UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For The Quarterly Period Ended June 30, 1999

                        Commission File Number: 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, 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 June 30, 1999
                                                                          Page
                                                                         Number

PART I   FINANCIAL INFORMATION

Item 1   Financial Statements

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

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

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

         Unaudited Consolidated Statements of Changes in
         Cash Resources for the Three and Six Months Ended
         June 30, 1999 and 1998.......................................      7

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

Item 2   Management's Discussion and Analysis of Financial
         Condition and Results of Operations..........................     17

PART II  OTHER INFORMATION............................................     28

SIGNATURES............................................................     29

INDEX TO EXHIBITS
         Exhibit 11 - Computation of Per Share Earnings...............     30

Note:    All items are in thousands of dollars except share and per share data
         or unless otherwise noted.


<PAGE>

                         PART I - FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
GORAN CAPITAL INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Canadian GAAP, stated in thousands of U.S. dollars)
<TABLE>
<CAPTION>

                                                                                          June 30,       December 31,
ASSETS                                                                                     1999             1998

<S>                                                                                      <C>               <C>
Cash and investments                                                                     $262,021          $253,718
                                                                                          -------           -------
Accounts receivable:
  Premiums receivable                                                                     258,426           121,328
  Income taxes recoverable                                                                  8,680            12,711
  Due from related parties                                                                  1,003             3,495
  Accrued and other receivables                                                             2,638             2,362
                                                                                          -------           -------
        TOTAL ACCOUNTS RECEIVABLE                                                         270,747           139,896
Reinsurance recoverable on paid and outstanding claims                                     96,975            67,885
Prepaid reinsurance premiums                                                              124,712            17,486
Capital assets, net of accumulated depreciation                                            20,872            19,350
Deferred policy acquisition costs                                                          17,454            16,332
Deferred income taxes                                                                       5,926             5,825
Intangibles                                                                                45,158            46,300
Other assets                                                                                6,214             4,197
                                                                                          -------           -------
        TOTAL ASSETS                                                                     $850,079          $570,989
                                                                                          =======           =======
LIABILITIES
Accounts Payable:
  Due to insurance companies                                                             $170,775           $12,353
  Accrued and other payables                                                               26,059            22,283
                                                                                          -------           -------
                                                                                          196,834            34,636
Outstanding claims                                                                        218,436           207,432
Unearned premiums                                                                         226,483           110,665
Bank loans                                                                                 13,435            13,744
                                                                                          -------           -------
                                                                                          655,188           366,477
                                                                                          -------           -------
Minority interest:
  Equity in net assets of subsidiaries                                                     16,271            19,787
  Preferred securities                                                                    135,000           135,000
                                                                                          -------           -------
                                                                                          151,271           154,787
                                                                                          -------           -------
Shareholders' equity                                                                       43,620            49,725
                                                                                          -------           -------
        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                       $850,079          $570,989
                                                                                          =======           =======

See notes to consolidated financial statements
</TABLE>

                                      -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,
                                                                                              1999           1998

<S>                                                                                         <C>            <C>
Gross premiums written                                                                      $173,870       $170,505
Less ceded premiums                                                                          (94,720)       (60,776)
                                                                                             -------        -------
Net premiums written                                                                          79,150        109,729
Change in net unearned premiums                                                               (2,623)       (10,111)
                                                                                             -------        -------
Net premiums earned                                                                           76,527         99,618
Fee income                                                                                     3,153          4,901
Net investment income                                                                          3,507          3,720
Net realized capital gain (loss)                                                                 366            846
                                                                                             -------        -------
      Total Revenues                                                                          83,553        109,085
                                                                                             -------        -------
Net claims incurred                                                                           72,293         71,187
General and administrative expenses                                                           21,015         24,244
Interest expense                                                                                 105             49
Amortization of intangibles                                                                      651            510
                                                                                             -------        -------
      Total expenses                                                                          94,064         95,990
                                                                                             -------        -------
      Earnings (loss) before undernoted items                                                (10,511)        13,095
Provision for income taxes                                                                    (3,576)         4,415
Distribution of preferred securities, net of tax                                               2,096          2,096
Minority interest                                                                             (3,149)         1,809
                                                                                             -------        -------
Earnings (loss) from continuing operations                                                    (5,882)         4,775
Loss from discontinued operations                                                                --             --
                                                                                             -------        -------
      Net Earnings (loss)                                                                    $(5,882)      $  4,775
                                                                                             =======        =======

