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, 1999

                        Commission File Number: 000-24366

                               GORAN CAPITAL INC.
             (Exact name of registrant as specified in its charter)

CANADA                                                       Not Applicable
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                            Identification No.)

                                   2 Eva Road
                                    Suite 200
                            Toronto, Ontario M9C 2A8

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

Registrant's telephone number, including area code:  (416) 662-0660 (Canada)
                                                     (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 1, 1999, there were 5,876,398 shares of Registrant's common stock
issued and outstanding exclusive of shares held by Registrant.




<PAGE>
                                 Form 10-Q Index
                    For The Quarter Ended September 30, 1999
                                                                      Page
                                                                     Number

PART I   FINANCIAL INFORMATION

Item 1   Financial Statements

         Unaudited Consolidated Financial Statements:
         Unaudited Consolidated Balance Sheets at
         September 30, 1999 and December 31, 1998......................      3

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

         Unaudited Consolidated Statements of Shareholders'
         Equity........................................................      6

         Unaudited Consolidated Statements of Changes in
         Cash Resources for the Three and Nine Months Ended
         September 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...........................     19

PART II  OTHER INFORMATION.............................................     34

SIGNATURES.............................................................     36

INDEX TO EXHIBITS
         Exhibit 11 - Computation of Per Share Earnings................     37

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
GORAN CAPITAL INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Canadian GAAP, stated in thousands of U.S. dollars)
<TABLE>
<CAPTION>

                                                                                     September 30,     December 31,
ASSETS                                                                                   1999              1998

<S>                                                                                    <C>               <C>
Cash and investments                                                                   $238,067          $253,718
                                                                                        -------           -------
Accounts receivable:
  Premiums receivable                                                                   145,025           121,328
  Income taxes recoverable                                                               11,708            12,711
  Due from related parties                                                                1,013             3,495
  Accrued and other receivables                                                           4,858             2,362
                                                                                        -------           -------
        TOTAL ACCOUNTS RECEIVABLE                                                       162,604           139,896
Reinsurance recoverable on paid and outstanding claims                                  225,843            67,885
Prepaid reinsurance premiums                                                             28,477            17,486
Capital assets, net of accumulated depreciation                                          22,062            19,350
Deferred policy acquisition costs                                                        12,509            16,332
Deferred income taxes                                                                    10,428             5,825
Intangibles                                                                              44,413            46,300
Other assets                                                                              5,674             4,197
                                                                                        -------           -------
        TOTAL ASSETS                                                                   $750,077          $570,989
                                                                                        =======           =======
LIABILITIES
Accounts Payable:
  Due to insurance companies                                                            $83,160           $12,353
  Accrued and other payables                                                             32,215            22,283
                                                                                        -------           -------
                                                                                        115,375            34,636
Outstanding claims                                                                      335,045           207,432
Unearned premiums                                                                       117,320           110,665
Notes Payable                                                                             7,589            13,744
                                                                                        -------           -------
                                                                                        575,329           366,477
                                                                                        -------           -------
Minority interest:
  Equity in net assets of subsidiaries                                                   10,047            19,787
  Preferred securities                                                                  135,000           135,000
                                                                                        -------           -------
                                                                                        145,047           154,787
                                                                                        -------           -------
Shareholders' equity                                                                     29,701            49,725
                                                                                        -------           -------
        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                     $750,077          $570,989
                                                                                        =======           =======
</TABLE>

See notes to consolidated financial statements

                                      -3-

<PAGE>

GORAN CAPITAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(Canadian GAAP, stated in thousands of U.S. dollars, except per share data)
<TABLE>
<CAPTION>

                                                                                         Three Months Ended
                                                                                            September 30,
                                                                                         1999           1998

<S>                                                                                     <C>            <C>
Gross premiums written                                                                  $67,685        $95,887
Less ceded premiums                                                                     (12,457)       (23,418)
                                                                                        -------        -------
Net premiums written                                                                     55,228         72,469
Change in net unearned premiums                                                          12,936         21,699
                                                                                         ------         ------
Net premiums earned                                                                      68,164         94,168
Fee income                                                                                3,161          3,813
Net investment income                                                                     3,197          3,281
Net realized capital gain (loss)                                                           (250)         1,145
                                                                                        -------        -------
      Total Revenues                                                                     74,272        102,407
                                                                                        -------        -------

Net claims incurred                                                                      75,693         92,490
General and administrative expenses                                                      24,395         27,468
Interest expense                                                                            631            129
Amortization of intangibles                                                                 197            698
                                                                                        -------        -------
      Total expenses                                                                    100,916        120,785
                                                                                        -------        -------

      Earnings (loss) before undernoted items                                           (26,644)       (18,378)
Provision for income taxes                                                               (8,614)        (5,902)
Distribution of preferred securities, net of tax                                          2,101          2,101
Minority interest                                                                        (6,224)        (4,344)
                                                                                        -------        -------
Earnings (loss) from continuing operations                                              (13,907)       (10,233)
Loss from discontinued operations                                                           --             --
                                                                                        -------        -------
      Net Earnings (loss)                                                              $(13,907)      $(10,233)
                                                                                        =======        =======

Earnings (loss) per share - basic                                                        $(2.37)        $(1.76)
                                                                                           ====           ====
Earnings (loss) per share - fully diluted                                                $(2.37)        $(1.76)
                                                                                           ====           ====
Earnings (loss) per share - operating                                                    $(2.33)        $(1.18)
                                                                                           ====           ====

</TABLE>

See notes to consolidated financial statements

                                      -4-

<PAGE>

GORAN CAPITAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
(Canadian GAAP, stated in thousands of U.S. dollars, except per share data)
<TABLE>
<CAPTION>

                                                                                          Nine Months Ended
                                                                                             September 30,
                                                                                         1999           1998

<S>                                                                                    <C>            <C>
Gross premiums written                                                                 $393,577       $443,588
Less ceded premiums                                                                     191,928       (163,029)
                                                                                        -------        -------
Net premiums written                                                                    201,649        280,559
Change in net unearned premiums                                                          10,166        (14,888)
                                                                                        -------        -------
Net premiums earned                                                                     211,815        265,671
Fee income                                                                               10,778         15,203
Net investment income                                                                    10,212         10,177
Net realized capital gain (loss)                                                         (1,206)         3,959
                                                                                        -------        -------
      Total Revenues                                                                    231,599        295,010
                                                                                        -------        -------

Net claims incurred                                                                     206,981        218,979
General and administrative expenses                                                      57,040         67,734
Interest expense                                                                            376            361
Amortization of intangibles                                                               1,887          1,719
                                                                                        -------        -------
      Total expenses                                                                    266,284        288,793
                                                                                        -------        -------

      Earnings (loss) before undernoted items                                           (34,685)         6,217
Provision for income taxes                                                              (11,574)         2,536
Distribution of preferred securities, net of tax                                          6,252          6,327
Minority interest                                                                        (9,740)          (890)
                                                                                        -------        -------
Earnings (loss) from continuing operations                                              (19,623)        (1,756)
Loss from discontinued operations                                                           --            (185)
                                                                                        -------          -----
      Net Earnings (loss)                                                              $(19,623)      $ (1,941)
                                                                                        =======        =======

Earnings (loss) per share - basic                                                        $(3.34)        $(0.33)
                                                                                           ====           ====
Earnings (loss) per share - fully diluted                                                $(3.34)        $(0.33)
                                                                                           ====           ====
Earnings (loss) per share - operating                                                    $(3.21)        $(0.77)
                                                                                           ====           ====
</TABLE>

See notes to consolidated financial statements

                                      -5-


<PAGE>

GORAN CAPITAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Canadian GAAP, stated in thousands of U.S. dollars)
<TABLE>
<CAPTION>

                                                                          Cumulative       Retained          Total
                                             Common       Contributed      Translation      Earnings      Shareholders'
                                              Stock        Surplus        Adjustment       (Deficit)         Equity

<S>                                         <C>              <C>              <C>           <C>               <C>
Balance at December 31, 1997                $18,010          $2,775           $(292)        $39,839           $60,332

