UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For The Quarterly Period Ended June 30, 1998

                        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.)

                              181 University Avenue
                               Box 11, Suite 1101
                            Toronto, Ontario M5H 3M7

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

Registrant's telephone number, including area code: (416) 594-1155 (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 June 30, 1998,  there were 5,839,466  shares of Registrant's  common stock
issued and outstanding exclusive of shares held by Registrant.




<PAGE>



                                 Form 10-Q Index
                       For The Quarter Ended June 30, 1998
                                                                    Page
                                                                   Number

PART I   FINANCIAL INFORMATION

Item 1   Financial Statements

         Unaudited Consolidated Financial Statements:
         Unaudited Consolidated Balance Sheets at
         June 30, 1998 and December 31, 1997 ..............................3

         Unaudited Consolidated Statements of Earnings for the
         Three and Six Months Ended June 30, 1998 and 1997 ..............4-5

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

         Unaudited Consolidated Statements of Changes in
         Cash Resources for the Three and Six Months Ended
         June 30, 1998 and 1997 ...........................................7

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

Item 2   Management's Discussion and Analysis of Financial
         Condition and Results of Operations ..............................9

PART II  OTHER INFORMATION ...............................................19

SIGNATURES ...............................................................20

INDEX TO EXHIBITS
         Exhibit 11 - Computation of Per Share Earnings ............ .....21



<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>

                                                              June 30,         December 31,
ASSETS                                                         1998               1997

<S>                                                          <C>                 <C>     
Cash and investments                                         $271,079            $247,124

Accounts receivable:

  Premiums receivable                                         239,482              89,762

  Due from insurance companies                                 14,230              13,782

  Due from associated companies                                    --               1,442

  Accrued and other receivables                                   708               2,658
                                                              -------             -------
        TOTAL ACCOUNTS RECEIVABLE                             254,420             107,644

Reinsurance recoverable on outstanding claims                 106,809              94,424

Prepaid reinsurance premiums                                  111,526              36,607

Capital assets, net of accumulated depreciation                17,570              12,230

Deferred policy acquisition costs                              18,727              11,849

Deferred income taxes                                           1,342               2,098

Intangibles                                                    42,126              42,562

Other assets                                                    7,506               6,310
                                                              -------             -------
        TOTAL ASSETS                                         $831,105            $560,848
                                                              =======             =======
LIABILITIES

Accounts Payable:

  Due to insurance companies                                 $156,054             $37,350

  Accrued and other payables                                   26,356              27,266
                                                              -------             -------
                                                              182,410              64,616

Outstanding claims                                            185,961             152,871

Unearned premiums                                             230,348             118,616

Bank loans                                                         35               4,182
                                                              -------             -------
                                                              598,754             340,285
                                                              -------             -------
Minority interest:

  Equity in net assets of subsidiaries                         28,302              25,231

  Preferred securities                                        135,000             135,000
                                                              -------             -------
                                                              163,302             160,231
                                                              -------             -------
SHAREHOLDERS' EQUITY

Capital stock                                                  18,376              18,010

Contributed surplus                                             2,775               2,775

Retained earnings                                              48,131              39,839

Cumulative translation adjustment                                (233)               (292)
                                                              -------             -------
        TOTAL SHAREHOLDERS' EQUITY                             69,049              60,332
                                                              -------             -------
        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY           $831,105            $560,848
                                                              =======             =======


</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
                                                                           June 30,
                                                                       1998           1997

<S>                                                                  <C>             <C>     
Gross premiums written                                               $170,505       $147,445

Less ceded premiums                                                   (60,776)       (63,711)
                                                                      -------         ------
Net premiums written                                                  109,729         83,734

Change in net unearned premiums                                       (10,111)        (8,356)
                                                                       ------         ------
Net premiums earned                                                    99,618         75,378

Fee income                                                              4,901          5,753

Net investment income                                                   3,720          3,603

Net realized capital gain                                                 846            742
                                                                      -------         ------
      Total Revenues                                                  109,085         85,476
                                                                      -------         ------
Net claims incurred                                                    71,187         59,343

General and administrative expenses                                    24,244         18,732

Interest expense                                                           49          1,080

