Rights Agreement executed at closing,  the Company filed a Form
S-4  Registration  Statement  with the SEC on  September  16, 1997 to effect the
Exchange  Offer.  The S-4  Registration  Statement  was  declared  effective  on
September  30, 1997 and the Exchange  Offer  successfully  closed on October 31,
1997.  The  proceeds  of the  Offering  were used to  repurchase  the  remaining
minority  interest in GGSH for $61 million,  repay the balance of the GGS Senior
Credit  Facility  of $44.9  million and the Company  expects to  contribute  the
balance,  after  expenses,  of  approximately  $24  million  to the  nonstandard
automobile insurers of which $10.5 million was contributed in the third quarter.
Expenses of the issue aggregated 4.9 million and will be amortized over the term
of the Preferred  Securities (30 years).  In the third quarter the Company wrote
off the  remaining  unamortized  costs  of the GGS  Senior  Credit  Facility  of
approximately $1.1 million pre-tax or approximately $0.07 per share.

The  excess  of the  acquisition  price  over the  minority  interest  liability
aggregated  approximately  $37,896,000  and was assigned to goodwill as the fair
market value of acquired assets  approximating  their carrying  value.  Goodwill
will be  amortized  over 25  years  to match  management's  expectations  of the
expected benefit period.

The  Preferred  Securities  have a term of 30 years  with  semi-annual  interest
payments commencing February 15, 1998. The Preferred  Securities may be redeemed
in whole or in part after 10 years.

The Company shall not, and shall not permit any subsidiary, to incur directly or
indirectly,  any indebtedness  unless, on the date of such Incurrence (and after
giving effect thereto),  the  Consolidated  Coverage Ratio exceeds 2.5 to 1. The
Coverage Ratio is the aggregate of net earnings,  plus interest expense,  income
taxes,  depreciation,  and amortization divided by interest expense for the same
period.

Assuming  this offering  took place at January 1, 1997,  the proforma  effect of
this offering on the Company's  consolidated  statement of earnings for the nine
months ended is as follows:    September 30, 1997
                                   Unaudited
                                 (In thousands)
Revenues                         $ 236,688
Net earnings                     $  13,645
Net earnings per common share       $ 1.28

                                      -11-

<PAGE>



The aforementioned  proforma results do not include the effects of the write-off
of the debt  issuance  cost recorded in the third  quarter.  The  aforementioned
proforma  amounts are dilutive because of the additional  reserve  adjustment to
the non-standard  auto operations in the second quarter and the non-inclusion of
investment  income on the  additional  proceeds from the  offering.  The Company
expects based on projected  premium  volumes and results of  operations  for the
non-standard  division  that this  transaction  will be accretive to earnings in
future years.


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

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

Nonstandard Automobile Insurance Operations

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

The Company follows the customary  industry  practice of reinsuring a portion of
its risks and paying for that  protection  based upon  premiums  received on all
policies subject to such reinsurance.  As part of its internal  procedures,  the
Company evaluates the financial  condition of each prospective  reinsurer before
it  cedes  business  to that  carrier.  Based  on the  Company's  review  of its
reinsurers'  financial health and reputation in the insurance  marketplace,  the
Company  believes its reinsurers are financially  sound and therefore,  can meet
their obligations to the Company under the terms of the reinsurance treaties.

Crop Insurance Operations

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

                                      -12-

<PAGE>



ability to repay these loans and to find sources of funding for the
following year's operating expenses.

The Company,  like other  private  insurers  participating  in the MPCI program,
generates revenues from the MPCI program in two ways. First, it markets,  issues
and administers policies, for which it receives administrative fees; and second,
it  participates in a  profit-sharing  arrangement in which it receives from the
government a portion of the aggregate profit, or pays a portion of the aggregate
loss,  in respect of the  business it writes.  The Company  writes MPCI and crop
hail insurance through approximately 1,300 independent agencies in 40 states.

