UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For The Quarterly Period Ended March 31, 1998

                        Commission File Number: 000-24366

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

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

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

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

Registrant's telephone number, including area code: (416) 594-1155 (Canada)
                                                    (317) 259-6400 (U.S.)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No


As of March 31, 1998, there were 5,808,466  shares of Registrant's  common stock
issued and outstanding exclusive of shares held by Registrant.




<PAGE>



                                 Form 10-Q Index
                      For The Quarter Ended March 31, 1998
                                                                      Page
                                                                     Number

PART I   FINANCIAL INFORMATION

Item 1   Financial Statements

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

         Unaudited Consolidated Statements of Earnings
         for the Three Months Ended March 31, 1998 and 1997 ............4

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

         Unaudited Consolidated Statements of Changes in
         Cash Resources for the Three Months Ended
         March 31, 1998 and 1997 .......................................6

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

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

PART II  OTHER INFORMATION ............................................15

SIGNATURES ............................................................16

INDEX TO EXHIBITS
         Exhibit 11 - Computation of Per Share Earnings ...............17



<PAGE>



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

                                                                      March 31,    December 31,
ASSETS                                                                  1998           1997

<S>                                                                   <C>            <C>     
Cash and investments                                                  $275,522       $247,124

Accounts receivable

  Premiums receivable                                                  162,569         89,762

  Due from insurance companies                                          13,169         13,782

  Due from associated companies                                          4,495          1,442

  Accrued and other receivables                                          2,805          2,658
                                                                       -------        -------
        TOTAL ACCOUNTS RECEIVABLE                                      183,038        107,644

Reinsurance recoverable on outstanding claims                           67,980         94,424

Prepaid reinsurance premiums                                            96,882         36,607

Capital assets, net of accumulated depreciation                         14,586         12,230

Deferred policy acquisition costs                                       18,376         11,849

Deferred income taxes                                                    2,528          2,098

Intangibles                                                             42,636         42,562

Other assets                                                             6,826          6,310
                                                                       -------        -------
        TOTAL ASSETS                                                  $708,374       $560,848
                                                                       =======        =======

LIABILITIES

Accounts Payable:

  Due to insurance companies                                           $98,384        $37,350

  Accrued and other payables                                            30,388         27,266
                                                                       -------        -------
                                                                       128,772         64,616

Outstanding claims                                                     141,418        152,871

Unearned premiums                                                      209,967        118,616

Bank loans                                                               2,569          4,182
                                                                       -------        -------
                                                                       482,726        340,285
                                                                       -------        -------
Minority interest:

  Equity in net assets of subsidiaries                                  26,591         25,231

  Preferred securities                                                 135,000        135,000
                                                                       -------        -------
                                                                       161,591        160,231
                                                                       -------        -------
SHAREHOLDERS' EQUITY

Capital stock                                                           18,321         18,010

Contributed surplus                                                      2,775          2,775

Retained earnings                                                       43,356         39,839

Cumulative translation adjustment                                        (395)          (292)
                                                                          ---            ---
        TOTAL SHAREHOLDERS' EQUITY                                      64,057         60,332
                                                                       -------        -------
        TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                    $708,374       $560,848
                                                                       =======        =======
</TABLE>

See notes to consolidated financial statements

                                      -3-

<PAGE>



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

                                                                            Three Months Ended
                                                                                  March 31,
                                                                              1998          1997

<S>                                                                         <C>           <C>     
Gross premiums written                                                      $177,196      $127,914

Less ceded premiums                                                          78,835         58,512
                                                                             ------         ------
Net premiums written                                                         98,361         69,402

Change in net unearned premiums                                              26,476          5,511
                                                                             ------         ------
Net premiums earned                                                          71,885         63,891

Fee income                                                                    6,489          5,038

Net investment income                                                         3,176          3,283

Net realized capital gain                                                     1,968            942
                                                                             ------         ------
      Total Revenues                                                         83,518         73,154
                                                                             ------         ------
Net claims incurred                                                          55,302         45,171