Amortization of intangibles                                               510            164
                                                                      -------         ------
      Total expenses                                                   95,990         79,319
                                                                      -------         ------
      Earnings before undernoted items                                 13,095          6,157

Provision for income taxes                                              4,415          2,124

Distribution of preferred securities, net of tax                        2,096             --

Minority interest                                                       1,809          1,011
                                                                      -------         ------
Earnings from continuing operations                                     4,775          3,022

Loss from discontinued operations                                          --           (286)
                                                                      -------         ------
      Net Earnings                                                   $  4,775        $ 2,736
                                                                      =======         ======

Earnings per share from continuing operations - basic                   $0.82          $0.54
                                                                         ====           ====
Earnings per share from continuing operations - fully diluted           $0.78          $0.49
                                                                         ====           ====
Net earnings per share - basic                                          $0.82          $0.49
                                                                         ====           ====
Net earnings per share - fully diluted                                  $0.78          $0.44
                                                                         ====           ====

</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>
                                                                        Six Months Ended
                                                                           June 30,
                                                                       1998          1997

<S>                                                                  <C>            <C>     
Gross premiums written                                               $347,701       $275,359

Less ceded premiums                                                  (139,611)      (124,835)
                                                                      -------        -------
Net premiums written                                                  208,090        150,524

Change in net unearned premiums                                       (36,587)       (11,255)
                                                                      -------        -------
Net premiums earned                                                   171,503        139,269

Fee income                                                             11,390         10,791

Net investment income                                                   6,896          6,885

Net realized capital gain                                               2,814          1,684
                                                                      -------        -------
      Total Revenues                                                  192,603        158,629
                                                                      -------        -------
Net claims incurred                                                   126,489        104,514

General and administrative expenses                                    40,266         32,492

Interest expense                                                          232          2,451

Amortization of intangibles                                             1,021            293
                                                                      -------        -------
      Total expenses                                                  168,008        139,750
                                                                      -------        -------
      Earnings before undernoted items                                 24,595         18,879

Provision for income taxes                                              8,438          6,240

Distribution of preferred securities, net of tax                        4,226             --

Minority interest                                                       3,454          4,723
                                                                      -------        -------
Earnings from continuing operations                                     8,477          7,916

Loss from discontinued operations                                        (185)          (573)
                                                                      -------        -------
      Net Earnings                                                   $  8,292       $  7,343
                                                                      =======        =======

Earnings per share from continuing operations - basic                   $1.46          $1.42
                                                                         ====           ====
Earnings per share from continuing operations - fully diluted           $1.40          $1.36
                                                                         ====           ====
Net earnings per share - basic                                          $1.42          $1.32
                                                                         ====           ====
Net earnings per share - fully diluted                                  $1.37          $1.26
                                                                         ====           ====


</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,  1996                  $17,416       $2,775       $(334)        $27,401          $47,258

Issuance of common shares                           53          ---         ---             ---               53

Change in cumulative
translation adjustment                             ---          ---          69             ---               69

Net earnings                                       ---          ---         ---           7,343            7,343
                                                ------        -----         ---          ------           ------
Balance at June 30, 1997                       $17,469       $2,775       $(265)        $34,744          $54,723
                                                ======        =====         ===          ======           ======

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

Issuance of common shares                          366          ---         ---             ---              366

Change in cumulative
translation adjustment                             ---          ---          59             ---               59

Net earnings                                       ---          ---         ---           8,292             8,292
                                                ------        -----         ---          ------            ------
Balance at June 30, 1998                       $18,376       $2,775       $(233)        $48,131           $69,049
                                                ======        =====         ===          ======            ======


</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>
                                                                                      Six Months Ended
                                                                                          June 30,
                                                                                    1998           1997

<S>                                                                             <C>                <C>
CASH PROVIDED BY OPERATING ACTIVITIES

  Net earnings for the period                                                     $8,292            $7,343

  Items not affecting cash resources:

    Amortization and depreciation                                                  2,434             1,353

    Loss (gain) on disposal of investments                                        (2,862)           (1,783)

    Minority interest in net income of consolidated subsidiary                     3,454             4,723