Issuance of common shares                       366             ---              --             ---               366
Change in cumulative                                                             59             ---                59
  translation adjustment                        ---             ---                             ---
Net earnings                                    ---             ---              --           8,292             8,292
                                             ------           -----             ---          ------            ------
Balance at September 30, 1998               $18,376          $2,775           $(233)        $48,131           $69,049
                                             ======           =====             ===          ======            ======

Balance at December 31, 1998                $19,317          $2,775            $252         $27,381           $49,725
Issuance of common shares                       ---             ---              --             ---               ---
Change in cumulative
  translation adjustment                        ---             ---            (401)            ---              (401)
Net earnings (loss)                             ---             ---              --         (19,623)          (19,623)
                                             ------           -----             ---          ------            ------
Balance at September 30, 1999               $19,317          $2,775           $(149)         $7,758           $29,701
                                             ======           =====             ===          ======            ======

</TABLE>

See notes to consolidated financial statements

                                      -6-

<PAGE>

GORAN CAPITAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN CASH RESOURCES
(Canadian GAAP, stated in thousands of U.S. dollars)
<TABLE>
<CAPTION>

                                                                                       Nine Months Ended
                                                                                         September 30,
                                                                                       1999         1998

<S>                                                                                  <C>           <C>
CASH PROVIDED BY OPERATING ACTIVITIES
  Net earnings (loss) for the period                                                 $(19,623)     $(1,941)
  Items not affecting cash resources:
    Amortization and depreciation                                                       1,887        3,210
    Loss (gain) on disposal of investments                                              1,206       (3,959)
    Minority interest in net income (loss) of consolidated subsidiary                  (9,740)        (890)
    Decrease (increase) in other assets                                                (1,477)    (156,251)
    Decrease (increase) in deferred policy acquisition costs                            3,823       (3,383)
    Decrease (increase) in deferred income taxes recoverable                           (4,603)      (3,087)
    Increase (decrease) in unearned premiums                                            6,655       27,393
    Increase (decrease) in outstanding losses                                         127,613      148,232
    Decrease (increase) in accounts receivable                                       (193,493)    (122,650)
    Increase (decrease) in accounts payable                                            80,739      120,974
                                                                                      -------      -------
                                                                                       (7,013)       7,648
                                                                                      -------      -------
FINANCING ACTIVITIES:
  Increase (reduction) of borrowed funds                                               (6,155)       9,418
  Issue of share capital                                                                   -           366
                                                                                      -------      -------
                                                                                       (6,155)       9,784
                                                                                      -------      -------
INVESTING ACTIVITIES:
  Net (purchase) sale of marketable securities                                          4,292      (15,543)
  Acquisition of subsidiary                                                                 -       (3,000)
  Net purchase of minority interest shares                                                  -       (1,208)
  Net purchase of capital assets                                                         (970)      (7,690)
                                                                                      -------      -------
                                                                                        3,322      (27,441)
                                                                                      -------      -------
Change in cash resources during the period                                             (9,846)     (10,009)
Cash resources, beginning of period                                                    42,759       36,557
                                                                                      -------       -------
Cash resources, end of period                                                         $32,913      $26,548
                                                                                      =======      =======
</TABLE>

See notes to consolidated financial statements

                                      -7-

<PAGE>

                               GORAN CAPITAL INC.
            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
             For The Three and Nine Months Ended September 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.

        These unaudited  consolidated financial statements have been prepared by
        the Company in accordance with accounting  principles generally accepted
        in Canada ("CDN GAAP").  These  principles  also conform in all material
        respects with  accounting  principles  generally  accepted in the United
        States  ("US  GAAP")  except  as  disclosed  in Note  13.  All  material
        intercompany amounts have been eliminated.

2.      Subsequent Events
        On  October  27,  1999 the  Company  announced  that it had  ceased  its
        previously  announced  efforts  to locate a buyer for all or part of its
        non-standard automobile and its crop insurance operations.

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. The Company has risks throughout the year with
        crops planted in the fall, the winter and spring.

                                      -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 and (iii) Buy-Up Expense  Reimbursement  at the
        applicable  rate  of MPCI  gross  premiums  written  along  with  normal
        operating expenses incurred in connection with premium writings.  In the
        third  quarter,   if  a  sufficient   volume,   approximately   90%,  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 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) Loss Adjustment  Expense ("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  in the 1999 crop
        year and thereafter. The Company was allowed to retain a portion of 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.

                                      -9-


<PAGE>

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 September 30, 1999,  the Company's IGF Insurance  Company  subsidiary
        ("IGF")  maintained  a  revolving  bank line of credit in the  amount of
        $12,000  (the "IGF  Revolver").  This line of credit  has been  extended
        through  December 15, 2000. At December 31, 1998,  March 31, 1999,  June
        30, 1999 and  September  30, 1999 the  outstanding  balance was $12,000,
        $1,989, $11,767 and $5,966, respectively. This line is collateralized by
        the crop-related  uncollected premiums,  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)
        restrict  IGF's  ability to accumulate  common  stock;  (ii) set minimum
        standards for  investments  and  policyholder  surplus;  and (iii) limit
        ratio of net written  premiums to statutory  surplus.  At September  30,
        1999,  IGF  was  not in  compliance  with a  minimum  statutory  surplus
        covenant. However, IGF has received a waiver from the bank for September
        30, 1999. IGF does expect to meet the minimum statutory surplus covenant
        at year-end.

        The average  interest  rate on the IGF  Revolver  was 7.81% for the nine
        months  ended  September  30, 1998 and 6.83% for the nine  months  ended
        September 30, 1999.

        Notes  payable  also  includes a $1,000 note due 2001 on the purchase of
        NACU which bears 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 which have various due dates from 2002 to 2006
        with periodic payments at interest rates ranging from 7% to 9.09%.

6.      Preferred Securities
        On August 12, 1997,  the  Company's  Symons  International  Group,  Inc.
        ("SIG")  issued $135 million in Trust  Originated  Preferred  Securities
        ("Preferred  Securities") at a cumulative  annual  distribution  rate of
        9.5% paid semi-annually. These Preferred Securities were offered through
        a trust  subsidiary of SIG. The Preferred  Securities have a Liquidation
        amount of $1,000 per share and mature on August 15, 2027.  The principal
        asset of the trust subsidiary is a subordinated debenture of the Company
        in the  principal  amount  of $135  million  with an  interest  rate and
        maturity  date  substantially   identical  to  those  of  the  Preferred
        Securities.

        The  Preferred   Securities  represent   Company-obligated   mandatorily
        redeemable securities of subsidiary holding solely parent debentures and
        have a  term  of 30  years  with  semi-annual  interest  payments  which
        commenced February 15, 1998. The Preferred Securities may be redeemed in
        whole or in part after 10 years. The Preferred  Security  obligations of
        approximately  $13  million  per year  are  funded  from  the  Company's
        nonstandard automobile management company and dividend capacity from the
        crop operations. The nonstandard auto funds are the result of management
        and billing fees in excess of operating costs.

                                      -10-

<PAGE>

        The  Trust  Indenture  for the  Preferred  Securities  contains  certain
        preventative  covenants.  These  covenants  are  based  upon  the  SIG's
        Consolidated   Coverage  Ratio  of  earnings  before  interest,   taxes,
        depreciation  and  amortization  (EBITDA)  whereby if SIG's EBITDA falls
        below 2.5  times  Consolidated  Interest  Expense  (including  Preferred
        Security  distributions) for the most recent four quarters the following
        restrictions become effective:

          - SIG may not incur additional Indebtedness or guarantee additional
            Indebtedness.
          - SIG may not make certain  Restricted  Payments  including  loans or
            advances to affiliates,  stock  repurchases and a limitation on
            the amount of dividends is inforce.
          - SIG may not increase its level of  Non-Investment  Grade Securities
            defined as equities,  mortgage loans, real estate,  real estate
            loans and non-investment grade fixed income securities.

        These restrictions  currently apply as SIG's Consolidated Coverage Ratio
        was (2.9x)  through  September 30, 1999 and will continue to apply until
        the SIG's Consolidated Coverage Ratio is in compliance with the terms of
        the Trust Indenture. This does not represent a Default by the Company on
        the Preferred Securities.  SIG was in compliance with these preventative
        covenants as of September 30, 1999.