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

The Company also  receives  from the FCIC (i) an expense  reimbursement  payment
equal to a percentage of Gross Premiums  Written for each Buy-up Coverage policy
it writes ("Buy-Up Expense  Reimbursement  Payment"),  (ii) an LAE Reimbursement
Payment equal to 13.0% of MPCI Imputed  Premiums for each CAT Coverage policy it
writes  (the "CAT LAE  Reimbursement  Payment"),  and (iii) a small  excess  LAE
reimbursement  payment of two hundredths of one percent (.02%) of MPCI Retention
(as defined  herein) to the extent the Company's MPCI Loss Ratios on a per state
basis exceed certain levels (the "MPCI Excess LAE Reimbursement  Payment").  For
1998,  1997 and 1996, the Buy-up Expense  Reimbursement  Payment has been set at
27%, 29% and 31%,  respectively,  of the MPCI Premium. For GAAP income statement
purposes,  the Buy-up Expense Reimbursement Payment is treated as a contribution
to income and reflected as an offset against policy  acquisition and general and
administrative  expenses.  The CAT LAE Reimbursement Payment and the MPCI Excess
LAE  Reimbursement  Payment are, for income statement  purposes,  recorded as an
offset  against  LAE, up to the actual  amount of LAE incurred by the Company in
respect of such policies,  and the remainder of the payment, if any, is recorded
as other income.

On June 9, 1997,  the  Secretary of  Agriculture  announced  that the USDA would
transfer  to the  private  sector CAT  coverage.  At this time,  the Company has
received  approximately  17,000  policies  that were  formerly  written  by USDA
offices.  Based on historical FSA CAT transfer per-policy averages,  the Company
has preliminarily  estimated that it will receive approximately an additional $2
to $3 million in premiums from such transferred policies,  however, there can be
no assurance that this number will be realized.

In addition to MPCI, the Company offers stand alone crop hail  insurance,  which
insures  growing  crops  against  damage  resulting  from hail  storms and which
involves no federal  participation,  as well as its  proprietary  product  which
combines the application and  underwriting  process for MPCI and hail coverages.
This  product  tends to produce less  volatile  loss ratios than the stand alone
product since the combined product  generally insures a greater number of acres,
thereby  spreading the risk of damage over a larger insured area.  Approximately
half of the  Company's  hail  policies  are  written in  combination  with MPCI.
Although  both crop hail and MPCI provide  coverage  against hail damage,  under
crop hail coverages farmers can receive payments for hail damage which

                                      -13-

<PAGE>



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  Named  Peril
Coverages.  These products  cover  specific  crops and are generally  written on
terms that are  specific to the kind of crop and farming  practice  involved and
the amount of actuarial  data  available.  The Company  plans to seek  potential
growth  opportunities  in this niche market by  developing  basic  policies on a
diverse  number of named  crops  grown in a variety of  geographic  areas and to
offer these policies primarily to large producers through certain select agents.

In order to reduce the Company's potential loss exposure under the MPCI program,
in  addition  to  Reinsurance  obtained  from the FCIC,  the  Company  purchases
stop-loss  Reinsurance from other private  insurers.  Such Reinsurance would not
eliminate the Company's  potential liability in the event a reinsurer was unable
to pay or losses  exceeded the limits of the stop-loss  coverage.  For crop hail
insurance,  the Company protects itself with quota share Reinsurance and various
layers of stop-loss Reinsurance.  Based on a review of the reinsurers' financial
health and reputation in the insurance  marketplace,  the Company  believes that
the reinsurers for its crop insurance  business are  financially  sound and that
they therefore can meet their  obligations to the Company under the terms of the
Reinsurance treaties.

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

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

Regulation

The  Company's  admitted  insurance  businesses  are  subject to  comprehensive,
detailed regulation  throughout the United States, under statutes which delegate
regulatory,   supervisory   and   administrative   powers  to  state   insurance
commissioners.  The primary  purpose of such  regulations and supervision is the
protection of policyholders and

                                      -14-

<PAGE>



claimants.  Depending on whether the insurance company is domiciled in the state
and whether it is an admitted or non-admitted insurer, such authority may extend
to such things as (i) periodic reporting of the insurer's  financial  condition,
(ii) periodic financial  examination,  (iii) approval of rates and policy forms,
(iv) loss  reserve  adequacy,  (v) insurer  insolvency,  (vi) the  licensing  of
insurers and their agents,  (vii)  restrictions  on the payment of dividends and
other  distributions,  (viii) approval of changes in control,  and (ix) the type
and amount of permitted investments.