    Decrease (increase) in reinsurance recoverable on outstanding claims         (12,385)          (38,805)

    Decrease (increase) in prepaid reinsurance premiums                          (74,919)          (59,281)

    Decrease (increase) in other assets                                            2,405             1,797

    Decrease (increase) in deferred policy acquisition costs                      (6,878)             (480)

    Increase (decrease) in deferred income taxes                                     756               --

    Increase (decrease) in unearned premiums                                     111,732            74,525

    Increase (decrease) in outstanding losses                                     33,090            37,116

    Decrease (increase) in accounts receivable                                  (150,168)         (102,260)

    Increase (decrease) in accounts payable                                      117,794           101,558
                                                                                 -------           -------
                                                                                  32,745            25,806
                                                                                 -------           -------
FINANCING ACTIVITIES:

  Increase (reduction) of borrowed funds                                          (4,147)           (2,728)

  Net purchase (increase) of minority interest                                    (1,111)            2,304

  Increase (decrease) in contributed surplus                                          --                23

  Issue of share capital                                                             366               198
                                                                                 -------            ------
                                                                                  (4,892)             (203)
                                                                                 -------            ------
INVESTING ACTIVITIES:

  Net purchase of marketable securities                                          (21,567)          (12,534)

  Net purchase of capital assets                                                  (6,545)           (2,659)

  Other                                                                               --               (13)
                                                                                 -------           -------
                                                                                 (28,112)          (15,206)
                                                                                 -------           -------
Change in cash resources during the period                                          (259)           10,397

Cash resources, beginning of period                                               36,557            33,731
                                                                                  ------            ------
Cash resources, end of period                                                    $36,298           $44,128
                                                                                  ======            ======


</TABLE>
See notes to consolidated financial statements


                                      -7-

<PAGE>



                               GORAN CAPITAL INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                For The Three and Six Months Ended June 30, 1998

NOTES TO THE CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

         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 3.  All  material
         intercompany amounts have been eliminated.

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

(3)      On July 8, 1998, the Company acquired North American Crop  Underwriters
         (NACU) a Henning, Minnesota based managing general agency which focuses
         exclusively on crop  insurance.  The  acquisition  price was $4 million
         with $3 million paid at closing and $1 million due July 1, 2000 without
         interest.  This acquisition captures 100% of the MPCI underwriting gain
         and  fees on  approximately  $27  million  of  premiums.  Prior to this
         transaction,  NACU received all fees and 50% of the  underwriting  gain
         with the balance going to the Company through the CNA transaction.


                                      -8-

<PAGE>



(4)      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>
                                                          June 30,    June 30,
                                                            1998        1997

<S>                                                        <C>          <C>   
Reported net earnings                                      $8,292       $7,343

US/Canada GAAP differences:

   Discounting on outstanding claims                           --          37
                                                            -----       -----
Revised net earnings                                       $8,292      $7,380
                                                            =====       =====
Earnings per share - basic                                  $1.42       $1.33
                                                             ====        ====
Earnings per share - fully diluted                          $1.37       $1.24
                                                             ====        ====
</TABLE>


<TABLE>
<CAPTION>
                                                          June 30,  December 31,
                                                            1998        1997

<S>                                                       <C>         <C>    
Shareholders' equity in accordance with Canadian GAAP     $69,049     $60,332

Add (deduct) effect of difference in accounting for:

   Deferred income taxes                                    1,911       1,975

   Outstanding claims                                      (1,696)     (1,765)

   Minority interest portion                                  (71)        (70)

   Receivables from sale of capital stock                    (321)       (346)

   Unrealized gain on investments*                          2,700       1,336
                                                           ------      ------
Shareholders' equity in accordance with US GAAP           $71,572     $61,462
                                                           ======      ======

</TABLE>

*Note:   The increase in  shareholders'  equity  attributable  to the unrealized
         gain of $2,700  and  $1,336 at June 30,  1998 and  December  31,  1997,
         respectively,  are net of  deferred  taxes of  $2,147  and  $1,005  and
         related minority interest of $1,291 and $658.