7.      Regulatory Affairs
        The Indiana Department of Insurance ("IDOI") is conducting  examinations
        of Pafco  General  Insurance  Company.  The  scope  of the  examinations
        encompass loss  reserves,  pricing and  reinsurance.  Although there has
        been no report  issued as a result of these  examinations,  the IDOI has
        required Pafco to provide monthly  financial  information,  obtain prior
        approval of  reinsurance  arrangements  and related party  transactions,
        submit  business  plans that address  levels of surplus and net premiums
        written, and consult with the IDOI on a monthly basis.

        As a result  of the  losses  experienced  by IGF in the  crop  insurance
        operations,  IGF has agreed with the IDOI to provide  monthly  financial
        statements  and  consult  monthly  with the IDOI,  and to  obtain  prior
        approval for related party transactions.

        The Florida  Department of Insurance  ("FDOI") has initiated  reviews of
        Superior.  The Company  expects  the scope of the  reviews to  encompass
        market  conduct,  data  processing  systems,  Year  2000  readiness  and
        financial  examinations  as of June 30,  1999  and  December  31,  1999.
        Although there have been no reports  issued or other actions taken,  the
        Company expects to meet shortly with the FDOI to discuss these and other
        issues, including reserve levels.

8.      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   agricultural   business

                                      -11-
<PAGE>

        interruption   insurance   policies   ("AgPI(R)").   Several  suits  and
        arbitrations have been filed regarding these policies. See Note 9 to the
        consolidated financial statements.

        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 also  indicated  it may assess the  Company to repay
        fees the agents  received from the insured.  The Company did not receive
        any of these broker fees and believes its practices are consistent  with
        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.  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 a material adverse  development is not deemed
        probable,  the Company  has not  accrued any amount in its  consolidated
        financial statements for this liability.

9.      Losses on AgPI(R) Product
        In 1998,  IGF sold a total of 157  policies  for  agricultural  business
        interruption  insurance  called  AgPI(R)  that were  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.,
        chemical  dealers).  Most  of  the  policies  were  sold  to  California
        policyholders.

        The policy form  required 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 was 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 and $1.6  million
        earned in the first quarter of 1999.  Adverse  weather  conditions and
        resultant  crop damage in parts of the country where the policies were
        sold, led the Company to begin establishing  reserves for its possible
        exposure.  However,  the  lack of  National  Agricultural  Statistical
        Service  ("NASS") and  policyholder  loss data adversely  affected the
        Company's  ability  to  establish  the  amount of their  exposure.  At
        December 31, 1998,  the Company set its reserves at an amount equal to
        100% of the 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  Company  recognized  that  it  was  experiencing
        unexpected  adverse loss  development  on these policies and increased
        its incurred losses related to 1998 policies to $15 million.  When the
        Company published second quarter results, NASS data was complete,  and
        the Company had received  policyholder  data on nearly all policies to
        determine  its  exposure.   The  Company's  estimated  gross  ultimate
        incurred loss settlement and loss  adjustment  expense ("LAE") related
        to these  policies  was $25 million  (gross  loss  before  reinsurance
        recoveries).   Although,   as  discussed  below,  a  number  of  legal

                                      -12-
<PAGE>

        proceedings have been commenced with respect to the AgPI(R)  policies,
        the Company has not found reason to alter that  estimate at this time.

        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. The AgPI(R)  policy form requires
        binding   arbitration.   As  of  the  date  of  this  Form  10-Q,  138
        policyholders have incurred an indemnifiable loss according to Company
        calculations. Of these, 38 policyholders have accepted settlements and
        released  the  Company  from  liability.  IGF is a  party  to 8  legal
        proceedings    involving   AgPI(R)   policyholders   and   arbitration
        proceedings  involving an additional 7  policyholders.  The Company is
        vigorously  defending these matters.  These lawsuits and  arbitrations
        remain in an early stage of development.  Arbitration hearings and any
        court  appearances will likely not begin until the year 2000. See Part
        II,  Item 1 of this  report.

        Less  than  $0.1  million  of  1999  gross  written  AgPI(R)
        premiums  have  been  written  and   assumed by the   Company
        through  September  30,  1999.  Based  on  the  information  presently
        available,  the Company believes that it has recognized,  through loss
        and LAE payments and reserves,  its ultimate loss exposure  related to
        the AgPI(R) product.  The Company feels its financial reserves for the
        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  ultimate liability for AgPI(R)
        related claims 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 and will not
        have a material adverse effect on the Company's  results of operations
        or financial  condition.  Of the $25 million  AgPI(R) losses  reserved
        approximately  $21  million  has been paid to date.

        During the first quarter of 1999, the Company entered into reinsurance
        arrangements  covering a portion of the AgPI(R) business.  Under those
        arrangements,  during the first  quarter  the  Company  recorded  $4.7
        million  of  ceded  gross  premium  and  a  $9.4  million  reinsurance
        recovery,  deferring the resulting net gain of $4.7 million.  The $4.7
        million  deferred gain was recognized as income in the second quarter.
        The  Company is not  entitled to any  further  recoveries  under these
        reinsurance arrangements.

10.     Adverse  Development on Prior Accident Year
        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.  During the third quarter, the Company  incurred an additional
        $2.5  million 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 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  and  personal   injury
        protection.

                                      -13-


<PAGE>

11.     Segment Disclosures
        The Company has two reportable  segments based on products:  Nonstandard
        automobile  insurance and Crop  insurance.  The  Nonstandard  automobile
        segment  offers  personal  nonstandard  automobile  insurance  coverages
        through a network of  independent  general  agencies.  The Crop  segment
        writes MPCI and crop hail insurance  through  independent  agencies with
        its primary concentration in the Midwest. The accounting policies of the
        segments are the same as those described in the December 31, 1998 annual
        report in "Nature of Operating and Significant  Accounting Policies" and
        in footnote 3 of the September 30, 1999 10-Q.  There are no  significant
        intersegment   transactions.   The  Company  evaluates  performance  and
        allocates  resources  to the  segments  based  on  profit  or loss  from
        operations before income taxes.

        The  following  is a  summary  of  the  Company's  segment  data  and  a
        reconciliation  of  the  segment  data  to  the  Consolidated  Financial
        Statements.  The "Corporate and Other" includes  operations not directly
        related to the reportable  business  segments and unallocated  corporate
        items (i.e., corporate investment income,  interest expense on corporate
        debt and unallocated overhead expenses). Segment assets are those assets
        in the Company's operations in each segment.

        The following tables show financial data by segment:

                                      -14-

<PAGE>

<TABLE>
<CAPTION>

                                                                                           For the three months
                                                                                            ended September 30,
                                                                                            1999          1998

<S>                                                                                         <C>          <C>
NONSTANDARD AUTOMOBILE INSURANCE OPERATIONS:
  Gross premiums written                                                                    $57,416      $61,536
                                                                                            =======       ======
  Net premiums written                                                                      $56,079      $55,381
                                                                                            =======       ======

  Net premiums earned                                                                       $59,238      $64,742
  Fee income                                                                                  2,994        3,827
  Net investment income                                                                       2,961        2,960
  Net realized gain (loss)                                                                     (407)       1,121
                                                                                             ------       ------
        TOTAL REVENUES                                                                       64,786       72,650
                                                                                             ------       ------
  Losses and loss adjustment expenses                                                        54,899       57,589
  Policy acquisition and general and administrative expenses                                 26,725       19,563
                                                                                             ------       ------
        TOTAL EXPENSES                                                                       81,624       77,152
                                                                                             ------       ------
  Earnings (loss) before income taxes                                                      $(16,838)     $(4,502)
                                                                                            =======       ======
GAAP RATIOS (Nonstandard Automobile Only):
  Loss and LAE Ratio                                                                          92.68%       88.95%
  Expense ratio, net of billing fees                                                          40.06%       24.31%
                                                                                              -----        -----
  Combined ratio                                                                             132.74%      113.26%
                                                                                             ======       ======

CROP INSURANCE OPERATIONS:
  Gross premiums written(2)                                                                 $10,201      $32,423
                                                                                             ======       ======
  Net premiums written                                                                        $(824)     $15,313
                                                                                              =====       ======

  Net premiums earned                                                                        $7,316      $29,170
  Fee income                                                                                    110          (12)
  Net investment income                                                                          22           55
  Net realized capital gain (loss)                                                               -            47
                                                                                             ------       ------
        TOTAL REVENUES                                                                        7,448       29,260
                                                                                             ------       ------
  Losses and loss adjustment expenses                                                        19,022       34,312
  Policy acquisition and general and administrative expenses(1)                              (3,889)       6,572
  Interest and amortization of intangibles                                                      318          287
                                                                                             ------       ------
        TOTAL EXPENSES                                                                       15,451       41,171
                                                                                             ------       ------
  Earnings (loss) before income taxes                                                       $(8,003)    $(11,911)
                                                                                             ======       ======
</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.