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

Results of Operations

For the three and nine months ended September 30, 1997, the Company recorded net
earnings  of  $6,013,000   and   $15,598,000  or  $0.56  and  $1.46  per  share,
respectively.  This is  approximately  a 31.0%  and  75.4%  increase  from  1996
comparable  amounts of $4,589,000  and  $8,893,000 or $0.66 and $1.27 per share.
The non-standard automobile insurance segment demonstrated improved earnings for
the three and nine months  ended due to  continued  premium  growth and improved
expense ratios.  The improvement in crop insurance  earnings for the nine months
ended  relates to growth in market  share and  favorable  underwriting  results.
Lower  earnings  in the crop  segment in the third  quarter  reflects  timing of
recognizing  underwriting  results.  In 1996,  early  concerns  in winter  wheat
coupled  with a late  planting  and  concerns  of  early  frost  delayed  profit
recognition until the third and fourth quarters.

                                      -15-

<PAGE>






                                                 For the three months ended
                                                       September 30,
                                                       (in thousands)
                                           1997                        1996
Nonstandard-Automobile Insurance
Operations:
  Gross premiums written                  $77,505                     $56,836
                                          =======                     =======
  Net premiums written                    $61,789                     $56,489
                                          =======                     =======
  Net premiums earned                     $61,059                     $54,701
  Fee income                                4,380                       2,486
  Net investment income                     2,702                       2,780
  Net realized capital gain/(loss)          3,837                       (834)
                                            -----                       -----
     TOTAL REVENUES                        71,978                      59,133
                                           ------                      ------
  Losses and loss adjustment expenses      44,873                      38,300
  Policy acquisition and general and
  administrative expenses                  18,170                      15,922
                                           ------                      ------
     TOTAL EXPENSES                        63,043                      54,222
                                           ------                      ------
  Earnings before income taxes              8,935                      $4,911
                                            =====                      ------

GAAP Ratios
(Nonstandard Automobile Only):
  Loss and LAE Ratio                        73.5%                       70.0%
  Expense ratio, net of billing fees        22.6%                       24.6%
                                            -----                       -----
  Combined ratio                            96.1%                       94.6%
                                            =====                       =====

Crop Insurance Operations:
  Gross premiums written                  $23,997                     $14,796
                                          =======                     =======
  Net premiums written                     $4,576                      $7,941
                                           ======                      ======
  Net premiums earned                     $10,985                     $14,393
  Net investment income                        52                          46
  Other income                              (181)                       (895)
  Net realized capital gain (loss)           (55)                         ---
                                             ----                         ---
     TOTAL REVENUES                        10,801                      13,544
                                           ------                      ------
  Losses and loss adjustment expenses       9,030                       9,642
  Policy acquisition and general and
  administrative expenses                 (2,609)                     (1,741)
  Interest expense                             40                         242
                                               --                         ---
     TOTAL EXPENSES                         6,461                       8,143
                                            -----                       -----
  Earnings before income taxes             $4,340                      $5,401
                                           ======                      ======


                                      -16-

<PAGE>




                                            For the nine months ended
                                                 September 30,
                                                (in thousands) 
                                              1997        1996
Nonstandard-Automobile Insurance
Operations:
  Gross premiums written                    $243,052     $119,126
                                            ========     ========
  Net premiums written                      $195,632     $118,578
                                            ========     ========
  Net premiums earned                       $189,303     $107,545
  Fee income                                  11,584        4,819
  Net investment income                        7,796        4,215
  Net realized capital gain/(loss)             5,521        (622)
                                               -----        -----
     TOTAL REVENUES                          214,204      115,957
                                             -------      -------
  Losses and loss adjustment expenses        143,897       77,131
  Policy acquisition and general and
  administrative expenses                     53,662       31,617
                                              ------       ------
     TOTAL EXPENSES                          197,559      108,748
                                             -------      -------
  Earnings before income taxes               $16,645       $7,209
                                             =======       ======
GAAP Ratios
(Nonstandard Automobile Only):
  Loss and LAE Ratio                           76.0%        71.7%
  Expense ratio, net of billing fees           22.2%        24.9%
                                               -----        -----
  Combined ratio                               98.2%        96.6%
                                               =====        =====