                                      -9-

<PAGE>



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

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

Nonstandard Automobile Insurance Operations

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

Crop Insurance Operations

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

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

MPCI is a  government-sponsored  program with accounting treatment which differs
in certain  respects from the more traditional  property and casualty  insurance
lines.  For income  statement  purposes under US generally  accepted  accounting
principles, gross premiums written consist of the aggregate amount of MPCI

                                      -10-

<PAGE>



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

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

In June 1998,  the United States  Congress  passed  legislation  which  provided
permanent funding for the crop insurance industry.  However,  beginning with the
1999 crop year, the Buy-Up Expense  Reimbursement  Payment was reduced to 24.5%,
the CAT LAE  Reimbursement  Payment was reduced to 11% and the $50 CAT  coverage
fee will no longer go to the insurance companies.

The Company expects to more than offset these  reductions  through growth in fee
income from non-federally subsidized programs such as AgPI(R) and GEO Ag Plus(R)
initiated  in 1998.  The  Company has also been  working to reduce its  internal
costs  including  agent's  commissions.  While the Company fully believes it can
more than offset these  reductions,  there is no  assurance  the Company will be
successful in its efforts or that further  reductions in federal  reimbursements
will not continue to occur.

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

                                      -11-

<PAGE>




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

AgPI(R) protects  businesses that depend upon a steady flow of a crop (or crops)
to stay  in  business.  This  protection  is  available  to  those  involved  in
agribusiness  who are a step beyond the farm gate,  such as elevator  operators,
custom  harvesters,  cotton gins and businesses that are dependent upon a single
supplier of products, (i.e., popping corn).

These businesses have been able to buy normal business interruption insurance to
protect  against on-site  calamities such as a fire, wind storm or tornado.  But
until now, they have been totally  unprotected by the insurance industry if they
incorporate  a  production  shortfall  in their trade area which  limited  their
ability  to  bring  raw  materials  to  their  operation.   AgPI(R)  allows  the
agricultural  business to protect  against a  disruption  in the flow of the raw
materials it depends on. AgPI(R) was formally introduced at the beginning of the
1998 crop year.

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

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

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

In 1996, the Company instituted a policy of recognizing (i) 35% of its estimated
MPCI gross premiums written for each of the first and second  quarters,  20% for
the third quarter and 10% for the fourth quarter, (ii) commission expense at the
applicable  rate of MPCI gross  premiums  written  recognized  and (iii)  Buy-Up
Expense  Reimbursement  at the applicable  rate of MPCI gross  premiums  written
recognized  along with normal  operating  expenses  incurred in connection  with
premium writings. In the third quarter, if a

                                      -12-

<PAGE>



sufficient  volume  of  policyholder  acreage  reports  have been  received  and
processed  by the  Company,  the  Company's  policy is to  recognize  MPCI gross
premiums  written for the first nine months based on a  re-estimate  which takes
into account  actual gross  premiums  processed.  If an  insufficient  volume of
policies has been processed,  the Company's  policy is to recognize in the third
quarter 20% of its full year  estimate of MPCI gross  premiums  written,  unless
other circumstances require a different approach.  The remaining amount of gross
premiums  written is  recognized  in the fourth  quarter,  when all  amounts are
reconciled.  The Company  also  recognizes  the MPCI  underwriting  gain or loss
during each quarter,  reflecting  the  Company's  best estimate of the amount of
such gain or loss to be  recognized  for the full year,  based on,  among  other
things,  historical results, plus a provision for adverse  developments.  In the
third  and  fourth  quarters,  a  reconciliation  amount is  recognized  for the
underwriting gain or loss based on final premium and loss information.

Results of Operations

For the three and six months  ended June 30,  1998,  the  Company  recorded  net
earnings of $4,775,000 and $8,292,000 or $0.82 and $1.42 per share (basic). This
is  approximately  a 74.5% and 12.9%  increase from 1997  comparable  amounts of
$2,736,000 and $7,343,000 or $0.49 and $1.32 per share (basic).

Increased  earnings  reflect  improved  results from the nonstandard  automobile
division due to  improvements  in both the loss and expense  ratios.  Prior year
results in the second  quarter  also  included a one-time  charge to earnings of
$5,300,000 for loss  reserves.  Crop results for the second quarter of 1998 were
up slightly over 1997 while year-to-date results for this division are virtually
flat  with  the  prior  year.  This is due to  volume  gains  offset  by  higher
commission  expense,  lower  reimbursements  and  integration  costs  of the CNA
transaction.