General and administrative expenses                                          16,022         13,760

Interest expense                                                                183          1,371

Amortization of intangibles                                                     511            129
                                                                             ------         ------
      Total expenses                                                         72,018         60,431
                                                                             ------         ------
      Earnings before undernoted items                                       11,500         12,723

Provision for income taxes                                                    4,023          4,117

Distribution of preferred securities, net of tax                              2,130            --

Minority interest                                                             1,645          3,712
                                                                             ------         ------
Earnings from continuing operations                                           3,702          4,894

Loss from discontinued operations                                              (185)          (287)
                                                                                ---            ---
      Net Earnings                                                          $ 3,517        $ 4,607
                                                                             ======         ======

Earnings per share from continuing operations - basic                         $0.64          $0.88
                                                                               ====           ====
Earnings per share from continuing operations - fully diluted                 $0.62          $0.87
                                                                               ====           ====
Net earnings per share - basic                                                $0.61          $0.83
                                                                               ====           ====
Net earnings per share - fully diluted                                        $0.59          $0.82
                                                                               ====           ====

See notes to consolidated financial statements
</TABLE>


                                      -4-

<PAGE>



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


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

<S>                                       <C>           <C>         <C>         <C>            <C>       
Balance at December 31,  1996             $17,416       $2,775         $(334)      $27,401      $47,258

Issuance of common shares                      12          ---           ---          ---            12

Change in cumulative
translation adjustment                        ---          ---            87          ---            87

Net earnings                                  ---          ---           ---        4,607         4,607
                                              ---          ---           ---       ------        ------

Balance at March 31, 1997                 $17,428       $2,775          $(247)    $32,008       $51,964
                                           ======        =====            ===      ======        ======


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

Issuance of common shares                     311          ---             ---        ---           311

Change in cumulative
translation adjustment                        ---          ---            (103)       ---          (103)

Net earnings                                  ---          ---             ---      3,517         3,517
                                              ---          ---             ---     ------        ------

Balance at March 31, 1998                 $18,321       $2,775           $(395)   $43,356       $64,057
                                           ======        =====             ===     ======        ======

</TABLE>

See notes to consolidated financial statements


                                      -5-

<PAGE>



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

                                                                                   Three Months Ended
                                                                                        March 31,
                                                                                   1998           1997

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

  Net earnings for the period                                                     $3,517           $4,607

  Items not affecting cash resources:

    Amortization                                                                   1,167              518

    Loss (gain) on disposal of investments                                        (1,968)            (958)

    Minority interest in net income of consolidated subsidiary                     1,645            3,712

    Decrease (Increase) in reinsurance recoverable on outstanding claims          26,444            4,877

    Decrease (increase) in prepaid reinsurance premiums                          (60,275)         (35,659)

    Decrease (increase) in other assets                                             (516)            2,401

    Decrease (increase) in deferred policy acquisition costs                      (6,527)             (72)

    Decrease (increase) in goodwill                                                  (74)            (265)

    Increase (decrease) in deferred income taxes                                    (430)             --

    Increase (decrease) in unearned premiums                                      91,351           41,273

    Increase (decrease) in outstanding losses                                    (11,453)         (16,629)

    Decrease (increase) in accounts receivable                                   (75,394)         (36,113)

    Increase (decrease) in accounts payable                                       64,156           51,347
                                                                                  ------           ------
                                                                                  31,643           19,039
                                                                                  ------           ------
FINANCING ACTIVITIES:

  Increase (reduction) of borrowed funds                                          (1,613)             --

  Increase (decrease) in minority interest                                         1,360            2,304

  Issue of share capital                                                             311               11
                                                                                   -----            -----
                                                                                      58            2,315
                                                                                   -----            -----
INVESTING ACTIVITIES:

  Net purchase of marketable securities                                          (10,329)         (16,257)

  Net purchase of capital assets                                                  (2,869)          (1,025)

  Other                                                                             (350)              88
                                                                                 -------           ------
                                                                                 (13,548)         (17,194)
Effect of exchange rate changes on cash resources:

Change in cash resources during the period                                        18,153            4,160

Cash resources, beginning of period                                               36,557           33,730
                                                                                  ------           ------
Cash resources, end of period                                                    $54,710          $37,890
                                                                                  ======           ======
Cash resources are comprised of:
  Cash                                                                           $28,273          $20,630
  Short-term investments                                                          26,437           17,260
                                                                                  ------           ------
                                                                                 $54,710          $37,890
                                                                                  ======           ======
</TABLE>
See notes to consolidated financial statements


                                      -6-

<PAGE>



                               GORAN CAPITAL INC.
            NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                    For The Three Months Ended March 31, 1998

NOTES TO THE CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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


                                      -7-

<PAGE>



NOTE 2 - UNITED STATES ACCOUNTING PRINCIPLES

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

<TABLE>
<CAPTION>

                                                                March 31,         March 31,
                                                                  1998              1997

<S>                                                              <C>               <C>   
Reported net earnings                                            $3,517            $4,607

US/Canada GAAP differences:

   Discounting on outstanding claims                                --                 38
                                                                  -----             -----
Revised net earnings                                             $3,517            $4,645
                                                                  =====             =====


Earnings per share - basic                                         $.61              $.84
Earnings per share - fully diluted                                 $.58              $.78

</TABLE>


<TABLE>
<CAPTION>
                                                                March 31,        December 31,
                                                                  1998             1997

<S>                                                             <C>               <C>    
Shareholders' equity in accordance with Canadian GAAP           $64,057           $60,332

Add (deduct) effect of difference in accounting for:

   Deferred income taxes                                          1,915             1,975

   Outstanding claims                                            (1,708)           (1,765)

   Minority interest portion                                        (68)              (70)

   Receivables from sale of capital stock                          (334)             (346)

   Unrealized gain on investments*                                 2,836            1,336
                                                                  ------           ------
Shareholders' equity in accordance with US GAAP                  $66,698          $61,462
                                                                  ======           ======
</TABLE>


*Note:   The increase in  shareholders'  equity  attributable  to the unrealized
         gain of $2,836  and $1,336 at March 31,  1998 and  December  31,  1997,
         respectively,  are net of  deferred  taxes of  $1,480  and  $1,005  and
         related minority interest of $1,363 and $658.


                                      -8-

<PAGE>



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

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

Nonstandard Automobile Insurance Operations

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

Crop Insurance Operations

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

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

MPCI is a  government-sponsored  program with accounting treatment which differs
in certain  respects from the more traditional  property and casualty  insurance
lines. For income statement purposes under US generally accepted accounting

                                      -9-

<PAGE>



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

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

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

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

In order to reduce the Company's potential loss exposure under the MPCI program,
in addition to reinsurance obtained from the FCIC, the Company

                                      -10-

<PAGE>



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

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

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

Results of Operations

For the three months ended March 31, 1998, the Company  recorded net earnings of
$3,517,000 or $0.61 per share (basic). This is approximately a 24% decrease from
1997 comparable amounts of $4,607,000 or $0.83 per share (basic).  This resulted
from  lower  earnings  in both the  nonstandard  automobile  and crop  segments.
However,  earnings in the first quarter of 1998 were at consensus  expectations.
Increases in gross premiums written and a lower nonstandard  automobile  expense
ratio were offset by a higher loss ratio.  However,  the first quarter 1998 loss
ratio  improved  from the fourth  quarter of 1997 due to the  effects of certain
rate increases.  Lower crop results reflect  increased  commission  rates due to
competition and a lower expense reimbursement from the federal government offset
by significant volume growth created internally and through the transaction with
CNA.