Earnings (loss) per share - basic                                                             $(1.00)         $0.82
                                                                                                ====           ====
Earnings (loss) per share - fully diluted                                                     $(1.00)         $0.78
                                                                                                ====           ====
Earnings (loss) per share - operating                                                         $(1.04)         $0.72
                                                                                                ====           ====

See notes to consolidated financial statements
</TABLE>

                                      -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,
                                                                                              1999           1998

<S>                                                                                         <C>            <C>
Gross premiums written                                                                      $325,892       $347,701
Less ceded premiums                                                                         (179,471)      (139,611)
                                                                                             -------        -------
Net premiums written                                                                         146,421        208,090
Change in net unearned premiums                                                               (2,770)       (36,587)
                                                                                             -------        -------
Net premiums earned                                                                          143,651        171,503
Fee income                                                                                     7,617         11,390
Net investment income                                                                          7,015          6,896
Net realized capital gain (loss)                                                                (956)         2,814
                                                                                             -------        -------
      Total Revenues                                                                         157,327        192,603
                                                                                             -------        -------
Net claims incurred                                                                          131,288        126,489
General and administrative expenses                                                           32,645         40,266
Interest expense                                                                                 179            232
Amortization of intangibles                                                                    1,256          1,021
                                                                                             -------        -------
      Total expenses                                                                         165,368        168,008
                                                                                             -------        -------
      Earnings (loss) before undernoted items                                                 (8,041)        24,595
Provision for income taxes                                                                    (2,960)         8,438
Distribution of preferred securities, net of tax                                               4,151          4,226
Minority interest                                                                             (3,516)         3,454
                                                                                             -------         ------
Earnings (loss) from continuing operations                                                    (5,716)         8,477
Loss from discontinued operations                                                                --            (185)
                                                                                             -------        -------
      Net Earnings (loss)                                                                    $(5,716)      $  8,292
                                                                                              ======        =======

Earnings (loss) per share - basic                                                             $(0.97)         $1.42
                                                                                                ====           ====
Earnings (loss) per share - fully diluted                                                     $(0.97)         $1.37
                                                                                                ====           ====
Earnings (loss) per share - operating                                                         $(0.87)         $1.11
                                                                                                ====           ====

See notes to consolidated financial statements
</TABLE>

                                      -5-


<PAGE>

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

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

<S>                                         <C>              <C>              <C>            <C>                <C>
Balance at December 31, 1997                $18,010          $2,775           $(292)         $39,839           $60,332
Issuance of common shares                       366             ---             ---              ---               366
Change in cumulative
translation adjustment                          ---             ---              59              ---                59
Net earnings                                    ---             ---             ---            8,292             8,292
                                             ------           -----             ---  -        ------            ------
Balance at June 30, 1998                    $18,376          $2,775           $(233)         $48,131           $69,049
                                             ======           =====             ===           ======            ======

Balance at December 31, 1998                $19,317          $2,775            $252          $27,381           $49,725
Issuance of common shares                       ---             ---             ---              ---               ---
Change in cumulative
translation adjustment                          ---             ---            (389)             ---              (389)
Net earnings (loss)                             ---             ---             ---           (5,716)           (5,716)
                                             ------           -----             ---           ------            ------
Balance at June 30, 1999                    $19,317          $2,775           $(137)         $21,665           $43,620
                                             ======           =====             ===           ======            ======