                                      -13-

<PAGE>

<TABLE>
<CAPTION>


                                                                    For the three months
                                                                       ended June 30,
                                                                   1998            1997

<S>                                                              <C>              <C>
NONSTANDARD AUTOMOBILE INSURANCE OPERATIONS:

  Gross premiums written                                         $79,530         $90,481
                                                                  ======          ======
  Net premiums written                                           $69,154         $74,255
                                                                  ======          ======
  Net premiums earned                                            $70,498         $65,139

  Fee income                                                       4,553           4,305

  Net investment income                                            3,133           2,756

  Net realized gain                                                  673             742
                                                                  ------          ------
        TOTAL REVENUES                                            78,857          72,942
                                                                  ------          ------
  Losses and loss adjustment expenses                             53,502          53,756

  Policy acquisition and general and administrative expenses      18,681          18,368

  Interest and amortization of intangibles                            --             --
                                                                  ------          ------
        TOTAL EXPENSES                                            72,183          72,124
                                                                  ------          ------
  Earnings before income taxes                                   $ 6,674         $   818
                                                                  ======          ======
GAAP RATIOS (Nonstandard Automobile Only):

  Loss and LAE Ratio                                                75.9%           82.5%

  Expense ratio, net of billing fees                                20.0            21.6
                                                                    ----            ----
  Combined ratio                                                    95.9%          104.1%
                                                                    ====           =====
CROP INSURANCE OPERATIONS:

  Gross premiums written(2)                                      $92,020         $56,647
                                                                  ======          ======
  Net premiums written                                           $35,560          $9,479
                                                                  ======           =====
  Net premiums earned                                            $28,460          $7,758

  Fee income                                                         350           1,448

  Net investment income                                              112              43

  Net realized capital gain                                          170              --
                                                                  ------           -----
        TOTAL REVENUES                                            29,092           9,249
                                                                  ------           -----
  Losses and loss adjustment expenses                             18,679           4,269

  Policy acquisition and general and administrative expenses(1)    3,897          (1,260)

  Interest expense                                                    50              13
                                                                  ------           -----
        TOTAL EXPENSES                                            22,626           3,022
                                                                  ------           -----
  Earnings before income taxes                                   $ 6,466          $6,227
                                                                  ======           =====

</TABLE>

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



                                      -14-

<PAGE>

<TABLE>
<CAPTION>


                                                                   For the six months
                                                                      ended June 30,
                                                                  1998            1997

<S>                                                             <C>             <C>
NONSTANDARD AUTOMOBILE INSURANCE OPERATIONS:

  Gross premiums written                                        $169,506        $165,547
                                                                 =======         =======
  Net premiums written                                          $151,421        $133,843
                                                                 =======         =======
  Net premiums earned                                           $138,821        $128,244

  Fee income                                                       8,708           7,204

  Net investment income                                            5,934           5,094

  Net realized gain                                                2,641           1,684
                                                                 -------         -------
        TOTAL REVENUES                                           156,104         142,226
                                                                 -------         -------
  Losses and loss adjustment expenses                            106,648          99,024

  Policy acquisition and general and administrative expenses      36,804          35,492

  Interest and amortization of intangibles                            --              --
                                                                 -------         -------
        TOTAL EXPENSES                                           143,452         134,516
                                                                 -------         -------
  Earnings before income taxes                                  $ 12,652        $  7,710
                                                                 =======         =======
GAAP RATIOS (Nonstandard Automobile Only):

  Loss and LAE Ratio                                                76.8%           77.2%

  Expense ratio, net of billing fees                                20.2            22.1
                                                                    ----            ----
  Combined ratio                                                    97.0%           99.3%
                                                                    ====            ====

CROP INSURANCE OPERATIONS:

  Gross premiums written(2)                                     $178,195        $108,356
                                                                 =======         =======
  Net premiums written                                          $ 52,854        $ 16,680
                                                                 =======         =======
  Net premiums earned                                           $ 28,621        $  7,768