Loss and LAE ratio:  ratio of loss and loss adjustment  expense  incurred during
the period, as a percentage of net premium earned.

Expense ratio, net of billing fees: ratio of policy  acquisition and general and
administrative expense less fee income, as a percentage of net premium earned.

Combined ratio: sum of the loss and LAE ratio plus the expense ratio net of
billing fees.

                                      -15-

<PAGE>

<TABLE>
<CAPTION>


                                                                                          For the nine months ended
                                                                                                September 30,
                                                                                             1999          1998

<S>                                                                                        <C>             <C>
NONSTANDARD AUTOMOBILE INSURANCE OPERATIONS:
  Gross premiums written                                                                   $184,659       $231,042
                                                                                            =======        =======
  Net premiums written                                                                     $193,918       $206,802
                                                                                            =======        =======

  Net premiums earned                                                                      $191,472       $203,563
  Fee income                                                                                 10,412         12,535
  Net investment income                                                                       9,421          8,894
  Net realized gain (loss)                                                                   (1,423)         3,762
                                                                                            -------        -------
        TOTAL REVENUES                                                                      209,882        228,754
                                                                                            -------        -------
  Losses and loss adjustment expenses                                                       167,843        164,237
  Policy acquisition and general and administrative expenses                                 69,929         56,367
                                                                                            -------        -------
        TOTAL EXPENSES                                                                      237,772        220,604
                                                                                            -------        -------
  Earnings (loss) before income taxes                                                      $(27,890)      $  8,150
                                                                                            =======        =======
GAAP RATIOS (Nonstandard Automobile Only):
  Loss and LAE Ratio                                                                          87.66%         80.68%
  Expense ratio, net of billing fees                                                          31.08%         21.53%
                                                                                             ------         ------
  Combined ratio                                                                             118.74%        102.21%
                                                                                             ======         ======

CROP INSURANCE OPERATIONS:
  Gross premiums written(2)                                                                $208,448       $210,618
                                                                                            =======        =======
  Net premiums written                                                                      $12,422        $68,167
                                                                                            =======        =======

  Net premiums earned                                                                       $12,330        $57,791
  Fee income                                                                                    247          2,670
  Net investment income                                                                          61            220
  Net realized capital gain                                                                       -            217
                                                                                             ------         ------
        TOTAL REVENUES                                                                       12,638         60,898
                                                                                             ------         ------
  Losses and loss adjustment expenses                                                        33,090         53,050
  Policy acquisition and general and administrative expenses(1)                             (16,551)         6,822
  Interest and amortization of intangibles                                                      735            520
                                                                                             ------         ------
        TOTAL EXPENSES                                                                       17,274         60,392
                                                                                             ------         ------
  Earnings (loss) before income taxes                                                       $(4,636)      $    506
                                                                                            =======        =======
</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.

Loss and LAE ratio: ratio of loss and loss adjustment expense incurred during
the period, as a percentage of net premium earned.

Expense ratio, net of billing fees: ratio of policy  acquisition and general and
administrative expense less fee income, as a percentage of net premium earned.

Combined  ratio:  sum of the loss and LAE ratio  plus the  expense  ratio net of
billing fees.

                                      -16-

<PAGE>

<TABLE>
<CAPTION>
                                                               Three Months Ended           Nine Months Ended
                                                                  September 30,               September 30,
                                                               1999          1998           1999         1998

<S>                                                         <C>            <C>           <C>             <C>
     Earnings (loss) before income taxes and
        minority interest:
            Nonstandard automobile                          $(16,838)      $(4,502)      $(27,890)      $8,150
            Crop                                              (8,003)      (11,911)        (4,636)         506
                                                              ------        ------         ------        -----
               Segment totals                                (24,841)      (16,413)       (32,526)       8,656
            Corporate and other                               (1,803)       (1,965)        (2,159)      (2,439)
                                                              ------      --------         ------        -----
                Consolidated totals                         $(26,644)     $(18,378)      $(34,685)      $6,217
                                                              ======        ======         ======        =====

</TABLE>

<TABLE>
<CAPTION>
                                                                                  September 30,  December 31,
                                                                                      1999           1998

<S>                                                                                 <C>            <C>
     Segment assets:
        Nonstandard automobile                                                      $317,908       $376,831
        Crop                                                                         367,666        143,434

</TABLE>

     Total assets of the crop  business are subject to normal  cyclical
     fluctuations and are normally high at September 30 of each year.

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              Nine Months Ended
                                                              September 30,                September 30,
                                                           1999          1998           1999           1998

<S>                                                      <C>           <C>            <C>            <C>
     Basic:
        Weighted-average common shares
          outstanding                                    5,876,398     5,825,930      5,876,398      5,825,930
                                                         =========     =========      =========      =========
     Diluted:
        Weighted-average common shares
          outstanding                                    5,876,398     5,825,930      5,876,398      5,825,930
        Dilutive effect of stock options                         0             0              0              0
                                                        ----------    ----------     ----------     ----------

     Average common shares outstanding
        assuming dilution                                5,876,398     5,825,930      5,876,398      5,825,930
                                                         =========     =========      =========      =========

</TABLE>

     The Company has 682,572  million stock options  outstanding as of September
     30, 1999. Of these,  682,572 million are antidilutive  because the exercise
     price is below the average market price during the period. Additionally due
     to the net  loss in 1998 and  1999,  stock  options  are  antidilutive  and
     therefore  are  excluded  from the  calculation  of average  common  shares
     outstanding  assuming  dilution and fully diluted earnings per share is the
     same a basic earnings per share.


                                      -17-

<PAGE>

13.  United States Accounting Principles
     These  unaudited  consolidated  financial  statements have been prepared in
     accordance with CDN GAAP. The differences  between CDN GAAP and US GAAP are
     as follows:

<TABLE>
<CAPTION>

                                                                                    September 30,     September 30,
                                                                                        1999              1998

<S>                                                                                  <C>                <C>
Reported net earnings (loss)                                                         $(19,623)          $(1,941)
US/Canada GAAP differences:
   No differences                                                                          --                --
                                                                                       ------             -----
Revised net earnings (loss)                                                          $(19,623)          $(1,941)
                                                                                       ======             =====

Earnings (loss) per share - basic                                                      $(3.34)           $(0.33)
                                                                                        =====              ====
Earnings (loss) per share - fully diluted                                              $(3.34)           $(0.33)
                                                                                        =====              ====
</TABLE>

<TABLE>
<CAPTION>
                                                                                    September 30,     December 31,
                                                                                        1999              1998

<S>                                                                                    <C>               <C>
Shareholders' equity in accordance with Canadian GAAP                                  $29,701           $49,725
Add (deduct) effect of difference in accounting for:
   Deferred income taxes                                                                    --                --
   Outstanding claims                                                                       --                --
   Minority interest portion                                                                --                --
   Receivables from sale of capital stock                                                 (242)           (1,377)
   Unrealized gain (loss) on investments*                                               (2,921)            1,176
                                                                                        ------            ------
Shareholders' equity in accordance with US GAAP                                        $26,538           $49,524
                                                                                        ======            ======

</TABLE>

*Note:  The increase  (decrease) in  shareholders'  equity  attributable  to the
unrealized gain (loss) of $(2,921) and $1,176 at September 30, 1999 and December
31, 1998, respectively,  are net of deferred tax expenses (recovery) of $(1,573)
and $679 and related minority interest of $(964) and $416.


