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 March 31, 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.)


                              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 March 31, 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 March 31, 1999
                                                                          Page
                                                                         Number

PART I   FINANCIAL INFORMATION

Item 1   Financial Statements

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

         Unaudited Consolidated Statements of Earnings
         for the Three Months Ended March 31, 1999 and 1998.............      4

         Unaudited Consolidated Statements of Shareholders'
         Equity.........................................................      5

         Unaudited Consolidated Statements of Cash Flows
         for the Three Months Ended March 31, 1999 and 1998.............      6

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

Item 2   Management's Discussion and Analysis of Financial
         Condition and Results of Operations............................     10

PART II  OTHER INFORMATION..............................................     17

SIGNATURES..............................................................     19



<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>
                                                                                 March 31,       December 31,
ASSETS                                                                             1999              1998

<S>                                                                              <C>               <C>
Cash and investments                                                             $252,662          $253,718
                                                                                  -------           -------
Accounts receivable
  Premiums receivable                                                             189,108           121,328
  Income taxes recoverable                                                         17,645            12,711
  Due from related parties                                                          3,136             3,495
  Accrued and other receivables                                                     2,706             2,362
                                                                                  -------           -------
        TOTAL ACCOUNTS RECEIVABLE                                                 212,595           139,896
Reinsurance recoverable on paid and unpaid claims                                  60,459            67,885
Prepaid reinsurance premiums                                                       78,378            17,486
Capital assets, net of accumulated depreciation                                    19,688            19,350
Deferred policy acquisition costs                                                  15,352            16,332
Deferred income taxes                                                               2,133             5,825
Intangibles                                                                        45,695            46,300
Other assets                                                                        7,781             4,197
                                                                                  -------           -------
        TOTAL ASSETS                                                             $694,743          $570,989
                                                                                  =======           =======
LIABILITIES
Accounts Payable:
  Due to insurance companies                                                     $100,873           $12,353
  Accrued and other payables                                                       26,292            22,283
                                                                                  -------           -------
                                                                                  127,165            34,636
Outstanding claims                                                                179,798           207,432
Unearned premiums                                                                 176,022           110,665
Notes payable                                                                       4,520            13,744
                                                                                  -------           -------
                                                                                  487,505           366,477
                                                                                  -------           -------
Minority interest:
  Equity in net assets of subsidiaries                                             20,452            19,787
  Preferred securities                                                            135,000           135,000
                                                                                  -------           -------
                                                                                  155,452           154,787
                                                                                  -------           -------
SHAREHOLDERS' EQUITY                                                               51,786            49,725
                                                                                  -------           -------
        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                               $694,743          $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
                                                                March 31,
                                                           1999          1998

<S>                                                      <C>          <C>
Gross premiums written                                   $152,022     $177,196
Less ceded premiums                                        80,083       78,835
                                                          -------      -------
Net premiums written                                       71,939       98,361
Change in net unearned premiums                               147       26,476
                                                          -------      -------
Net premiums earned                                        71,792       71,885
Fee income                                                  4,464        5,120
Net investment income                                       3,508        3,176
Net realized capital gain (loss)                           (1,322)       1,968
                                                          -------      -------
      Total revenues                                       78,442       82,149
                                                          -------      -------
Net claims incurred                                        54,327       55,302
General and administrative expenses                        16,298       14,653
Interest expense                                               74          183
Amortization of intangibles                                   605          511
                                                          -------      -------
      Total expenses                                       71,304       70,649
                                                          -------      -------
      Earnings before undernoted items                      7,138       11,500

Provision for income taxes                                  2,250        4,023
Distribution of preferred securities, net of tax            2,055        2,130
Minority interest                                             665        1,645
                                                          -------      -------
Earnings from continuing operations                         2,168        3,702
Loss from discontinued operations                              --         (185)
                                                          -------      -------
      Net earnings                                        $ 2,168      $ 3,517
                                                          =======      =======
Net earnings per share - basic                              $0.37        $0.61
                                                             ====         ====
Net earnings per share - fully diluted                      $0.36        $0.59
                                                             ====         ====
</TABLE>
See notes to consolidated financial statements

