<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549-1004

                                    FORM 10-Q

Mark One
[X]            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES AND EXCHANGE ACT OF 1934

            For the transition period from _________ to ____________



                        Commission File Number: 000-24366

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



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


                                   2 Eva Road
                                    Suite 200
                            Toronto, Ontario M9C 2A8

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

     Registrant's telephone number, including area code: (416) 622-0660 (Canada)
                                                         (317) 259-6300 (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 May 1, 2001, there were 5,776,398 shares of Registrant's common stock
issued and outstanding, exclusive of shares held by Registrant.


<PAGE>

                                 FORM 10-Q INDEX
                      FOR THE QUARTER ENDED MARCH 31, 2001

<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                          Number
<S>                                                                                                       <C>
PART I     FINANCIAL INFORMATION

Item 1     Financial Statements

           Consolidated Balance Sheets at March 31, 2001
           (unaudited) and December 31, 2000.......................................................       3

           Unaudited Consolidated Statements of Earnings (Loss)
           For the Three Months Ended
           March 31, 2001 and 2000.................................................................       4

           Unaudited Consolidated Statements of Shareholders' Equity (Deficit)
           For the Three Months Ended March 31, 2001 and 2000 .....................................       5

           Unaudited Consolidated Statements of Cash Flows for the
           Three Months Ended March 31, 2001 and 2000 .............................................       6

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

Item 2     Management's Discussion and Analysis of Financial
           Condition and Results of Operations.....................................................       13

Item 3     Quantitative and Qualitative Disclosures about Market Risk..............................       18

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

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

INDEX TO EXHIBITS
           Exhibit 11 - Analysis of Loss Per Share.................................................       20
</TABLE>


                                       2
<PAGE>


PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
GORAN CAPITAL INC.
CONSOLIDATED BALANCE SHEETS
(CANADIAN GAAP, stated in thousands of U.S. dollars)

<TABLE>
<CAPTION>
                                                                                     March 31,
                                                                                        2001           December 31,
                                                                                   (Unaudited)              2000
                                                                                   ---------------     ---------------
<S>                                                                                <C>                 <C>
ASSETS
  Investments:
    Fixed maturities                                                                    $96,816            $107,827
    Equity securities                                                                    20,285              20,268
    Short-term investments, at amortized cost, which approximates market                 14,605              17,594
    Mortgage loans, at cost                                                               1,870               1,870
    Other invested assets                                                                 1,414               1,331
                                                                                          -----               -----
  TOTAL INVESTMENTS                                                                     134,990             148,890
  Investments in and advances to related parties                                          3,435               4,254
  Cash and cash equivalents                                                               4,655               3,230
  Receivables,  net  of  allowance  of  $1,952  and  $1,551  in  2001  and  2000,        66,784              54,370
    respectively
  Reinsurance recoverable on paid and unpaid losses, net                                 60,649              44,843
  Prepaid reinsurance premiums                                                           35,408              24,774
  Deferred policy acquisition costs                                                       5,995               6,454
  Property and equipment, net of accumulated depreciation                                12,388              12,400
  Intangible assets                                                                       4,947               4,983
  Other assets                                                                              189               3,784
  Assets of discontinued operations                                                     222,097             132,050
                                                                                        -------             -------
TOTAL ASSETS                                                                           $551,537            $440,032
                                                                                       ========            ========

LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES:
  Loss and loss adjustment expense reserve                                            $103,677             $113,149
  Unearned premiums                                                                     71,022               62,386
  Reinsurance payables                                                                  89,122               63,632
  Distributions payable on preferred securities                                         18,258               15,263
  Other liabilities                                                                     19,086               14,904
  Liabilities of discontinued operations                                               220,828              131,366
                                                                                       -------              -------
TOTAL LIABILITIES                                                                      521,993              400,700
                                                                                       -------              -------
  Minority interest:
    Company-obligated  mandatorily redeemable preferred stock of trust subsidiary      112,000              112,000
                                                                                       -------              -------
    holding solely parent debentures
STOCKHOLDERS' EQUITY (DEFICIT):
  Common stock, no par value,  unlimited shares  authorized,  5,776 shares issued       19,132               19,132
    and outstanding as of March 31, 2001 and December 31, 2000
  Contributed surplus                                                                   23,748               23,748
  Cumulative translation adjustment                                                       (532)                (291)
  Retained (deficit)                                                                  (124,804)            (115,257)
                                                                                      ---------            ---------
TOTAL STOCKHOLDERS' (DEFICIT)                                                          (82,456)             (72,668)
                                                                                       --------             --------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)                                         $551,537             $440,032
                                                                                      ========             ========
</TABLE>