                                      -18-

<PAGE>

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

FORWARD LOOKING STATEMENTS AND CERTAIN RISKS

All statements,  trend analyses, and other information herein contained relative
to markets for the Company's products and/or trends in the Company's  operations
or  financial  results,  as well as other  statements  including  words  such as
"anticipate,"  "could,"  "feel(s),"  "believe,"  "believes," "plan," "estimate,"
"expect," "should," "intend," "will," and other similar expressions,  constitute
forward-looking statements under the Private Securities Litigation Reform Act of
1995. These  forward-looking  statements are subject to known and unknown risks,
uncertainties  and other factors which may cause actual results to be materially
different  from  those  contemplated  by the  forward-looking  statements,  Such
factors include, among other things: (i) general economic conditions,  including
prevailing  interest  rate levels and stock  market  performance;  (ii)  factors
affecting  the  Company's  crop  insurance  operations  such as  weather-related
events,  final harvest  results,  commodity price levels,  governmental  program
changes,  new product  acceptance  and commission  levels paid to agents;  (iii)
factors  affecting  the  Company's  nonstandard  automobile  operations  such as
premium volume and levels of operating  expenses as compared to premium  volume;
and (iv) the factors described in this section and elsewhere in this report.

Problems  with  Policy  Administration  Systems
Three out of the five policy administration  systems utilized by the nonstandard
auto segment  during 1999 were  implemented in the 1998 and 1999 time frames and
do not have fully automated  financial  reporting  functionality.  The other two
policy  administration  systems  being used are systems  with  mature  financial
reporting capabilities.

Implementation  of the three new  systems  without  mature  financial  reporting
capabilities,  has  resulted in the usage of an accounts  receivable  estimation
methodology.  Currently, appropriate financial reporting capabilities are in the
development stage, but the reports have not been adequately tested for accuracy.
The Company's other two systems generate accounts  receivable reports which show
the total of all premium  receivable  balances and which balance to the total of
all premium receivable  balances of all policies within the system. As a result,
the Company estimates accounts receivable on policies  administered by the three
new systems.  Approximately  80% or $56.5  million of accounts  receivable as of
September 30, 1999, relate to policies  administered by new systems. The Company
expects that it will be able to generate accounts  receivable  balances directly
from its policy  administration  systems at Pafco and Superior  early next year.
Two of the three new policy administration  systems were implemented in December
1998 and August 1999. After the systems were  implemented,  system problems were
identified  which  resulted in additional bad debt expense being  recorded.  The
additional  bad debt expense was due to problems in billing  policies  contained
within the two systems.  Of the $4.5 million of  estimated  premium  receivables
administered by the two systems,  the Company has estimated $2.9 million of that
amount  to be  un-collectable  primarily  as a  result  of  policy  billing  and
cancellation  problems.  Accordingly,  that  amount has been  written off in the
third quarter of 1999.  The Company is converting  policies from the two systems
back to a mature policy administration system which the Company has used before.
The Company expects the conversion to be completed during the fourth quarter.

                                      -19-


<PAGE>

The  third new  policy  administration  system  has also  experienced  reporting
problems.  Approximately  75% of all of nonstandard  automobile  policies are on
this policy  administration  system.  The reporting problems appear to be due to
programming  changes in how data was  extracted  from the policy  administration
system for reporting purposes.

The effect of the  identified  problems has been  recorded in the third  quarter
1999.  Additional  research  needs to be completed to measure the full financial
impact of these problems.

Operating Losses in Nonstandard Automobile Segment
The Company's nonstandard  automobile segment accounted for approximately 65% of
the net loss  reported for the third  quarter of 1999.  The loss ratios for this
segment  remain  higher  than  industry  ratios.  The  Company  has  developed a
state-by-state  action plan for improving its loss ratio. The plan includes more
restrictive  underwriting of new and renewal business,  withdrawal from selected
states,  rate increases,  and product  redesign.  More restrictive  underwriting
including  extensive use of motor vehicle reports (MVR's) was implemented during
the second and third  quarters  of 1999.  The  Company  has  notified  agents in
selected  states of its decision to withdraw from those states.  Rate  increases
are being  implemented in major states during the fourth quarter of 1999 and the
first quarter of 2000. The  introduction of redesigned  products  started in the
third quarter of 1999 and will continue through the first half of 2000.  Because
a majority of the Company's  policyholders  purchase annual policies, the impact
of  corrective  actions will be relatively  modest during the fourth  quarter of
1999.  Profitable  underwriting results are expected to occur in the latter half
of 2000.

The  Company's  operating  expenses are  currently  high relative to its premium
volume.  To a large extent this is a result of extraordinary  expenses  incurred
during 1999 to address system issues.  Those systems issues have also negatively
impacted  the  Company's  ability to service its  policyholders  and agents and,
thereby, have negatively impacted the Company's premium volume. During 2000, the
Company expects  significantly  reduced expenses associated with systems issues.
In addition,  during the first half of 2000,  the Company will reduce  operating
expenses so that those expenses are in line with projected premium volume.

Weaknesses in Internal Control Systems
The  Company's  systems of internal  control  present  within key  processes and
information  technology  systems are being evaluated  through an ongoing review.
The  Company's  systems of  internal  control are  intended  to insure  reliable
financial  reporting as well as provide for the  safeguarding  of the  Company's
assets.  Specific  weaknesses have been identified in the following areas:  Year
2000  compliance of certain  operating  systems in the  nonstandard  operations,
general  ledger  systems   integration,   financial  reporting   controls,   the
relationship  of  actuarial  analysis  with  claims  processing,   and  specific
technical documentation. Many of the identified weaknesses in these areas should
be ameliorated when the Company's  automated operating and financial systems are
properly integrated.  Technological inadequacies arising during the migration of
systems are being addressed on an ongoing basis. An action plan has been created
to insure that attention is given to identified areas. The four part action plan
includes:  1) specific human resource initiatives designed to increase financial
accounting staffing and core competency and the hiring of experienced  financial
management,  2) imposition of task force direction  headed by senior  management

                                      -20-

<PAGE>

designed to integrate  and automate the  information  technology  and  financial
reporting  applications,  3)  increased  emphasis on internal  audit  functional
responsibilities  including the  development  of  comprehensive  internal  audit
programs  designed to monitor and report on compliance with established  control
systems, and 4) ongoing use of external consulting resources in the oversight of
system   documentation,   development   of   financial   reporting   procedures,
re-engineering of interdepartmental integration processes and the implementation
and enhancement of existing policies and procedures.

Timeliness of Financial Information
The Company's problems with its policy administration systems and the weaknesses
in internal controls discussed in this report have resulted in the Company being
unable to prepare  certain  otherwise  routine  monthly and quarterly  financial
statements and  information on a timely basis.  Such  statements and information
are necessary for the Company's  internal use, for filings with  regulators  and
for compliance with the Company's  periodic reporting  obligations.  The Company
expects to be able to  generate  and  prepare  these  financial  statements  and
information on a timely basis in the year 2000.

Regulatory Uncertainties
The  losses,  adverse  trends and  uncertainties  discussed  in this  report are
matters of concern to the  domiciliary  insurance  regulators  of the  Company's
operating subsidiaries, the IDOI and FDOI. As previously disclosed, the IDOI has
commenced  target  examinations  of Pafco  covering loss  reserves,  pricing and
reinsurance.  Although no report has been issued, the IDOI has required Pafco to
provide  monthly  financial  statements,  obtain prior  approval of  reinsurance
arrangements  and of affiliated party  transactions,  submit business plans that
address levels of surplus and net premiums written, and consult with the IDOI on
a monthly basis.  In addition,  as a result of the losses  experienced by IGF in
the crop insurance  operations,  IGF has agreed with the IDOI to provide monthly
financial statements and consult monthly with the IDOI and obtain prior approval
for affiliated party transactions.  The FDOI has initiated examinations covering
Superior.  The scope of these  examinations  has  covered or will  cover  market
conduct, data processing systems, Year 2000 readiness and financial examinations
as of June 30, 1999 and December 31, 1999. Although no report has been issued or
other action taken, the Company expects to meet shortly with the FDOI to discuss
these and other  issues,  including  reserve  levels.  The  Company's  operating
subsidiaries and their transactions with affiliates,  including the Company, are
subject to the regulation by these insurance  departments.  Although the Company
expects to resolve all issues with these insurance departments in a satisfactory
manner,  failure to resolve  issues  could  result in  regulatory  actions  that
materially and adversely affect the Company.