                                      -4-

<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                       311              --              --            ---            311
Change in cumulative
   translation adjustment                       ---              --            (103)           ---           (103)
Net earnings                                    ---              --              --          3,517          3,517
                                             ------           -----             ---         ------         ------
Balance at March 31, 1998                   $18,321          $2,775           $(395)       $43,356        $64,057
                                             ======           =====             ===         ======         ======

Balance at December 31, 1998                $19,317          $2,775            $252        $27,381        $49,725
Issuance of common shares                       ---              --              --            ---            ---
Change in cumulative
   translation adjustment                       ---              --            (107)           ---           (107)
Net earnings                                    ---              --              --          2,168          2,168
                                             ------           -----             ---         ------         ------
Balance at March 31, 1999                   $19,317          $2,775            $145        $29,549        $51,786
                                             ======           =====             ===         ======         ======

</TABLE>
See notes to consolidated financial statements



                                      -5-

<PAGE>

GORAN CAPITAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN CASH RESOURCES
(Canadian GAAP, stated in thousands of U.S. dollars)
<TABLE>
<CAPTION>
                                                                                    Three Months Ended
                                                                                         March 31,
                                                                                    1999         1998
<S>                                                                                <C>          <C>
CASH PROVIDED BY OPERATING ACTIVITIES
  Net earnings for the period                                                      $2,168       $3,517
  Items not affecting cash resources:
   Amortization                                                                     1,426        1,167
   Loss (gain) on disposal of investments                                           1,322       (1,968)
   Minority interest in net income of consolidated subsidiary                         665        1,645
   Decrease (increase) in reinsurance recoverable on paid and
     unpaid claims                                                                  7,426       26,444
   Decrease (increase) in prepaid reinsurance premiums                            (60,892)     (60,275)
   Decrease (increase) in other assets                                             (8,610)        (516)
   Decrease (increase) in deferred policy acquisition costs                           980      (6,527)
   Decrease (increase) in goodwill                                                     --         (74)
   Increase (decrease) in deferred income taxes                                     3,692        (430)
   Increase (decrease) in unearned premiums                                        65,357       91,351
   Increase (decrease) in outstanding losses                                      (27,634)     (11,453)
   Decrease (increase) in accounts receivable                                     (67,780)     (75,394)
   Increase (decrease) in accounts payable                                         92,529       64,156
                                                                                   ------       ------
                                                                                   10,649       31,643
                                                                                   ------       ------
FINANCING ACTIVITIES:
  Increase (reduction) of borrowed funds                                           (9,224)      (1,613)
  Increase (decrease) in minority interest                                             --        1,360
  Issue of share capital                                                               --          311
                                                                                   ------       ------
                                                                                   (9,224)          58
                                                                                   ------       ------
INVESTING ACTIVITIES:
  Net purchase of marketable securities                                           (10,340)     (10,329)
  Net purchase of capital assets                                                     (970)      (2,869)
  Other                                                                                --         (350)
                                                                                   ------       ------
                                                                                  (11,310)     (13,548)
                                                                                   ------       ------
Change in cash resources during the period                                         (9,885)      18,153
Cash resources, beginning of period                                                42,759       36,557
                                                                                   ------       ------
Cash resources, end of period                                                     $32,874      $54,710
                                                                                   ======       ======
Cash resources are comprised of:
  Cash                                                                            $ 4,615      $28,273
  Short-term investments                                                           28,259       26,437
                                                                                   ------       ------
                                                                                  $32,874      $54,710
                                                                                   ======       ======
</TABLE>
See notes to consolidated financial statements

                                      -6-
<PAGE>

                               GORAN CAPITAL INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                    For The Three Months Ended March 31, 1999

       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 2. All material
         intercompany amounts have been eliminated.