See notes to consolidated financial statements
</TABLE>

                                      -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,
                                                                                                 1999           1998
<S>                                                                                             <C>            <C>
CASH PROVIDED BY OPERATING ACTIVITIES
  Net earnings (loss) for the period                                                            $(5,716)       $8,292
  Items not affecting cash resources:
    Amortization and depreciation                                                                 3,801         2,434
    Loss (gain) on disposal of investments                                                          956        (2,862)
    Minority interest in net income of consolidated subsidiary                                   (3,516)        3,454
    Decrease (increase) in reinsurance recoverable on outstanding claims                        (29,090)      (12,385)
    Decrease (increase) in prepaid reinsurance premiums                                        (107,226)      (74,919)
    Decrease (increase) in other assets                                                           3,841         2,405
    Decrease (increase) in deferred policy acquisition costs                                     (1,122)       (6,878)
    Increase (decrease) in deferred income taxes                                                   (101)          756
    Increase (decrease) in unearned premiums                                                    115,818       111,732
    Increase (decrease) in outstanding losses                                                    11,004        33,090
    Decrease (increase) in accounts receivable                                                 (137,098)     (150,168)
    Increase (decrease) in accounts payable                                                     162,198       117,794
                                                                                                -------       -------
                                                                                                 13,749        32,745
                                                                                                -------       -------
FINANCING ACTIVITIES:
  Increase (reduction) of borrowed funds                                                           (309)       (4,147)
  Net purchase (increase) of minority interest                                                       --        (1,111)
  Increase (decrease) in contributed surplus                                                         --            --
  Issue of share capital                                                                             --           366
                                                                                                -------       -------
                                                                                                   (309)       (4,892)
                                                                                                -------       -------
INVESTING ACTIVITIES:
  Net purchase of marketable securities                                                          (8,660)      (21,567)
  Net purchase of capital assets                                                                 (3,685)       (6,545)
  Other                                                                                            (126)           --
                                                                                                -------       -------
                                                                                                (12,471)      (28,112)
                                                                                                -------       -------

Change in cash resources during the period                                                          969         (259)
Cash resources, beginning of period                                                              42,759        36,557
                                                                                                 ------        ------
Cash resources, end of period                                                                   $43,728       $36,298
                                                                                                 ======        ======

See notes to consolidated financial statements
</TABLE>

                                      -7-

<PAGE>

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

CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

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

3.      Certain Accounting Policies for Multi-Peril Crop Insurance ("MPCI")
        A  significant  portion of the  Company's  gross  premiums  written  and
        earnings before income taxes within the crop insurance segment relate to
        the MPCI program. MPCI is a government-sponsored program with accounting
        treatment  which differs in certain  respects from the more  traditional
        property  and  casualty  insurance  lines.  For  statement  of  earnings
        purposes  under GAAP,  gross premiums  written  consist of the aggregate
        amount of MPCI  premiums  paid by  farmers  for  buy-up  coverage  (MPCI
        coverage  in excess  of  catastrophic  ("CAT")  Coverage  - the  minimum
        available  level of MPCI  Coverage),  and any  related  federal  premium
        subsidies, but do not include MPCI premium on CAT Coverage. By contrast,
        net premiums written do not include any MPCI premiums or subsidies,  all
        of  which  are  deemed  to  be  ceded  to  the  Federal  Crop  Insurance

                                      -8-

<PAGE>

        Corporation  ("FCIC") as a reinsurer.  The Company's profit or loss from
        its MPCI business is determined  after the crop season ends on the basis
        of a complex profit sharing formula established by law and the FCIC. For
        statement of earnings  purposes,  any such profit or loss sharing earned
        or payable by the  Company is  treated as an  adjustment  to  commission
        expense  and  is  included  in  policy   acquisition   and  general  and
        administrative expenses.

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

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

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

                                      -9-

<PAGE>

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

5.      Notes Payable
        At June 30, 1999, the Company's IGF Insurance  Company  subsidiary (IGF)
        maintained a revolving bank line of credit in the amount of $12,000 with
        Brenton Bank. At December  31,1998,  March 31, 1999 and June 30,1999 the
        outstanding  balance was $12,000,$1,989 and $11,767  respectively.  This
        line  is  collateralized  by  the  crop-related   uncollected  premiums,
        reinsurance  recoverable on paid losses,  FCIC annual settlement,  and a
        first lien on the real estate owned by IGF.  The IGF  Revolver  contains
        certain covenants which (i) restricts IGF's ability to accumulate common
        stock;  (ii) sets minimum  standards for  investments  and  policyholder
        surplus;  and (iii)  limits  ratio of net written  premiums to statutory
        surplus.  At June 30, 1999,  IGF was in  compliance  with all  covenants
        associated with the line of credit, or had received proper waivers.  IGF
        has  received  a waiver  from the bank  with  regard to the ratio of net
        written premiums to surplus as of second quarter 1999.