Crop Insurance Operations:
  Gross premiums written                    $132,353      $95,332
                                            ========      =======
  Net premiums written                       $21,256      $22,894
                                             =======      =======
  Net premiums earned                        $18,753      $20,615
  Net investment income                          144          142
  Other income                                 3,406          253
  Net realized capital gain                     (55)           16
                                             -------       ------
     TOTAL REVENUES                           22,248       21,026
                                              ------       ------
  Losses and loss adjustment expenses         13,299       16,086
  Policy acquisition and general and
  administrative expenses                    (8,635)      (6,114)
  Interest expense                                 1          469
                                                 ---          ---
     TOTAL EXPENSES                            4,729       10,441
                                               -----       ------
  Earnings before income taxes               $17,519      $10,585
                                             =======      =======
Statutory Capital and Surplus:
  Pafco                                      $23,418
                                             =======
  IGF                                        $40,552
                                             =======
  Superior                                   $71,455
                                             =======


                                      -17-

<PAGE>



Consolidated  Gross Premiums  Written  increased  44.7% in the third quarter and
75.1% year-to-date due to growth in both the nonstandard auto and crop segments.
Gross Premiums Written for the nonstandard  auto segment  increased 36.4% in the
third quarter and 104% year-to-date. While a portion of this increase relates to
four additional months of premium in 1997 of Superior, additional premium growth
relates  to  internal   growth  due  to  improved   service,   certain   product
improvements,  tougher uninsured  motorist laws in states such as California and
Florida and entrance  into new states such as Nevada and Oregon.  Such  increase
was  primarily due to volume  rather than rate  increases,  although the Company
adjusts rates on an ongoing basis.  Gross Premiums  Written for the crop segment
increased  62.2% in the third quarter and  increased  38.8%  year-to-date.  Such
increases were due to continued industry  privatization and aggressive marketing
efforts,  resulting  in  continued  increase in market  share.  Remaining  gross
written premiums  represent  commercial  business which was ceded 100% effective
January 1, 1996 to an affiliate, Granite Reinsurance Company Ltd.

Net Premiums Written increased in the third quarter and year-to-date for 1997 as
compared  to 1996 due to the growth in Gross  Premiums  Written  offset by quota
share reinsurance.

In 1997, the Company ceded $15,716,000 and $47,420,000 of nonstandard automobile
premiums during the third quarter and  year-to-date as part of a 20% quota share
treaty instituted  January 1, 1997. No such treaty was in effect during 1996. In
1997, the Company ceded  $3,610,000 and $15,415,000 of crop hail premiums during
the  third  quarter  and  year-to-date  as  part  of a 40%  quota  share  treaty
instituted  January 1, 1997. In 1996, crop hail premiums were ceded at a rate of
10%. The nonstandard  automobile quota share  reinsurance  treaty was reduced to
10% effective October 1, 1997 following additional capital  contributions to the
insurance companies from the proceeds of the Preferred Securities Offering.

Net Premiums Earned  increased for the three and nine months ended September 30,
1997 as compared to the corresponding  periods of the prior year, reflecting the
strong growth in Gross Written Premiums offset by the effects of the nonstandard
automobile and crop hail quota share treaties.

Fee income  increased  $2,591,000  and  $9,320,000 for the three and nine months
ended September 30, 1997 as compared to the  corresponding  periods of the prior
year.  Such increases  were due to billing fee income on nonstandard  automobile
business from an increase in in-force  policy count.  There was also an increase
in the receipt of CAT Coverage  Fees and CAT LAE  Reimbursement  Payments due to
higher premium volume.

Net investment  income  increased  $56,000 and $3,799,000 for the three and nine
months ended September 30, 1997 as compared to the corresponding  periods of the
prior year. Such increases were due primarily to investment income from Superior
and greater invested assets.

Realized  gains of  $5,466,000  in 1997 were due primarily to a change in equity
managers and a repositioning of the portfolio.  Realized gains were particularly
strong  in  the  third  quarter  on  the  strength  of the  equity  markets  and
corresponding sales of securities that had reached targeted pricing levels.

The Loss and LAE  Ratio for the  nonstandard  automobile  segment  was 73.5% and
76.0% for the three and nine  months  ended  September  30,  1997 as compared to
70.0% and 71.7% for the corresponding  periods in 1996. The Crop Hail Loss Ratio
in 1997 is 67.1%  compared  to 51.3% in 1996.  The  increase in the Loss and LAE
Ratio for the  nonstandard  automobile  segment  reflects  the recent  growth in
premium  volume in an effort to increase  market share and improve  economics of
scale. The $5.3 million reserve  adjustment in the second quarter  increases the
nine month  Loss and LAE Ratio  2.8%.  The  increase  was also due to  increased
severity in certain  coverages.  The increase in the crop hail loss ratio is the
result of storm damage in the third quarter in certain eastern states.