(2)      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>

                                                                            March 31,      December 31,
                                                                              1999            1998
         <S>                                                                <C>             <C>

         Shareholders' equity in accordance with Canadian GAAP              $51,786         $49,725
         Add (deduct) effect of difference in accounting for:
           Receivables from sale of capital stock                            (1,377)         (1,377)
           Unrealized gain (loss) on investments*                               251           1,176
                                                                             ------          ------
         Shareholders' equity in accordance with US GAAP                    $50,660         $49,524
                                                                             ======          ======
</TABLE>

         *Note: The increase in shareholders' equity attributable to the
          unrealized gain of $251 and $1,176 at March 31, 1999 and December 31,
          1998, respectively, are net of deferred tax expense (recovery) of
          $(64) and $679, and related minority interest (recovery) of $(39)
          and $416.

(3)      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 Insurance Company.  The CDOI has 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 has carried on the
         insurance practice that is normal for many of the insurance companies
         writing automobile insurance in California.  The total amount, if CDOI
         proceeds and requires all fees returned with no recovery from agents,
         is $3 million.  As the ultimate outcome of this potential assessment is
         not deemed probable, the Company has not accrued any amount in its

                                      -7-
<PAGE>


         consolidated financial statements.  Although the  assessment has not
         been formally made by the CDOI at this time,  the Company  believes it
         will  prevail and will vigorously defend any potential assessment.

         As part of an agreement by the Company to assume the  multi-peril  and
         crop operations of CNA during 1998, the Company agreed to reimburse
         CNA for certain  direct  overhead  costs incurred by CNA during the
         first  quarter of 1998  before  the  Company  assumed  this book of
         business.  CNA  has  requested  reimbursement  of $2.0  million  in
         expenses which the Company believes should only be $1.1 million.
         Negotiations are in process to settle this dispute.  The Company fully
         expects the ultimate settlement will approximate $1.1 million and has
         therefore, accrued this amount in its consolidated financial statements
         at March 31, 1999.

(4)      Year 2000 Compliance

         General

         The Year 2000 Project ("Project")  addresses the inability of computer
         software  and hardware to  distinguish  between the year 1900 and the
         year 2000. In 1996, the Company began a  company-wide  replacement of
         hardware and software  systems to address this and other issues.  The
         Company is utilizing systems from Dell, Hewlett Packard, Sun Systems,
         Compaq, Oracle and ZIM as well as certain software conversions using
         Java. The new hardware is in place and operational at all subsidiaries.
         The software systems are in place in our nonstandard auto operations
         and are being implemented on a state-by-state basis. The Company first
         began implementing the new nonstandard auto operating system in those
         states in which the Company  writes  annual  policies (annual states).
         100% of  those  annual  states  are  currently  in production.  The
         remaining  non-annual  states are  scheduled  to be completed by
         June 30, 1999.  The Y2K issue does not have an effect on the crop
         operations  until October 1, 1999. The Company is converting
         non-compliant crop operating  systems,  through  programmatic  means,
         into a Y2K compliant environment.  The crop operation has completed the
         conversion and the testing  phase of the  Project.  A number of the
         Company's other IT projects are being delayed or completely eliminated
         due to the implementation of the Project.

         Project

         The  Company  has  divided  the  Project   into  three   sections  -
         Infrastructure,   Applications/Business  Systems  and  Third  Party
         Suppliers.  There are common  portions  of each of these  divisions
         which are: (1) identifying Y2K items; (2) assigning a priority for
         those items identified; (3) repairing or replacing those items;  (4)
         testing the fixes; and (5) designing a contingency and business
         continuation plan for each subsidiary.

         In February 1998, all items had been identified and the plans for
         replacement or repair were proposed to management.  These plans were
         approved and the process began.

         The infrastructure section of the Project was quickly implemented and
         tested by the Company's IT staff and has been completed since May of
         1998.  All desktop, mini and midrange systems as well as phone
         switches, phones and building security systems have been tested for Y2K
         compliance. Any new systems required by the Company are being tested
         and certified prior to purchase with completion by June 30, 1999.  Two

                                      -8-

<PAGE>

         mainframes being used by the Company are not Y2K certified or
         compliant. These machines have been replaced by Sun and HP compliant
         systems and are being kept in production until new applications are
         put in place on the new machines.