  Fee income                                                       2,682           3,587

  Net investment income                                              165              92

  Net realized gain                                                  170              --
                                                                 -------          ------
        TOTAL REVENUES                                            31,638          11,447
                                                                 -------          ------
  Losses and loss adjustment expenses                             18,738           4,269

  Policy acquisition and general and administrative expenses(1)      250          (6,026)

  Interest expense                                                   233              24
                                                                 -------          ------
        TOTAL EXPENSES                                            19,221          (1,733)
                                                                 -------          ------
  Earnings before income taxes                                  $ 12,417         $13,180
                                                                 =======          ======

</TABLE>

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

Consolidated  gross premiums written increased 15.6% and 26.3% for the three and
six months  ended June 30, 1998  compared to  comparable  periods in 1997 due to
growth in both the nonstandard auto and crop segments.



                                      -15-

<PAGE>



Gross premiums written for the nonstandard auto segment  decreased 12.1% for the
three  months  ended June 30, 1998 and  increased  2.4% for the six months ended
June 30, 1998 compared to comparable periods in 1997. The decrease in the second
quarter  primarily  reflects certain program changes and rate increases taken in
Florida to improve loss experience.

Gross premiums  written for the crop segment  increased  62.4% and 64.5% for the
three and six months ended June 30, 1998 compared to comparable periods in 1997.
Such  increase  was due to the  transaction  with CNA,  internal  growth and new
products  such as  AgPI.  Premium  increases  were  noted  in all  lines of crop
insurance.  Crop  premiums  for the three and six  months  ended  June 30 are as
follows:
<TABLE>
<CAPTION>
                                                          Three Months                      Six Months
                                                          Ended June 30,                   Ended June 30,
                                                      1998             1997            1998             1997
                                                      ----             ----            ----            ----

<S>                                                  <C>              <C>            <C>             <C>    
CAT imputed                                          $16,319          $13,031        $32,638         $26,063
MPCI                                                  46,654           39,239        107,297          79,016
Crop hail and named perils                            37,873           17,408         63,365          29,340
AgPI                                                   7,493              --           7,533             --
                                                     -------           ------        -------         -------
                                                     108,339           69,678        210,833         134,419
Less: CAT imputed                                    (16,319)         (13,031)       (32,638)        (26,063)
                                                     -------           ------        -------         -------
                                                     $92,020          $56,647       $178,195        $108,356
                                                      ======           ======        =======         =======

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

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

<S>                                      <C>            <C>
Nonstandard automobile                   10%            20%
Crop hail                                25%            40%
Named peril                              50%            50%

</TABLE>
Fee  income  decreased  14.8%  for the  three  months  ended  June 30,  1998 and
increased  5.6% for the six  months  ended  June  30,  1998 as  compared  to the
corresponding  periods of the prior year.  The decrease in the second quarter of
1998 results from the Company's  practice of  offsetting  CAT fees with crop LAE
costs.  Such  offset was  greater in 1998.  However,  overall  fees  continue to
increase.  Such increase was due to greater installment  billings on nonstandard
automobile policies, which averaged 5.14% and 4.35% of gross written premiums in
1998 and 1997,  respectively,  and  additional  CAT fees on crop business due to
growth in volume.

The loss  ratio for the  nonstandard  automobile  segment  for the three and six
months ended June 30, 1998 was 75.9% and 76.8% as compared to 82.5% and 77.2% in
1997. The loss ratio for the  nonstandard  automobile  segment for the three and
six months ended June 30, 1997, excluding the $5.3 million reserve adjustment in
the second  quarter of 1997 was 74.4% and 73.1%,  respectively.  The increase in
the  loss  ratio  in 1998  from  1997,  excluding  the  effects  of the  reserve
adjustment in 1997, reflects increased severity costs and the effects of certain
pending rate  increases.  However,  this loss ratio has improved  from the first
quarter of 1998 which was 77.8%,  due to the effects of recent  rate  increases.
The crop hail loss ratio in 1998 was 53.5% compared to 54.2% in 1997.