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

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

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

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

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

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

                                      -10-

<PAGE>

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

        The Company  writes  nonstandard  insurance  business  through agents in
        California where some of the agents charge administration fees on top of
        the premium to these customers.  The California  Department of Insurance
        (CDOI) in early 1998 indicated that such broker fees are part of premium
        and has requested  reimbursement to the  policyholders by Superior.  The
        CDOI has  indicated  it may assess the  Company to repay fees the agents
        received  from the  insured.  The  Company  did not receive any of these
        broker fees and has carried on the insurance practice that is normal for
        many  of  the  insurance  companies  writing  automobile   insurance  in
        California.  The total  amount,  if CDOI  proceeds and requires all fees
        returned  with no recovery  from  agents,  is $3 million.  As a material
        adverse development is not deemed probable,  the Company has not accrued
        any  amount  in its  consolidated  financial  statements.  Although  the
        assessment  has not been  formally  made by the CDOI at this  time,  the
        Company  believes  it  will  prevail  and  will  vigorously  defend  any
        potential assessment.

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

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

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

        A  large  number of policies  were written  through a  third  party
        insurance  company  under a fronting  arrangement.   The  Company
        directly wrote or reinsured 157 AgPI(R) policies written in 1998, 111 of
        which were purchased by California  policyholders  through a third party
        carrier.  The policy form requires that the county in which crops reside

                                      -11-
<PAGE>

        must  suffer a minimum  level of crop loss  before a loss  recovery by a
        policyholder  is possible.  After the county loss test is met,  then the
        policyholder   must  demonstrate  an  insurable   economic  loss  on  an
        individual basis under the policy.

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

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

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

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

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

        As of the date of this Form 10-Q, 128 policyholders have incurred an
        indemnifiable  loss  according to company calculations.  As of the date
        of this Form 10-Q, 8 policyholders have accepted  settlements  and
        released the Company from  liability,  3 policyholders  have  filed for
        arbitration,  and 7  policyholders  have instituted  litigation against
        the Company.  The policyholders  seeking  arbitration are  requesting
        indemnification  totaling the  face amount of their  policies  plus

                                      -12-


<PAGE>

        their policies plus punitive damages.  Arbitration  hearings will likely
        not begin  until the year 2000 (See note 7).

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

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

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

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

                                      -13-

<PAGE>

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

CROP INSURANCE OPERATIONS:
  Gross premiums written(2)                                                                $107,524      $92,020
                                                                                            =======       ======
  Net premiums written                                                                      $11,633      $35,560
                                                                                             ======       ======
  Net premiums earned                                                                        $6,074      $28,460
  Fee income                                                                                    197          350
  Net investment income                                                                         (18)         112
  Net realized capital gain (loss)                                                               --          170
                                                                                             ------       ------
        TOTAL REVENUES                                                                        6,253       29,092
                                                                                             ------       ------
  Losses and loss adjustment expenses                                                         8,894       18,679
  Policy acquisition and general and administrative expenses(1)                              (4,654)       3,897
  Interest and amortization of intangibles                                                      246           50
                                                                                             ------       ------
        TOTAL EXPENSES                                                                        4,486       22,626
                                                                                             ------       ------
  Earnings before income taxes                                                              $ 1,767       $6,466
                                                                                             ======        =====
</TABLE>

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

                                      -14-

<PAGE>

<TABLE>
<CAPTION>

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

CROP INSURANCE OPERATIONS:
  Gross premiums written(2)                                                                $198,247     $178,195
                                                                                            =======      =======
  Net premiums written                                                                     $ 13,246     $ 52,854
                                                                                            =======      =======
  Net premiums earned                                                                        $5,014     $ 28,621
  Fee income                                                                                    138        2,682
  Net investment income                                                                          39          165
  Net realized capital gain                                                                      --          170
                                                                                            -------      -------
        TOTAL REVENUES                                                                        5,191       31,638
                                                                                            -------      -------
  Losses and loss adjustment expenses                                                        14,068       18,738
  Policy acquisition and general and administrative expenses(1)                             (12,662)         250
  Interest and amortization of intangibles                                                      416          233
                                                                                            -------      -------
        TOTAL EXPENSES                                                                        1,822       19,221
                                                                                            -------      -------
  Earnings before income taxes                                                             $  3,369     $ 12,417
                                                                                            =======      =======
</TABLE>