OVERVIEW 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".  Beginning in September the Company began to
market its  non-standard  auto policies  from both Pafco and Superior  under the
same name: Superior Insurance Group.  Nonstandard insureds are those individuals

                                      -21-

<PAGE>

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 of crop  loss  from  adverse  weather  and  other
uncontrollable  events. Farms are subject to drought,  floods, and other natural
disasters  that can cause  widespread  crop losses and, in severe  cases,  force
farmers out of business.  Historically, one out of every twelve acres planted by
farmers  has not been  harvested  because  of adverse  weather or other  natural
disasters.  Because many farmers  rely on credit to finance  their  purchases of
such agricultural inputs as seed, fertilizer, machinery, and fuel, the loss of a
crop to a natural  disaster can reduce their ability to repay these loans and to
find sources of funding for the following year's operating expenses.

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

The Company's risk in the first two quarters of the year is due to the following
facts:  (1) the  Company has a large  exposure of crops  planted in the fall and
winter (citrus and nursery in Florida,  nursery in Texas, wheat in Kansas),  (2)
the Company's CRC risk which is tied to commodity  prices is quantified in July,
November and December but is incurred  throughout the various  growing  seasons,
(3) the  preventative  planting risk that the Company incurs on its  traditional
spring crops, and (4) the planting of its spring crops (corn and soybeans in the
Midwest)the  majority of which  occurs prior to the end of May of any given crop
year.  Also,  MPCI policies are  continuous  and  automatically  renew each year
unless the  insured  notifies  the Company  prior to March 15 of each year.  The
Company  allocates a percentage  of risk  incurred in the first quarter equal to
35% of the overall risk for the year, 35% for the second quarter and 20% for the
third quarter. The risk of drought is highest on traditional spring crops in the
months of July, August,  and early September.  The remaining portion of the risk
(10%) is  recognized  in the  fourth  quarter  and  relates to the late fall and
winter crops and CRC adjustments.

                                      -22-

<PAGE>

Therefore,  the  Company's  revenue and profit for the MPCI and CRC programs are
recognized in a 35%, 35%, 20%,10% manner throughout the year.

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
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.

REVIEW OF CONSOLIDATED OPERATIONS

Net Earnings (Loss)
For the three and nine months ended  September 30, 1999, the Company  recorded a
net loss of $(13,907) and $(19,623), or $(2.37) and $(3.34) per share (basic and
diluted).  This is an increase  in net loss for the three and nine months  ended
September  30, 1998 of  $(10,233)  and $(1,941) or $(1.76) and $(0.33) per share
(basic  and  diluted).

Income  before  taxes  and   distributions  on  preferred   securities  for  the
nonstandard  automobile segment showed a loss of $(16,838) and $(27,890) for the
three and nine months ended  September  30, 1999  compared to a loss of $(4,502)
and earnings of $8,150 for the three and nine months ended  September  30, 1998.
These losses were driven  primarily  by an increase in loss and loss  adjustment
expense  ("LAE")  reserves and as a result of  extraordinary  expenses  incurred
during 1999 to address system issues.

Income before taxes and distributions on preferred  securities for the three and
nine  months  ended  September  30,  1999 in the crop  segment  showed a loss of
$(8,003) and $(4,636) which compares to a loss of $(11,911) and earnings of $506
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 9).

                                      -23-
<PAGE>

Losses before tax and  distributions  on preferred  securities for the corporate
segment are comparable to prior year, at $(1,803) and $(2,159) for the three and
nine months  ended  September  30, 1999 and  $(1,965)  and $(2,439) 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 6.7% and 20.1% for the
three and nine months ended  September  30, 1999  compared to the three and nine
months ended  September 30, 1998. The primary reasons for this decline in volume
had 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.
However,  management  believes that service has  subsequently  improved and this
quarter's  decreased  premium  volume percent of 6.7% is less than that reported
last quarter of 16.9%.  Management  believes this improvement in the declines is
indicative of the improved service.

Gross premiums written for the crop segment
decreased  68.5% and 1.0% for the three and nine months ended September 30, 1999
compared to comparable  periods in 1998.  Such decrease in the nine months ended
September 30, 1999 was due to lower crop values and reduced sales of named peril
products including AgPI(R). Crop premiums (expressed in thousands) for the three
and nine months ended September 30 are as follows:
<TABLE>
<CAPTION>
                                                             Three Months                  Nine Months
                                                          Ended September 30,          Ended September 30,
                                                        1999               1998       1999              1998
                                                        ----               ----       ----              ----

<S>                                                   <C>               <C>          <C>             <C>
CAT imputed                                           $(3,275)          $1,502       $27,507         $34,140
MPCI                                                   (4,254)          18,071       136,774         125,368
Crop hail and named perils                             14,455           14,356        71,578          77,721
AgPI(R)                                                     0               (4)           96           7,529
                                                       ------           ------       --------        -------
                                                        6,926           33,925       235,955         244,758
Less: CAT imputed                                       3,275           (1,502)      (27,507)        (34,140)
                                                       ------           ------       -------         -------
                                                      $10,201          $32,423      $208,448        $210,618
                                                       ======           ======       =======         =======

</TABLE>
Remaining other gross written  premiums not reflected in nonstandard  automobile
or  crop  segments  represent  assumed  intercorporate  reinsurance  of  Granite
Reinsurance  Company Ltd. Other gross written premiums were $68 and $470 for the
three and nine months ended September 30, 1999 compared to $1,928 and $1,928 for
the same  periods in 1998.  Gross  written  decreased in 1999 as a result of the
sale of the commercial  business  effective  January 1999.

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 nine months ended September 30 are as follows:

                                      -24-


<PAGE>

                                                 1999        1998
                                                 ----        ----

Nonstandard automobile                            0%          10%
Crop hail                                        69%          25%
Named peril                                      50%          50%

With respect to automobile reinsurance, the Company determined that, as a result
of an evaluation of the financial viability of the primary reinsurer,  it was no
longer in the  Company's  interest to continue  such  reinsurance  in 1999.  The
increase in crop hail  reinsurance  resulted from increased  coverage  emanating
from the acquisition of the CNA book during 1998 combined with additional  quota
share  reinsurance  purchased to better  protect the Company from the effects of
normal crop insurance  fluctuations from season to season.

Fee Income
Fee  income  decreased  17.1% and 29.1%  for the  three  and nine  months  ended
September 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  decreased 2.6% for the three months ended and increased
5.9%  for  the  nine  months  ended  September  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.

Net Claims Incurred
The loss ratio for the  nonstandard  automobile  segment  for the three and nine
months ended  September  30, 1999 was 92.7% and 87.7% of net premiums  earned as
compared to 89.0% and 80.7% in 1998.  Nonstandard automobile results in 1999 are
worse than in 1998 because of adverse  development  on loss and loss  adjustment
expense  reserves  for  accidents  occurring  in 1998 and because of  continuing
deterioration  in results for accident year 1999.  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.

During the third  quarter,  the Company  incurred an additional  $2.5 million of
loss and loss  adjustment  expenses 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 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  and personal  injury
protection.

In the second  quarter,  the  Company,  reexamined  its  nonstandard  automobile
projections for 1999 and strengthened  reserves for the current accident year by
$5.0  million,  $2.5 million of which was for  accidents  occurring in the first
quarter  of  1999.  In  the  third  quarter,  the  Company  again  reviewed  its
projections for the nonstandard  automobile segment and strengthened reserves an
additional  $2.8 million,  $1.5 million of which was for accidents  occurring in
the first half of 1999.

                                      -25-
<PAGE>

As noted in Note 9 to the unaudited  consolidated  financial  statements for the
nine months ended September 30, 1999, in 1998 the Company sustained  significant
losses on its AgPI(R) product, the quantification of which became known in 1999.

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.

General and  Administrative  Expenses
Policy acquisition and general and administrative  expenses decreased to $24,395
and  $57,040  or 35.8% and 26.9% of net  premium  earned  for the three and nine
months  ended  September  30, 1999  compared to $24,468 and $67,734 or 29.2% and
25.5% of net  premium  earned  in the  corresponding  periods  of 1998.  Overall
expenses  in the first nine  months of 1999 versus the first nine months of 1998
decreased by $10,694.  Within this decrease  crop expenses  decreased by $23,373
while nonstandard auto expenses increased by $13,562.