                                      -18-

<PAGE>



Policy acquisition and general and  administrative  expenses have increased as a
result of the  increased  volume of  business  produced by the  Company.  Policy
acquisition  and general and  administrative  expenses rose to  $15,803,000  and
$46,200,000  or 21.9% and  22.2% of Net  Premium  Earned  for the three and nine
months ended September 30, 1997 compared to $13,829,000 and $26,022,000 or 20.0%
and 20.3% of Net  Premium  Earned in the  corresponding  periods  of 1996.  Such
increase was due to a higher mix of nonstandard  automobile  premiums in 1997 as
compared to 1996.  The Expense Ratio,  net of billing fees, for the  nonstandard
automobile  segment  improved  to 22.6% and 22.2% for the three and nine  months
ended  September  30, 1997 as compared to 24.6% and 24.9% for the  corresponding
periods  in  1996,  due  to  technological  and  operational  efficiencies,  and
continued economies of scale.

Due to the accounting for the crop insurance segment, operating expenses for the
three and nine months  ended  September  30,  1997  includes a  contribution  to
earnings of  $2,609,000  and  $8,035,000  as compared to  comparable  amounts of
$1,741,000 and $6,114,000 for the  corresponding  periods in 1996. Such increase
was due to greater Buy-up Expense  Reimbursement  Payments and MPCI underwriting
gain due to increased premium volumes and more favorable underwriting results.

The nonstandard  automobile quota share treaty reduced  premiums earned,  losses
and LAE incurred and policy acquisition and general  administrative  expenses by
$14,912,000,  $9,943,000  and  $4,596,000,  and  $30,724,000,  $20,855,000,  and
$9,101,000,  respectively,  for the three and nine months  ending  September 30,
1997, for a net pre-tax earnings reduction of $373,000 and $768,000 in the three
and nine months ending September 30, 1997. Reduction in expenses reflects ceding
commission income net of a deferred acquisition cost adjustment.

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

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

Income tax expense was 34.7% and 35.3% of pre-tax  income for the three and nine
months ended September 30, 1997 as compared to 34.7% and 33.0% in 1996.

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

Financial Condition and Capital Reserves and Liquidity

The  Company's  total assets of  $661,878,000  at September  30, 1997  increased
$317,199,000  from $344,679,000 as of December 31, 1996. The primary reasons for
this increase  were an increase of $ 57,167,000 in cash and invested  assets and
increases in receivables and reinsurance  assets due to growth in premium volume
and premium due on installment  sales,  which generate  billing fee income,  and
timing of crop  operations and an increase in goodwill due to the acquisition of
the minority  interest portion of GGSH. The increase in cash and invested assets
was due to the  increase  in cash flow from  operations  and  proceeds  from the
Preferred  Securities  Offering.  The Company did not  significantly  change its
investment mix or philosophy in 1997.

The primary  source of funds  available to the Company as a holding  company are
dividends from its primary  subsidiaries,  IGF, IGF Holdings and GGS Management.
Subsequent to the Offering of the Preferred  Securities and the repayment of the
GGS Senior Credit Facility and purchase of the remaining 48% minority  interest.
The Company  also  receives  $150,000  quarterly  pursuant to an  administration
agreement  with IGF to cover  the  costs of  executive  management,  accounting,
investing, marketing, data processing

                                      -19-

<PAGE>



and reinsurance.

GGS  Management  collects  billing  fees charged to  policyholders  of Pafco and
Superior  who  elect  to  make  their  premium  payments  in  installments.  GGS
Management  also receives  management  fees under its management  agreement with
Pafco and Superior.  When the Florida  Department  approved the  acquisition  of
Superior by GGS  Holdings,  it  prohibited  Superior  from paying any  dividends
(whether  extraordinary  or not) for  four  years  from the date of  Acquisition
without the prior written approval of the Florida Department,  and extraordinary
dividends,  within the meaning of the Indiana  Insurance Code, cannot be paid by
Pafco without the prior  approval of the Indiana  Commissioner.  The  management
fees charged to Pafco ad Superior by GGS Management are subject to review by the
Indiana and Florida Departments.