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

                                      -15-
<PAGE>


12.   Earnings Per Share
      Basic and diluted net earning (loss) per share are computed by dividing
      net earnings (loss) as reported  by the average number of shares
      outstanding as follows:

                                      Three Months Ended      Six Months Ended
                                           June 30,              June 30,
                                       1999       1998        1999       1998

      Basic:
      Weighted-average common
         shares outstanding          5,876,398  5,839,348   5,876,398  5,819,049
                                     =========  =========   =========  =========

      The Company has 683,000 stock  options  outstanding  as of June 30,
      1999. These options are antidilutive in 1999 primarily due to the
      net loss in 1999, and therefore fully diluted  earnings per share
      is the same as basic earnings per share.

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

<TABLE>
<CAPTION>

                                                                                       June 30,          June 30,
                                                                                        1999              1998

<S>                                                                                   <C>                 <C>
Reported net earnings (loss)                                                          $(5,716)            $8,292
US/Canada GAAP differences:
   No differences                                                                          --                 --
                                                                                        -----              -----
Revised net earnings                                                                  $(5,716)            $8,292
                                                                                        =====              =====

Earnings (loss) per share - basic                                                      $(0.97)             $1.42
                                                                                         ====               ====
Earnings (loss) per share - fully diluted                                              $(0.97)             $1.37
                                                                                         ====               ====
</TABLE>

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

<S>                                                                                    <C>               <C>
Shareholders' equity in accordance with Canadian GAAP                                  $43,620           $49,725

Add (deduct) effect of difference in accounting for:
   Deferred income taxes                                                                    --                --
   Outstanding claims                                                                       --                --
   Minority interest portion                                                                --                --
   Receivables from sale of capital stock                                                 (232)           (1,377)
   Unrealized gain (loss) on investments*                                                 (739)            1,176
                                                                                        ------            ------
Shareholders' equity in accordance with US GAAP                                        $42,649           $49,524
                                                                                        ======            ======
</TABLE>

*Note: The increase  (decrease) in  shareholders'  equity  attributable to the
       unrealized  gain  (loss) of  $(739)  and  $1,176  at June 30,  1999 and
       December  31,  1998,  respectively,  are net of deferred  tax  expenses
       (recovery) of $(860) and $679 and related minority interest of $(527)
       and $416.

                                      -16-

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

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

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

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

                                      -17-

<PAGE>

that  offering  crop hail  insurance  enables it to sell more  policies  than it
otherwise would.

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

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

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

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.

REVIEW OF CONSOLIDATED OPERATIONS

Net Earnings (Loss)
For the three and six months  ended June 30,  1999,  the Company  recorded a net
loss of $(5,882) and $(5,716), or $(1.00) and $(0.97) per share (basic). This is
a decrease from net earnings for the three and six months ended June 30, 1998 of
$4,775 and $8,292 or $0.82 and $1.42 per share (basic).

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

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

                                      -18-

<PAGE>

Losses before tax and  distributions  on preferred  securities for the corporate
segment are comparable to prior year, at $(431) and $(356) for the three and six
months  ended June 30,  1999 and $(45) and  $(474) for the same  period in 1998.
These losses consist  primarily of  amortization  of intangibles and general and
administrative expenses.

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

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

                                                           Three Months                      Six Months
                                                          Ended June 30,                   Ended June 30,
                                                       1999             1998           1999           1998
                                                       ----             ----           ----           ----

<S>                                                   <C>              <C>               <C>             <C>
CAT imputed                                           $14,470          $16,319       $30,782         $32,638
MPCI                                                   78,748           46,654       141,028         107,297
Crop hail and named perils                             28,776           37,873        57,123          63,365
AgPI(R)                                                  --              7,493            96           7,533
                                                      ------           -------       -------         -------
                                                      121,994          108,339       229,028         210,833
Less: CAT imputed                                     (14,470)         (16,319)      (30,782)        (32,638)
                                                      -------          -------       -------         -------
                                                     $107,524          $92,020      $198,247        $178,195
                                                      =======           ======       =======         =======
</TABLE>

Remaining other gross written  premiums not reflected in nonstandard  automobile
or crop segments  represent  commercial  business which is ceded 100% to Granite
Reinsurance Company Ltd. Other gross written premiums were $274 and $402 for the
three and six months  ended June 30, 1999  compared to $(1,045) and $-0- for the
same periods in 1998.