         The applications systems section of the Project  includes:  (1)  the
         replacement of nonstandard  auto companies Policy  Administration  and
         Claims  systems;  (2) the  conversion  of crop  operations  systems in
         total;   and  (3)  replacement  of   non-compliant   business  systems
         company-wide (this includes wordprocessors, network operating systems,
         spreadsheet programs, presentation systems, etc.).

         The Company had already made the decision to transition off all of its
         nonstandard  auto  legacy  systems  and this  process had been in work
         since 1996.  These  systems are Y2K  compliant  and are  scheduled for
         completion by the end of June 30, 1999. The conversion of crop systems
         began in  August  1998 and is  complete.  Business  systems  are being
         replaced as vendors  certify their  compliance.  The Company is at 90%
         compliance in this area.

         The  Company   relies  on  third  party  vendors  for   investments,
         reinsurance  treaties and banking.  The Company began  inquiring about
         Y2K compliance with its third party vendors beginning in July 1998. To
         date, all vendors have replied regarding their compliance efforts.
         Those that are not in compliance have until the end of second quarter
         1999 to do so, or they will be replaced.

         Costs

         The Company considers the cost associated with the Project to be
         material. The Company has estimated the total cost to be $5.7 million,
         the majority of which  has been capitalized  as hardware or software
         costs. The Company has also incurred substantial costs for carrying two
         systems  including  personnel  costs and  outside  service  fees.  The
         component of these costs  specifically  associated  with Y2K cannot be
         reasonably estimated. The total amount expended through March 31, 1999
         on all  infrastructure  and  software  upgrades  is  approximately  $5
         million.  The Company expects to spend another $800,000 in its efforts
         to  complete  the  Project.  This does not include  additional  annual
         maintenance  costs that will be incurred as we move  forward.  Funding
         for these costs will continue to be provided by funds from operations.
         The  Company  believes  that  the new  nonstandard  auto  system  will
         significantly  enhance service  capability and reduce future operating
         costs.

         Risks

         Failure to correct the Y2K  problem  through  efficient   and  timely
         implementation  of the Company's  new  operating  system could cause a
         failure or interruption of normal business operations.  These failures
         could materially affect the Company's  operational results,  financial
         condition and  liquidity  through  reduction of premium  volume and an
         increase  in  operating  costs as a  percentage  of premium  volume or
         deterioration  of  loss  experience.  Due to  the  nature  of the  Y2K
         problem,  the  Company  is  uncertain  whether it will have a material
         affect or the potential magnitude of any financial impact. The Company
         believes that the  possibility of significant  business  interruptions
         should be reduced by successful implementation of the Project.

                                      -9-

<PAGE>

(5)      On April 19, 1999, the Company guaranteed loans in the amount of
         $2,505,000, granted by a third party lender to certain shareholders,
         the proceeds of which were used to repay the Company for loans
         previously made to the shareholders. The guarantees were secured by the
         pledge of 715,800 shares of Symons International Group, Inc., a 67%
         owned subsidiary of the Company.

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

General

     The three principal components of the Company's crop insurance business are
Multi-Peril Crop Insurance ("MPCI") and private named peril, crop hail insurance
and 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,

                                      -10-
<PAGE>

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 2,007 independent agencies in 43 states.

     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.

     AgPI(R) is business  interruption  insurance that 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
other  processing  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  encounter  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 these  businesses  depends on. AgPI(R) was formally  introduced at the
beginning of the 1998 crop year.