                                      -11-

<PAGE>

<TABLE>
<CAPTION>



                                                                          For the three months
                                                                             ended March 31,

                                                                          1998            1997

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

  Gross premiums written                                                $89,976          $75,066
                                                                         ======           ======

  Net premiums written                                                  $82,267          $59,588
                                                                         ======           ======

  Net premiums earned                                                   $68,323          $63,105

  Fee income                                                              4,155            2,899

  Net investment income                                                   2,801            2,338
  
  Net realized gain                                                       1,968              942
                                                                         ------           ------

        TOTAL REVENUES                                                   77,247           69,284
                                                                         ------           ------

  Losses and loss adjustment expenses                                    53,146           45,268

  Policy acquisition and general and administrative expenses             18,123           17,124
                                                                         ------           ------

        TOTAL EXPENSES                                                   71,269           62,392
                                                                         ------           ------

  Earnings before income taxes                                           $5,978           $6,892
                                                                          =====            =====

GAAP RATIOS (Nonstandard Automobile Only):

  Loss and LAE Ratio                                                      77.8%            71.7%

  Expense ratio, net of billing fees                                      20.4             22.5
                                                                          ----             ----

  Combined ratio                                                          98.2%            94.2%
                                                                          ====             ====



CROP INSURANCE OPERATIONS:

  Gross premiums written                                                $86,175          $51,709
                                                                         ======           ======

  Net premiums written                                                  $17,294           $7,201
                                                                         ======            =====

  Net premiums earned                                                      $161              $10

  Fee income                                                              2,332            2,139

  Net investment income                                                      53               49
                                                                          -----            -----

        TOTAL REVENUES                                                    2,546            2,198
                                                                          -----            -----

  Losses and loss adjustment expenses                                        59               --

  Policy acquisition and general and administrative expenses(1)          (3,647)          (4,766)

  Interest expense                                                          183               11
                                                                          -----           ------

        TOTAL EXPENSES                                                   (3,405)          (4,755)
                                                                          -----            -----

  Earnings before income taxes                                           $5,951           $6,953
                                                                          =====            =====

</TABLE>

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


                                      -12-

<PAGE>



Consolidated  gross  premiums  written  increased  39% due to growth in both the
nonstandard auto and crop segments.

Gross  premiums  written for the  nonstandard  auto segment  increased 20%. Such
increase was due primarily to continued  introduction of multi-tiered  products,
introduction of two new states and increased market share penetration.

Gross premiums written for the crop segment increased 67%. Such increase was due
to the transactions  with CNA and internal growth.  Premium increases were noted
in all lines of crop  insurance.  Crop premiums for the three months ended March
31 are as follows:
<TABLE>
<CAPTION>

                                            1998              1997
                                            ----              ----

<S>                                        <C>              <C>    
CAT imputed                                $16,319          $13,032
MPCI                                        60,743           39,777
Crop hail and named perils                  25,431           11,932
                                            ------           ------
                                           102,493           64,741
Less: CAT imputed                          (16,319)         (13,032)
                                            ------           ------

                                           $86,174          $51,709
                                            ======           ======

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

MPCI  premiums are  considered  to be 100% ceded to the federal  government  for
accounting purposes.  Quota share cession rates for other lines of insurance for
the three months ended March 31 are as follows:
<TABLE>
<CAPTION>

                                            1998             1997
                                            ----             ----

<S>                                          <C>              <C>
Nonstandard automobile                       10%              20%
Crop hail                                    30%              40%
Named peril                                  50%              50%

</TABLE>
Fee income increased 28.8% for the three months ended March 31, 1998 as compared
to the corresponding  period of the prior year. Such increase was due to greater
installment billings on nonstandard  automobile  policies,  which averaged 4.62%
and  3.86%  of  gross  written  premiums  in 1998 and  1997,  respectively,  and
additional CAT fees on crop business due to growth in volume.

Net investment  income  decreased 3.3% for the three months ended March 31, 1998
as compared to the corresponding period of the prior year.

The loss  ratio  for the  nonstandard  automobile  segment  in 1998 was 77.8% as
compared to 71.7% in 1997. The increase in the loss ratio in 1998 from the first
quarter of 1997  reflects  increased  severity  costs and the effects of certain
pending rate  increases.  However,  this loss ratio has improved from the fourth
quarter of 1997 which was 79.4%, excluding the effects of certain fourth quarter
adjustments,  due to the effects of recent rate increases. Crop hail loss ratios
in the first quarter do not have significant impact on consolidated earnings.