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

                                                        1999           1998
                                                        ----           ----

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

Fee Income
Fee income decreased 35.7% and 33.1% for the three and six months ended June 30,
1999 as compared to the  corresponding  periods of the prior year.  The decrease
was  primarily  due to the federal  government  retaining  the CAT policy fee in
1999, versus Company retention of this fee in 1998. Fee income has also decrease
in the  nonstandard  auto  segment due to  decreases  in gross  written  premium
volume.

                                      -19-

<PAGE>

Net Investment Income
Net  investment  income  decreased 5.7% for the three months ended June 30, 1999
and  increased  1.7% for the six months  ended June 30,  1999 as compared to the
corresponding  periods of the prior year.  Such  increase  was due  primarily to
higher yields on invested assets caused by a shift out of equity  securities and
into fixed income investments.

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

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

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

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

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

                                      -20-

<PAGE>

of loss  and LAE in  1998,  the  first  quarter  and  second  quarter  of  1999,
respectively.  Losses for second quarter were partially  offset by the recording
of a net gain of $4.67 million on a reinsurance treaty.

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

Policy Acquisition and General and Administrative Expenses
Policy acquisition and general and administrative  expenses decreased to $21,015
and  $32,645  or 27.5% and  22.7% of net  premium  earned  for the three and six
months ended June 30, 1999 compared to $24,244 and $40,266 or 24.3% and 23.5% of
net premium earned in the corresponding periods of 1998. Overall expenses in the
first six  months of 1999  versus  the first  six  months of 1998  decreased  by
$7,621.   Within  this  decrease  crop  expenses   decreased  by  $12,912  while
nonstandard auto expenses increased by $6,400.

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

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

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

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

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

                                      -21-

<PAGE>

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

Provision (Benefit) for Income Taxes
Income tax benefit was (34.0)% and (36.8)% of pre-tax loss for the three and six
months  ended June 30,  1999  compared  to 33.7% and 34.3% of pre-tax  profit in
1998. The increased  effective tax rate at June 30, 1999 is due to a combination
of estimated permanent  differences,  of $1,138, between book and taxable income
offset by non-taxable income in Granite Reinsurance, coupled with a year to date
pre-tax loss rather than a pre-tax gain.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  consolidated  total assets of $850,079 at June 30, 1999 increased
$279,090  from  $570,989 as of December  31, 1998.  The primary  reason for this
increase  was an  increase  in  receivable  balances  which are  impacted by the
cyclical nature of the crop/hail business.  Typically crop/hail  receivables are
high as of June 30. Crop/hail receivables do not start to become due until July.

Net cash provided by operating  activities  decreased $18,996 to $13,749 for the
first six months of 1999 when  compared  to the same  period in the prior  year,
driven partially by a $14,008 decrease in net earnings. Cash and cash equivalent
increased  slightly from the end of 1998 to $43,729.  Repayment of officer loans
as well as cash generated from  operations was used for the purchase of invested
assets as well as  additional  computer  equipment  and related  software in the
Company's non-standard auto operations.

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

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

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

YEAR 2000 COMPLIANCE

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

The Company has four primary  locations  where Y2K issues have the  potential to
significantly impact the Company's operations. These locations are Indianapolis,
Indiana;  Atlanta,  Georgia;  Tampa,  Florida,  and Des Moines,  Iowa. Given the

                                      -22-

<PAGE>

nature of the Company  structure,  the issues  relating to Tampa will be grouped
together with those of the Company's Atlanta  operations and will be referred to
as "Atlanta" issues.

The Company's location in Des Moines,  Iowa primarily  administers the Company's
crop insurance business which, on a premium volume basis, represents roughly 50%
of the Company's total business. The Company's corporate headquarters is located
in Indianapolis and the Company's Indianapolis location also houses non-standard
automobile  business  operations  which, on a premium volume basis,  account for
roughly 25% of the Company's  non-standard  automobile  business.  The Company's
Atlanta location  (including Tampa),  administers the remainder of the Company's
non-standard automobile business.