                                      -16-

<PAGE>



Policy acquisition and general and  administrative  expenses have increased as a
result of the  increased  volume of  business  produced by the  Company.  Policy
acquisition  and general and  administrative  expenses rose to  $24,244,000  and
$40,266,000  or 24.3%  and  23.5% of net  premium  earned  for the three and six
months ended June 30, 1998 compared to $18,732,000  and $32,492,000 or 24.9% and
23.3% of net premium  earned in the  corresponding  periods of 1997. The expense
ratio,  for the nonstandard  segment  improved to 20.0% and 20.2% for the second
quarter and  year-to-date  in 1998 as  compared to 21.6% and 22.1% in 1997,  due
primarily to reduced  expenses from the Indianapolis  operations  (Pafco General
Insurance Company) resulting from lower commissions on multi-tiered products and
other efficiency implementations as well as higher billing fee rates.

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

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

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

Income tax expense  was 33.7% and 34.3% of pre-tax  income for the three and six
months ended June 30, 1998 compared to 34.5% and 33.1% in 1997.

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

Operations  of  Granite  Re  continue  to show solid  improvement  with  pre-tax
earnings of $1.8 million in 1998 compared to $1.1 million in 1997.


                                      -17-

<PAGE>



Financial Condition

The  Company's   total  assets  of  $831,105,000  at  June  30,  1998  increased
$270,257,000  from $560,848,000 as of December 31, 1997. The primary reasons for
this  increase  was an increase  in cash and  invested  assets due to  continued
growth in  premiums,  normal  receipt of crop funds from the FCIC,  increases in
receivables  from insureds and reinsurers due to continued  growth in volume and
growth in prepaid  reinsurance in crop operations due to the accounting for MPCI
with the FCIC.

Year-to-date net cash provided by operating  activities  improved to $32,745,000
in 1998  compared to  $25,806,000  in 1997 due to continued  premium  growth and
normal receipt of crop funds from the FCIC.  This  additional cash flow was used
to increase invested assets.  Financing activities included normal activities on
the Company's line of credit for crop operations.


                                      -18-

<PAGE>



PART II -   OTHER INFORMATION

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

ITEM 2.     CHANGES IN SECURITIES
            None

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES
            None

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

ITEM 5.     OTHER INFORMATION
            None

ITEM 6(a).  EXHIBITS
            (11) Statement Regarding Computation of Per Share Earnings

ITEM 6(b).  REPORTS ON FORM 8-K
            None


                                      -19-

<PAGE>



                                   SIGNATURES



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



Dated: August 12, 1998              By:______________________
                                    Alan G. Symons
                                    President



Dated: August 12, 1998              By:______________________
                                    Gary P. Hutchcraft
                                    Vice President, Treasurer and
                                    Chief Financial Officer





                                      -20-

<PAGE>


GORAN CAPITAL INC. - Consolidated                                  Exhibit 11.01
Analysis of Earnings Per Share


<TABLE>
<CAPTION>
                                                                       Six                          Six
                                                                   Months Ended                 Months Ended
                                                                  June 30, 1998                June 30, 1997

<S>                                                                <C>           <C>            <C>  
Average Price (US $)                                                    $27.88     (A)              $24.07

Proceeds from Exercise of Warrants and Options
   (US $)                                                          $15,360,402     (B)          $3,562,823
                                                                    ==========                   =========

Shares Repurchased - Treasury Method                                   550,947   (B)/(A)           148,026
                                                                       =======                     =======

Shares Outstanding - Weighted Average                                5,819,049                   5,552,097

Add:  Options and Warrants Outstanding                                 802,304                     544,692

Less:  Treasury Method - Shares Repurchased                           (550,947)                   (148,026)
                                                                       -------                     -------
Shares Outstanding for US GAAP Purposes                               6,070,406    (C)           5,948,763
                                                                      =========                  =========
Net Earnings in Accordance with US GAAP                              $8,292,000    (D)          $7,380,000
                                                                      =========                  =========
Earnings Per Share - US GAAP - Basic                                      $1.42                      $1.33
                                                                           ====                       ====
Earnings Per Share - US GAAP - Fully Diluted                              $1.37  (D)/(C)             $1.24
                                                                           ====                       ====
</TABLE>




                                      -21-

<PAGE>