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

                                      -11-


<PAGE>

Certain  Accounting  Policies  for  Crop  Insurance Operations

     MPCI is a  government-sponsored  program with  accounting  treatment  which
differs in certain  respects  from the more  traditional  property  and casualty
insurance  lines.  For  income  statement   purposes  under  generally  accepted
accounting principles, gross premiums written consist of the aggregate amount of
MPCI premiums paid by farmers for buy-up  coverage  (MPCI  coverage in excess of
CAT Coverage - 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  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")  and (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").  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 accounting 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 is, 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 MPCI crop year,  the Buy-Up  Expense  Reimbursement  Payment was reduced to
24.5%,  the CAT LAE  Reimbursement  Payment  was  reduced to 11% and the $60 CAT
coverage fee will no longer go to the insurance companies.

     The Company expects to more than offset these reductions  through growth in
non-federally  subsidized programs such as AgPI(R) and Geo AgPLUS(TM)  initiated
in 1998.  The  Company  has also been  working to reduce  its  costs.  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 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  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,

                                      -12-
<PAGE>

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 latest available loss information.





                                      -13-

<PAGE>

Results of Operations
<TABLE>
<CAPTION>
                                                                                      For the three months
                                                                                         ended March 31,
                                                                                      1999          1998
<S>                                                                                 <C>           <C>
NONSTANDARD AUTOMOBILE INSURANCE OPERATIONS:
  Gross premiums written                                                            $61,171       $89,976
                                                                                     ======        ======
  Net premiums written                                                              $62,526       $82,267
                                                                                     ======        ======
  Net premiums earned                                                               $65,396       $68,323
  Fee income                                                                          4,521         4,155
  Net investment income                                                               3,164         2,801
  Net realized gain (loss)                                                           (1,382)        1,968
                                                                                     ------        ------
        TOTAL REVENUES                                                               71,699        77,247
                                                                                     ------        ------
  Losses and loss adjustment expenses                                                51,313        53,146
  Policy acquisition and general and administrative expenses                         19,595        18,123
                                                                                     ------        ------
        TOTAL EXPENSES                                                               70,908        71,269
                                                                                     ------        ------
  Earnings before income taxes                                                      $   791       $ 5,978
                                                                                     ======        ======
GAAP RATIOS (Nonstandard Automobile Only):
  Loss and LAE Ratio                                                                   78.5%         77.8%
  Expense ratio, net of billing fees                                                   23.0          20.4
                                                                                       ----          ----
  Combined ratio                                                                      101.5%         98.2%
                                                                                      =====          ====

CROP INSURANCE OPERATIONS:
  Gross premiums written                                                            $90,723       $86,175
                                                                                     ======        ======
  Net premiums written                                                              $ 6,281       $17,294
                                                                                     ======        ======
  Net premiums earned                                                                $3,608          $161
  Fee income                                                                            (58)          963
  Net investment income                                                                  57            53
                                                                                     ------        ------
        TOTAL REVENUES                                                                3,607         1,177
                                                                                     ------        ------
  Losses and loss adjustment expenses                                                   506            59
  Policy acquisition and general and administrative expenses(1)                      (3,340)       (5,016)
  Amortization of intangibles                                                            95            --
  Interest expense                                                                       74           183
                                                                                     ------        ------
        TOTAL EXPENSES                                                               (2,665)       (4,774)
                                                                                     ------        ------
  Earnings before income taxes                                                      $ 6,272       $ 5,951
                                                                                     ======        ======
</TABLE>

(1) Negative crop expenses are caused by inclusion of MPCI expense reimbursement
and underwriting gain.

Net Earnings

     For the three  months  ended  March 31,  1999,  the  Company  recorded  net
earnings of $2,168,000 or $0.37 per share (basic). This is approximately a 38.4%
decrease from 1998 comparable amounts of $3,517,000 or $0.61 per share (basic).

                                      -14-

<PAGE>

Consolidated Gross Premiums Written

     Gross premiums  written for the nonstandard  automobile  segment  decreased
32.0% for the three  months  ended March 31, 1999  compared to the three  months
ended March 31, 1998.  This  represents  an 8.8%  decrease in premiums  from the
average  premium volume in the last half of 1998.  The primary  reasons for this
decline  in volume has been the  downsizing  by the  Company of its  nonstandard
automobile  business in certain competitive  markets,  the loss of some business
prior to the hiring of a new  product  development  team and the  slowing of new
business  during  the  conversion  by the  Company to a new  operating  computer
system.