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

Readiness

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

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

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

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

                                     Atlanta
The  Company  has  replaced  its policy  administration  and  claims  systems by
converting to Y2K compliant systems.  These new policy administration and claims
systems are currently  operational for all new business written by the Company's
Atlanta facility.  There are, however,  approximately  24,000 insurance policies
which are currently  maintained  on a non-Y2K  compliant  policy  administration

                                      -23-

<PAGE>

system  provided by an unrelated  third party.  The policies  maintained on this
non-Y2K  compliant  system  represent  approximately  18%  of the  policy  count
currently administered by the Company's Atlanta operations.  Given the nature of
the policy term of these  24,000  insurance  policies,  the Company  expects the
policies to be beyond their term as of December 31, 1999 and it is the Company's
intention  that if such  policies  are quoted for  renewals,  if any,  that such
renewals  will be processed on Atlanta's  Y2K  compliant  policy  administration
system.  As an interim step, the Company has arranged for such  unrelated  third
party to store inactive  policy data while  providing the Company access to such
data on a fee basis.  A data  warehouse  is  currently  being  developed  by the
Company for such inactive policy data, with an expected  completion date of June
1,  2000.  Ongoing  operations  of  the  Company  will  not be  affected  by the
warehousing of such inactive policy data. Further, there are approximately 6,100
claims which are currently  being  administered on Atlanta's  non-Y2K  compliant
claims system.  The claims which are currently  being  administered on Atlanta's
non-Y2K  compliant claims system represent  approximately 60% of Atlanta's total
pending claim count, which will decrease during the balance of 1999.

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

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

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

                                      -24-

<PAGE>

states.  The  Company  believes  that such state  specific  programming  will be
completed  (including  testing) by October 31, 1999. The hardware  necessary for
the Company's  Indianapolis policy  administration  conversion has been acquired
and is Y2K compliant.

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

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

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

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

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

                                      -25-

<PAGE>

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

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

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

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

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

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

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

Contingency Plans

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

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

                                      -26-


<PAGE>

FORWARD LOOKING STATEMENTS

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

                                      -27-


<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.

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

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

ITEM 2.          CHANGES IN SECURITIES
                 None

ITEM 3.          DEFAULTS UPON SENIOR SECURITIES
                 None

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

ITEM 5.          OTHER INFORMATION
                 None

ITEM 6.          EXHIBITS AND REPORTS ON FORM 8-K
                 The  Company  filed an 8-K on August  26,  1999  regarding  the
                 filing of an amended 10-Q for the quarterly  period ended March
                 31, 1999.


                                      -28-

<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 27, 1999           By: /s/ Alan G. Symons
                                    Alan G. Symons
                                    Chief Executive Officer



Dated: August 27, 1999           By: /s/ Thomas R. Kaehr
                                     Thomas R. Kaehr
                                     Vice President, Treasurer and
                                     Chief Financial Officer


                                      -29-




<PAGE>

GORAN CAPITAL INC. - Consolidated                                 Exhibit 11.01
Analysis of Earnings Per Share
<TABLE>
<CAPTION>

                                                                          Six                       Six
                                                                     Months Ended               Months Ended
                                                                     June 30, 1999              June 30, 1998

<S>                                                                    <C>          <C>              <C>
Average Price (US $)                                                   $9.07        (A)            $27.88

Proceeds from Exercise of Warrants and Options (US $)                $6,608,811     (B)          $15,360,402
                                                                      =========                   ==========
Shares Repurchased - Treasury Method                                    728,527   (B)/(A)            550,947
                                                                        =======                      =======
Shares Outstanding - Weighted Average                                 5,876,398                    5,819,049

Add:  Options and Warrants Outstanding                                  682,572                      802,304

Less:  Treasury Method - Shares Repurchased                            (728,527)                    (550,947)
                                                                      ---------                    ---------
Shares Outstanding for US GAAP Purposes                               5,830,443      (C)           6,070,406
                                                                      =========                    =========
Net Earnings in Accordance with US GAAP                             $(5,716,000)     (D)          $8,292,000
                                                                      =========                    =========
Earnings Per Share - US GAAP - Basic                                     $(0.97)                       $1.42
                                                                           ====                         ====
Earnings Per Share - US GAAP - Fully Diluted                             $(0.97)   (D)/(C)             $1.37
                                                                           ====                         ====
</TABLE>




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