The expense ratio for the  nonstandard  auto segment was 40.1% and 31.1% for the
third quarter and  year-to-date  in 1999 as compared to 24.3% and 21.5% 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  13.8%  on gross  premium;  compared  to 11.7% 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 13.8%  estimate is in line with  actual  annual  results  over the past four
years.  The 11.7%  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 IGF Revolver and
three  smaller  notes  assumed  in the  acquisition  of NACU.  See Note 5 to the
consolidated financial statements.

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.

                                      -26-

<PAGE>

Provision (Benefit) for Income Taxes
Income tax expense was 32.3% and 33.4% of pre-tax  income for the three and nine
months ended  September 30, 1999 compared to 32.1% and 40.8% for the same period
in 1998.  The  decreased  effective  tax rate at September  30, 1999 is due to a
combination  of estimated  permanent  differences,  of $2,030,  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

Cash and Investments
Total cash and  investments  as of September 30, 1999 and December 31, 1998 were
$238,067 and $253,718,  respectively.  Composition  of investments is comparable
between these  periods.  The Company's  market risk exposure has not  materially
changed since prior year end.

Due From Related Parties
Investments in and advances to related parties decreased from $3,495 at December
31, 1998, to $1,013 at September 30, 1999.  The decrease was caused by repayment
of certain loans by company officers.

Premium  Receivables
Receivables net of allowances for doubtful accounts as of September 30, 1999 and
December 31, 1998 were $145,025 and $121,328,  respectively. The crop portion of
receivable  balances as of September 30, 1999 and December 31, 1998 were $86,824
and $55,484, respectively.  Crop receivables are seasonally higher in second and
third quarter as compared to at year end.

Nonstandard auto receivable balances net of allowance for doubtful accounts were
$62,053 and  $65,076,  respectively  as of  September  30, 1999 and December 31,
1998.  Receivables  are down due to a decline  in  premium  volume.

Reinsurance Recoverables and Prepaid  Reinsurance  Premiums
Reinsurance  recoverables were $225,843 and $67,885 as of September 30, 1999 and
December 31, 1998, respectively.  However the reinsurance recoverable balance is
more effectively compared to the September 30, 1998 balance of $236,390. This is
primarily  due  to the  cyclical  nature  of the  crop  business.  Of the  total
reinsurance recoverable balance,  $217,532 and $155,460 pertain to crop business
as of September 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  $47,920 to $1,910 for the period  from  September  30, 1998 to the current
year to date due to the commutation of a quota share treaty.

Prepaid  reinsurance  premiums were $28,477 and $17,486 as of September 30, 1999
and December 31, 1998,  respectively.  This prepaid balance is more  effectively
compared to the September 30, 1998 prepaid reinsurance  balance of $42,693.  The
prepaid  reinsurance balance is affected also by the cyclical nature of the crop
business  reinsured.  Crop  prepaid  reinsurance  premiums  totaled  $29,169 and
$24,681 as of September  30, 1999 and 1998,  respectively.  Prepaid  reinsurance
premiums on nonstandard auto decreased from $8,368 at September 30, 1998 to $-0-
at September 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 $12,509 and $16,332 as of September 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 September 30, 1998 were $15,232.  Deferred  acquisition  costs were primarily
composed  of  deferred  acquisition  costs on  nonstandard  auto of $12,068  and

                                      -27-

<PAGE>

$12,192,   respectively   at  September   30,  1999  and   September  30,  1998,
respectively. Deferred policy acquisition costs for nonstandard auto as compared
with  nonstandard  net  unearned  premiums of $86,192 and $81,263 were 14.0% and
15.0% as of the above dates,  respectively.  Deferred acquisition costs for crop
were $331 and $474,  respectively  at  September  30,  1999 and 1998,  which are
comparable  from one year to  another.  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 $11,708 and $12,711 at September 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 September 30, 1999.

The deferred  income tax asset  balance of $10,428 as of September  30, 1999 has
increased  from $5,185 at  September  30,  1998 and $5,825 at December  31, 1998
because of higher unearned  premiums,  changes in the unrealized gain or loss in
investments and an increase in loss reserve.

Capital Assets

Property and Equipment,  net of accumulated  depreciation  has increased  $2,712
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.

Outstanding Claims

Total loss and loss adjustment  expense  reserves  increased from $207,432 as of
December 31, 1998, to $335,045 as of September 30, 1999.  The total  increase in
loss and loss adjustment expense reserves is approximately $127,613.

Nonstandard  auto reserves  declined $2.1 million during 1999 resulting from the
Company's premium decrease. Reserves for crop insurance increased $131.7 million
from  December  31,  1998,  due to the  seasonal  nature of the  business.  Crop
insurance reserves will decline to comparable December 1998 levels as claims are
settled during fourth quarter.

Unearned Premium

The  unearned  premium  reserve  increased  by $6,655 from  December  31,1998 to
September  30,1999.  Gross  unearned  premium was  $117,320  and  $110,665 as of
September 30, 1999 and December 31, 1998. However, this unearned premium balance
is more  effectively  compared to the September 30, 1998 balance of $146,009 due
to the cyclical  nature of the crop business.  Unearned for the crop business is
impacted by the cyclical  nature of the business.  Crop unearned as of September
30, 1999 and  September  30, 1998 was $30,830 and  $35,062,  respectively.  Crop
unearned  decreased by $4,232 or 12.1% from  September 30, 1998 to September 30,
1999.  This was primarily due to a decrease in crop hail written premium of 7.9%
for the same period. Unearned on nonstandard auto decreased $10,263 or 10.6% for
the same period.  This was primarily due to a decrease in  nonstandard  premiums
written of 9.3% for the  respective  quarters ended  September 30.  Unearned for
nonstandard  auto was $86,192 and $96,455 as of September 30, 1999 and September
30, 1998.

                                      -28-

<PAGE>

Due to Insurance Companies
Reinsurance  payables  increased by $70,807 from  December 31, 1998 to September
30,  1999 due to the  cyclical  nature of the crop  business.  Crop  receivables
increased from year end by $73,544 through September 30, 1999.  Nonstandard auto
decreased by $13,565 to $130 from  December  1998 due a  commutation  of a quota
share reinsurance treaty.

Notes  Payable
IGF depends upon the IGF Revolver to meet its seasonal needs for liquidity. This
line of credit has been  extended  through  December 15,  2000.  At December 31,
1998,  March 31,  1999,  June 30, 1999 and  September  30, 1999 the  outstanding
balance was  $12,000,  $1,989,  $11,767 and $5,966,  respectively.  This line is
collateralized by the crop-related uncollected premiums, 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) restrict
IGF's  ability to  accumulate  common  stock;  (ii) set  minimum  standards  for
investments  and  policyholder  surplus;  and (iii)  limit  ratio of net written
premiums to statutory surplus.  At September 30, 1999, IGF was not in compliance
with a minimum statutory surplus  covenant.  However,  IGF has received a waiver
from the bank for  September  30,  1999.  IGF does  expect  to meet the  minimum
statutory surplus covenant at year-end.

The  average  interest  rate on the IGF  Revolver  was 7.81% for the nine months
ended September 30, 1998 and 6.83% for the nine months ended September 30, 1999.

Notes payable also includes a $1,000 note due 2001 on the purchase of NACU which
bears 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
which  have  various  due  dates  from 2002 to 2006 with  periodic  payments  at
interest rates ranging from 7% to 9.09%.

Accrued and Other Payables
Other  liabilities  increased by $9,932 from  December 31, 1998 to September 30,
1999.  However,  payables as of September 30, 1998 of $20,817 are  comparable to
payables of $30,611 as of September 30, 1999.  The payables tend to be higher at
September 30 due to cyclical nature of the crop business and the related overall
effect on cash flow in the consolidated business.

Equity in Net Assets of Subsidiary
The Company's  minority interest equity in net assets of its subsidiary  reduced
from  $19,787 to $10,047 as of  December  31, 1998 and  September  30, 1999 as a
result of operating losses in SIG, the Company's 67% owned subsidiary.

Shareholders' Equity
Stockholders' equity has decreased $20,024 from December 31, 1998. This decrease
is the result of a net loss of $19,623 for the nine months ended  September  30,
1999.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  consolidated  total  assets of  $750,077 at  September  30, 1999
increased $179,088 from $570,989 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 September 30.