The nonstandard  automobile insurance  subsidiaries' primary source of funds are
premiums,  investment  income and proceeds from the maturity or sale of invested
assets.  Such funds are used  principally  for the payment of claims,  operating
expenses (primarily management fees), commissions, dividends and the purchase of
investments.  There is  variability  to cash outflows  because of  uncertainties
regarding settlement dates for liabilities for unpaid losses.  Accordingly,  the
Company has  experienced  an increase in its  investment  portfolio  and has not
experienced  any problems with meeting its  obligations  for claims  payments or
management fees.

The Company has  prepared a  management  agreement  between IGF and IGF Holdings
similar to that for the nonstandard  automobile operations in which IGF will pay
IGF Holdings certain  management fees for services  rendered by IGF Holdings for
IGF. IGF Holdings has no  limitations on dividends to the Company thus providing
a cash flow stream  other than  dividends  from IGF for amounts in excess of IGF
Holding's  expenses.  As of  December  31,  1996,  IGF  has the  ability  to pay
$12,122,000 in dividends without prior regulatory approval.

Cash flows in the Company's  MPCI  business  differ from cash flows from certain
more  traditional  lines. The Company pays insured losses to farmers as they are
incurred during the growing season,  with the full amount of such payments being
reimbursed to the Company by the federal  government within three business days.
MPCI premiums are not received  from farmers until covered crops are  harvested.
Such  premiums  are required to be paid over in full to the FCIC by the Company,
with interest, if not paid by a specified date in each crop year.

During 1997,  IGF  continued  the practice of borrowing  funds under a revolving
line of  credit to  finance  premium  payables  to the FCIC on  amounts  not yet
received from farmers (the "IGF Revolver").  The maximum  borrowing amount under
the IGF Revolver is $7,000,000.

Net  cash  provided  by  operating  activities  in 1997  aggregated  $20,610,000
compared to $12,057,000  in 1996.  This increase in funds provided was caused by
additional cash of $1,252,000 from net earnings  adjusted for non-cash  expenses
and realized  gains or losses and  continued  premium  growth  which  results in
increased cash flow as loss payments lag receipt of premiums.

Net cash used in investing  activities  increased  from  $88,565,000  in 1996 to
$113,962,000  in 1997  reflecting  investment  of  remaining  proceeds  from the
Preferred Securities Offering and cash flow from operations.

In 1997,  financing  activities  provided cash of  $89,412,000  compared to cash
provided of  $79,790,000  in 1996,  with funds in 1997 being  primarily from the
Preferred  Securities Offering while 1996 funds were provided from the financing
of the acquisition of Superior.

                                      -20-

<PAGE>




PART II - OTHER INFORMATION

ITEM 1.             LEGAL PROCEEDINGS
                    IGF instituted litigation against the FCIC on March 23, 1995
                    in  the  United  States  District  Court  for  the  Southern
                    District of Iowa seeking $4.3 Million as  reimbursement  for
                    certain expenses.  IGF alleges the FCIC wrongfully sought to
                    hold  IGF   responsible   for  those   expenses.   The  FCIC
                    counterclaimed  for  approximately  $1.2  Million  in claims
                    payments for which the FCIC contends IGF is responsible  for
                    as successor to the run-off book of business. On October 27,
                    1997,  IGF reached an agreement  with the FCIC to settle the
                    case,  with both parties  dismissing  all claims against one
                    another which were subject to the  litigation.  The FCIC has
                    agreed to pay IGF a lump sum payment of $60,000.

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
                    Form 8-K filed on August  26,  1997  regarding  issuance  of
                    Preferred   Securities  and  acquisition  of  remaining  48%
                    minority interest in GGSH.

                    Form 8-KA  filed on October 3, 1997  regarding  issuance  of
                    Preferred  Securities  and  acquisition of the remaining 48%
                    minority interest in GGSH.


                                      -21-

<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: November 12, 1997               By: /s/ Alan G. Symons
                                       Alan G. Symons
                                       Chief Executive Officer





Dated: November 12, 1997               By: /s/ Gary P. Hutchcraft
                                       Gary P. Hutchcraft
                                       Vice President, Treasurer and
                                       Chief Financial Officer



                                      -22-

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