     Gross premiums  written for the crop segment were  comparable to those of a
year ago. Crop premiums for the three months ended March 31 are as follows:
<TABLE>
<CAPTION>
                                     1999           1998
                                     ----           ----
<S>                                 <C>            <C>
CAT imputed                         $16,312        $16,319
MPCI                                 62,280         60,743
Crop hail and named perils           28,443         25,431
                                    -------        -------
                                    107,035        102,493
Less: CAT imputed                   (16,312)       (16,319)
                                     ------         ------
                                    $90,723        $86,174
                                     ======         ======
</TABLE>

     Remaining gross written  premiums  represent  commercial  business which is
ceded 100% to another subsidiary, Granite Reinsurance Company Ltd.

     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 months ended March 31 are as follows:
<TABLE>
<CAPTION>
                                    1999           1998
                                    ----           ----

<S>                                   <C>           <C>
Nonstandard automobile                0%            10%
Crop hail                            62%            25%
Named peril                          50%            50%
AgPI                                 62%             0%

</TABLE>

     Fee income  decreased  12.8% for the three  months  ended March 31, 1999 as
compared  to the  corresponding  period of the prior  year.  Such  decrease  was
primarily  due to the  discontinuance  by the  government  of the CAT policy fee
partially  offset  by  increased  penetration  of  policy  issuance  fees on the
automobile book.

     Net investment income  increased 10.5% for the three months ended March 31,
1999 as  compared  to the  corresponding  period  of the  prior  year due to the
transfer of invested  assets to interest  bearing fixed  maturities  from equity
based  investments  since the  first  quarter  of 1998.  The  realized  loss was
primarily due to tax loss related selling of certain  securities as well as some
selling to reduce the average duration of the fixed income portfolio.

     The loss ratio for the nonstandard  automobile segment for the three months
ended March 31, 1999 was 78.5%  comparable  to 77.8% for the three  months ended
March  31,  1998 . Crop  hail  loss  ratios  in the  first  quarter  do not have
significant impact on consolidated earnings.

     Policy acquisition and general and  administrative  expenses have increased

                                      -15-


<PAGE>

to  $16,298,000  or 22.7% of net premium earned for the three months ended March
31,  1998  compared  to  $14,653,000  or  20.4%  of net  premium  earned  in the
corresponding  period  of 1998.  Nonstandard  auto  general  and  administrative
expenses  rose due to  increased  use of  temporary  help to resolve  processing
backlogs and lower expense  recoveries from reinsurers due to the elimination of
quota share reinsurance in 1999.

     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  negative  expense  results  primarily  from  the
inclusion of the MPCI Underwriting Gain.

     Amortization  of  intangibles  includes  goodwill from the  acquisition  of
Superior,  additional  goodwill from the  acquisition  of the minority  interest
portion of GGSH and the acquisition of NACU, debt or preferred security issuance
costs and organizational costs.

     Income  tax  expense  was 31.5% and 35.0% of  pre-tax  income for the three
months ended March 31, 1999 and 1998.  The decrease in the average rate resulted
primarily from the earning of income in nontaxable jurisdictions.

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

Financial Condition

     The  Company's  total assets of  $694,743,000  at March 31, 1999  increased
$123,754,000 from $570,989,000 as of December 31, 1998.

     Net cash provided by operating  activities  reduced to  $10,649,000 in 1999
from $31,643,000 in 1998 due to lower premium volume.  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.


                                      -16-

<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
         Of the 682,572  employee  stock  options  outstanding  at
         March 31,  1999,  639,626  have been  repriced,  subject  to
         disinterested  shareholder approval, to an exercise price of
         Cdn $14.70, the closing price of the Company's common shares
         on the Toronto  Stock  Exchange  on  November 9, 1998.  This
         repricing is subject to approval by a majority of the disinterested
         shareholders at the Company's next annual meeting on June 15, 1999.