As of September 30, 1999, the Company had $32,913 of cash, cash  equivalents and
short-term  investments  available to meet short-term operating cash needs. This
was a decrease of $9,846 and $6,365 over the December 31, 1998 and September 30,
1998 balances.

                                      -29-

<PAGE>

The Portfolio of fixed maturities of the Company's 67% owned  subsidiary  Symons
International Group, Inc. ("SIG") reduced to $172,502 at September 30, 1999 from
$191,002 and $181,310 at December 31, 1998 and  September  30, 1998, as a result
of the sale of fixed  maturities  to fund  operating  losses.

Net cash used in operating  activities to September 30, 1999  aggregated  $7,013
compared to cash provided from operations of $7,648 in 1998 due to the effect of
operating  losses  offset by net cash  from  changes  in  operating  assets  and
liabilities.

Net cash  provided in investing  activities  of $3,322 for the nine months ended
September 30, 1999 compares to $26,233 for the comparable period in 1998.

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

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

The IGF Revolver has been  extended  through  December 15, 2000. At December 31,
1998,  March 31,  1999,  June 30, 1999 and  September  30, 1999 the  outstanding
balance was $12,000, $1,989, $11,767 and $5,966, respectively.

The nonstandard automobile insurance  subsidiaries' primary sources of funds are
premiums,  investment  income and proceeds from the maturity or sale of invested
assets.  Such funds are used  principally  for the payment of claims,  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 maintains  investment programs intended to provide adequate funds to pay
claims without forced sales of investments.

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 in full to the FCIC by the Company,  with
interest, if not paid by a specified date in each crop year.

The Trust Indenture for the Preferred  Securities contains certain  preventative
covenants.  These covenants are based upon the SIG's Consolidated Coverage Ratio
of earnings before  interest,  taxes,  depreciation  and  amortization  (EBITDA)
whereby if SIG's  EBITDA  falls below 2.5 times  Consolidated  Interest  Expense
(including  Preferred Security  distributions) for the most recent four quarters
the following restrictions become effective:

-  SIG may not incur additional Indebtedness or guarantee additional
   Indebtedness.
-  SIG  may not make certain Restricted  Payments including loans or advances to
   affiliates,  stock  repurchases  and  a  limitation  on  the  amount  of
   dividends is inforce.
-  SIG may not increase its level of Non-Investment Grade Securities defined as
   equities,   mortgage   loans,   real  estate,   real  estate  loans  and
   non-investment grade fixed income securities.

These  restrictions  currently  apply as SIG's  Consolidated  Coverage Ratio was
(2.9x)  through  September  30,  1999 and will  continue  to apply  until  SIG's
Consolidated  Coverage  Ratio  is in  compliance  with the  terms  of the  Trust
Indenture. This does not represent a Default by SIG on the Preferred Securities.
SIG is in compliance with these preventative covenants as of September 30, 1999.

                                      -30-

<PAGE>

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

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.

                                      -31-

<PAGE>

                                   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  8,000 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  less  than ten  percent  of the  policies
currently administered by the Company's Atlanta operations.  Given the nature of
the policy  term of these 8,000  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.  The Company has arranged for an unrelated third party to store inactive
policy  data while  providing  the  Company  access to such data on a fee basis.
Ongoing  operations  of the Company will not be affected by the  warehousing  of
such inactive policy data. All open claims are currently  being  administered on
Atlanta's Y2K compliant  claims  system.

The Company's  Atlanta  operation must migrate  historical data from its non-Y2K
compliant  legacy  systems  (policy   administration   and  claims).   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 has
developed the program logic to move  historical  claims  information  to its Y2K
compliant platform and is in the process of doing so.

                                  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 state's  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 December 27, 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.

                                      -32-

<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  developed an alternative plan with
respect to its legacy systems, whereby the Company has upgraded its hardware and
operating  software and has  completed  the  remediation  of its current  policy
administration software and is presently in the final testing phase. 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 $8.3 million towards
completion  of the  Project  of which  $7.0  million  has been  capitalized  for
hardware and new software  purchased and installed by outside vendors.  In 1996,
the Company began several projects to replace hardware and software systems. The
intention  of the new  systems  was to improve  transaction  processing  and the
Company's  expense ratio rather than any Year 2000 issue. The Company  estimates
that it has  expensed  $1.3  million  for costs to prepare  systems for the Year
2000.  Further,  the  Company  estimates  that  approximately  $1.0  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.

                             Des Moines and Atlanta
With  respect  to the  Company's  Des  Moines  and  Atlanta  locations  the most
reasonably likely worst case scenario would be a telephone or power failure.  If
this were to occur,  the Company would  execute our  contingency  plan.  See the
contingency plan below.

                                  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 fails to
successfully  convert policy  administration  from its non-Y2K  complaint legacy
policy  administration  system,  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 nonstandard  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;

                                      -33-


<PAGE>

-    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;
-    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 area or phases of the Company's operations.

Contingency Plans
The Company has assessed the  feasibility  of other  alternatives  to its stated
plan and is  developing a contingency  plan for each of the Des Moines,  Atlanta
and  Indianapolis  locations.  The  Company  is  currently  in  the  process  of
documenting  the plans and expects  that the  contingency  plans for each of its
locations will be in place by December 31, 1999. The Des Moines location can not
complete  its  contingency  plan until FCIC  issues  its  instructions  for crop
insurers  system  contingency.  It is  expected  that the FCIC will  publish its
instructions  no later than the first week of December 1999.

ITEM 3 QUALITATIVE AND  QUANTITATIVE   DISCLOSURES   ABOUT  MARKET  RISK

Information   related  to
Qualitative and  Quantitative  Disclosures  about Market Risk was included under
Item 1.  Business in the December 31, 1998 Form 10-K.  No material  changes have
occurred in market risk since this information was disclosed in the December 31,
1998 Form 10-K.

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.

                 IGF is a party  to a number  of  pending  legal  proceedings
                 relating to the AgPI(R) agricultural  business  interruption
                 policies  sold  by  IGF  during  1998.  See  Note  9 to  the
                 consolidated financial statements. IGF is a defendant in six
                 lawsuits  now  pending in  California  state court (King and
                 Fresno counties) and is a defendant in  counterclaims  filed
                 in two declaratory judgment actions that were brought by IGF
                 in federal district court in California. In addition, IGF is
                 a party to arbitration  proceedings  involving seven AgPI(R)
                 policyholders.  The first of these proceedings was commenced
                 in July 1999.  All of these  proceedings  remain in an early
                 stage and  hearings on the merits are not  expected to occur
                 until next year.

                 The  policyholders  involved  in these  proceedings  have
                 asserted  that IGF is  liable  to them for the face  amount  of
                 their policies, an aggregate of approximately $41 million, plus
                 an unspecified  amount of punitive damages and attorney's fees.
                 As of  September  30,  1999,  IGF  had  paid  an  aggregate  of
                 approximately  $10  million to the  policyholders  involved  in
                 these  legal  proceedings.  The  Company  believes  that it has
                 meritorious  defenses to any claims in excess of the amounts it

                                      -34-

<PAGE>

                 has  already  paid  and that  the  loss  payments  made and LAE
                 reserves  established  with respect to the AgPI(R) claims as of
                 September  30,  1999,  are  adequate  with regard to all of the
                 AgPI(R) policies sold. However,  there can be no assurance that
                 the Company's  ultimate liability with respect to these and any
                 future legal  proceedings  involving  AgPI(R) policies will not
                 have a  material  adverse  effect on the  Company's  results of
                 operations or financial position.

ITEM 2.          CHANGES IN SECURITIES
                 None

ITEM 3.          DEFAULTS UPON SENIOR SECURITIES
                 None

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

ITEM 5.          OTHER INFORMATION
                 None

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





                                      -35-

<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 23, 1999                   By: /s/ Alan G. Symons
                                           Alan G. Symons
                                           Chief Executive Officer



Dated: November 23, 1999                   By: /s/ Bruce K. Dwyer
                                           Bruce K. Dwyer
                                           Vice President and
                                           Chief Financial Officer









                                      -36-


<PAGE>