Policy acquisition and general and  administrative  expenses have increased as a
result of the  increased  volume of  business  produced by the  Company.  Policy
acquisition and general and administrative expenses rose to $16,022,000 or

                                      -13-

<PAGE>


22.3% of net premium  earned for the three months ended March 31, 1998  compared
to  $13,760,000 or 21.5% of net premium  earned in the  corresponding  period of
1997.  The increase in the expense  ratio in the first quarter of 1998 is due to
the effects of higher  commissions and lower expense  reimbursements in the crop
segment.  However,  the  consolidated  expense  ratio has been  reduced from the
fourth  quarter  1997 rate of 26.6%.  The  expense  ratio,  for the  nonstandard
segment improved to 20.4% in 1998 as compared to 22.5% in 1997, due primarily to
reduced  expenses  from  the  Indianapolis   operations   resulting  from  lower
commissions on multi-tiered  products and other  efficiency  implementations  as
well as higher billing fee rates.

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

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

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

Income tax  expense was 35.0% and 32.4% of pre-tax  income for the three  months
ended March 31, 1998 and 1997.  The  increase in the  effective  rate was due to
greater goodwill amortization in 1998.

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

Financial Condition

The  Company's  total  assets  of  $708,374,000  at  March  31,  1998  increased
$147,526,000  from $560,848,000 as of December 31, 1997. The primary reasons for
this increase were an increase of $28,398,000 in cash and invested assets due to
continued growth in premiums and the normal receipt of crop funds from the FCIC.
The  remaining  increase is due to increases in  receivables  from  insureds and
reinsurers due to continued  growth in volume and growth in prepaid  reinsurance
in crop operations due to the accounting for MPCI with the FCIC.

Net cash provided by operating  activities  improved to $33,835,000 in 1998 from
$19,039,000  in 1997 due to continued  premium growth and normal receipt of crop
funds from the FCIC.  This  additional  cash flow was used to increase  invested
assets. Financing activities included normal activities on the Company's line of
credit for crop operations.


                                      -14-

<PAGE>



PART II -   OTHER INFORMATION

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

ITEM 2.     CHANGES IN SECURITIES
            None

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES
            None

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

ITEM 5.     OTHER INFORMATION
            None

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

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


                                      -15-

<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:  May 8, 1998                 By:______________________
                                    Alan G. Symons
                                    President



Dated:  May 8, 1998                 By:______________________
                                    Gary P. Hutchcraft
                                    Vice President, Treasurer and
                                    Chief Financial Officer



                                      -16-

<PAGE>


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


                                                          Three Months                Three Months
                                                              Ended                      Ended
                                                          March 31, 1998              March 31, 1997

<S>                                                         <C>            <C>         <C>   
Average Price (US $)                                          $28.76         (A)         $24.46

Proceeds from Exercise of Warrants and Options
   (US $)                                                   $9,582,503       (B)       $3,533,293
                                                             =========                  =========

Shares Repurchased - Treasury Method                           333,189     (B)/(A)        144,444
                                                               =======                    =======

Shares Outstanding - Weighted Average                        5,798,750                  5,533,776

Add:  Options and Warrants Outstanding                         576,304                    545,317

Less:  Treasury Method - Shares Repurchased                  (333,189)                  (144,444)
                                                              -------                    -------

Shares Outstanding for US GAAP Purposes                      6,041,865       (C)        5,934,649
                                                             =========                  =========

Net Earnings in Accordance with US GAAP                     $3,517,000       (D)       $4,645,171
                                                             =========                  =========

Earnings Per Share - US GAAP - Basic                             $0.61                      $0.84
                                                                  ====                       ====

Earnings Per Share - US GAAP - Fully Diluted                     $0.58     (D)/(C)          $0.78
                                                                  ====                       ====
</TABLE>




                                      -17-

<PAGE>