ITEM 5.  OTHER INFORMATION
         Within  this  form  10-Q  the  Company  has  incorporated  the
         financial impact of events which had occurred as of March 31, 1999,
         but  which  came to  management's  attention  and / or became
         quantifiable after the release to the public of the first quarter
         results of operations on May 12, 1999.

         Through the Company's 67% owned insurance subsidiaries,  the
         Company writes a portion of  its crop  hail insurance based  on
         continuous  policies which remain  in-force  unless and until
         cancelled  by the  policyholder.  The  Company  also writes a
         lesser amount of crop hail  insurance on an annual basis.  In
         the first quarter  earnings  release dated May 12, 1999,  the
         Company  recorded  approximately  $11.3  million of crop hail
         gross written premium related to processed crop hail
         policies.  However,  the Company failed to record all of the
         continuous  policies for which  liabilities had attached as
         of the March 31, 1999 balance sheet date, thus understating
         crop hail gross written premium by approximately
         $16.6 million, and net written premium by approximately $4.0
         million.  The crop hail gross  written  premium  should have
         totalled  $27.9  million  for the  first  quarter,  which is
         comparable with the $24.5 million in crop hail gross
         written premium recorded in the first quarter of 1998.

         The  increase  in the crop  hail  premiums  has an effect on
         income through  ceding  commissions  the Company  receives on
         quota share reinsurance  treaties.  It also improves earnings
         through profits on the net retained portion of the crop
         hail  business.  The  total  amount  of  pre-tax  earnings
         related to the  additional  $16.6  million  in gross  written
         premiums   recorded  for  the  first   quarter  of  1999  was
         approximately $2.0 million, or $.9 million after income taxes of
         $.7 million and minority interest of $.4 million.

                                      -17-


<PAGE>

         Also, through the Company's 67% owned insurance subsidiaries, the
         Company writes reinsures 100% of a book of crop insurance business
         written through a third party insurance company.  As described in the
         notes to the 1998 audited financial statements, this product, called
         "AgPI(R)", insures against business interruption risk. At year end
         1998 the Company had recorded $7.5 million in gross assumed loss
         reserves.  Based on further recent analysis, coupled with recently
         released  national data related to the 1998 crop year,  the Company
         has increased its assumed gross loss reserves from $7.5 million to
         $15.0 million as of March 31, 1999.

         To date,  there has not been a ceding  of paid  losses to the
         Company from the third party  reinsurance  company related to
         the potential  AgPI(R)  liability.  The Company  believes the
         ultimate development on these gross reserves could range from
         $10 million to $20 million,  and, as such,  believes that recorded
         gross  loss  reserves of  $15  million  is sufficient.  However, there
         can be no assurance that the Company's ultimate liability for AgPI(R)
         related losses will not be materially greater or less than the
         Company's reserve for this liability.

         The Company  retrocedes  the  majority  of  this  business  to
         reinsurers.   The  retrocession  cover  on  this  book  of business
         is 62% quota share reinsurance  of which 7.5% is retroceded  to
         Granite  Reinsurance Company Ltd., a 100% owned subsidiary. As such
         the Company has ceded approximately $4.1 million of premium, and $8.2
         million of loss reserves, to its non-affiliated retro reinsurers.
         The Company also incurred approximately $1M in pretax fee expense
         related to this treaty in the first quarter, or approximately $.5
         million after income taxes of $.35 million and minority interest
         of $.2 million.

ITEM 6(a)EXHIBITS
         (10) Material Contracts - AgPI, Crop Hail and MPCI Multi-year Quota
                Share Reinsurance Agreement
         (11) Statement Regarding Computation of Per Share Earnings

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

                                      -18-

<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: June 1, 1999                          By:/s/ Alan G. Symons
                                                Alan G. Symons
                                                President



Dated: June 1, 1999                          By:/s/ Thomas R. Kaehr
                                                Thomas R. Kaehr
                                                Vice President, Treasurer and
                                                Chief Financial Officer


                                      -19-

<PAGE>