SEE CONDENSED 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
                                                                                       -----------------------
                                                                                        2001             2000
                                                                                       ------           ------
<S>                                                                                   <C>              <C>
Gross premiums written                                                                $48,338          $59,859
Less ceded premiums                                                                    31,393           28,000
                                                                                       ------           ------
    NET PREMIUMS WRITTEN                                                              $16,945          $31,859
                                                                                      =======          =======
    NET PREMIUMS EARNED                                                               $18,844          $44,467
Fee income                                                                              2,962            3,950
Net investment income                                                                   1,809            3,122
Net realized capital gain (loss)                                                         (703)             364
                                                                                         -----             ---
    TOTAL REVENUES                                                                     22,912           51,903
                                                                                       ------           ------
Expenses:
    Losses and loss adjustment expenses                                                17,745           36,353
    Policy acquisition and general and administrative expenses                         11,673           18,730
    Amortization of intangibles                                                            46              491
                                                                                           --              ---
    TOTAL EXPENSES                                                                     29,464           55,574
                                                                                       ------           ------
    LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND MINORITY INTEREST          (6,552)          (3,671)
                                                                                       -------          -------

    TOTAL INCOME TAXES                                                                      0              487
                                                                                            -              ---
    LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTEREST                           (6,552)          (4,158)
Minority interest:
Distributions on preferred securities, net of tax of $0 in both 2001 and 2000           2,995            3,264
                                                                                        -----            -----
LOSS FROM CONTINUING OPERATIONS                                                        (9,547)          (7,422)
Discontinued operations:
  Income from operations of discontinued segment, less applicable income                    0            4,010
  taxes of $0 in both 2001 and 2000                                                         -            -----

NET LOSS                                                                              $(9,547)         $(3,412)
                                                                                      ========         ========
Weighted average shares outstanding - basic and fully diluted                           5,776            5,876
                                                                                        =====            =====
Net loss from continuing operations per share - basic and fully diluted                $(1.65)          $(1.26)
                                                                                       =======          =======
Net income of discontinued operations per share - basic and fully diluted               $0               $0.68
                                                                                        ==               =====
Net loss per share - basic and fully diluted                                           $(1.65)          $(0.58)
                                                                                       =======          =======
</TABLE>


SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       4
<PAGE>


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

<TABLE>
<CAPTION>
                                     Common      Contributed Cumulative    Retained       Total
                                      Stock        Surplus   Translation   Earnings    Stockholders'
                                                             Adjustment   (Deficit)  Equity (Deficit)
<S>                                <C>         <C>          <C>          <C>          <C>
Balance at December 31, 1999       $  19,317   $   2,775    $      13    $ (34,992)   $ (12,887)

Issuance of common shares                  0           0            0            0            0

Change in cumulative translation           0           0         (249)           0         (249)
adjustment

Net earnings (loss)                        0           0            0       (3,412)      (3,412)
                                   ---------   ---------    ---------    ---------    ---------

Balance at March 31, 2000          $  19,317   $   2,775    $    (236)   $ (38,404)   $ (16,548)
                                   =========   =========    =========    =========    =========

Balance of December 31, 2000       $  19,132   $  23,748    $    (291)   $(115,257)   $ (72,668)

Issuance of common shares                  0           0            0            0            0

Change in cumulative translation           0           0         (241)           0         (241)
adjustment

Net earnings (loss)                        0           0            0       (9,547)      (9,547)
                                   ---------   ---------    ---------    ---------    ---------

Balance at March 31, 2001          $  19,132   $  23,748        ($532)   ($124,804)   $ (82,456)
                                   =========   =========    =========    =========    =========
</TABLE>


SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                                       5
<PAGE>

GORAN CAPITAL INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CANADIAN GAAP, stated in thousands of U.S. dollars)

<TABLE>
<CAPTION>
                                                                              Three Months
                                                                             Ended March 31
                                                                          --------------------
                                                                            2001        2000
                                                                          --------    --------
<S>                                                                       <C>         <C>
Cash flows from operating activities:
    Net loss for the period                                               $ (9,547)   $ (3,412)

    Adjustments to reconcile net earnings to net cash provided by (used
    in)operations:
        Depreciation and amortization                                        1,112       1,719
        Deferred income tax provision                                            0           5
        Net realized (gain) loss                                               703        (364)
      Net changes in operating assets and liabilities:
      Receivables                                                          (10,901)       (450)
      Reinsurance recoverable on paid and unpaid losses, net               (15,806)    (14,130)
      Prepaid reinsurance premiums                                         (10,634)    (17,719)
      Deferred policy acquisition costs                                        459       2,358
      Other assets and liabilities                                           2,275      (6,333)
      Loss and loss adjustment expense reserve                              (9,472)    (15,169)
      Unearned premiums                                                      8,636       5,110
      Reinsurance payables                                                  25,490      27,697
      Distribution payable on preferred securities                           6,743       3,264
      Net assets from discontinued operation                                  (872)     17,847
                                                                              ----      ------
NET CASH PROVIDED BY (USED IN) OPERATIONS                                  (11,814)        423
                                                                           -------         ---
Cash flow from investing activities net of assets acquired:
    Net sales of short-term investments                                      2,989       4,153
    Proceeds from sales, calls and maturities of fixed maturities           11,736      11,558
    Purchases of fixed maturities                                             (756)          0
    Proceeds from sales of equity securities                                 3,765         154
    Purchase of equity securities                                           (4,475)     (2,009)
    Proceeds from repayment of mortgage loans                                   30          30
    Purchase of property and equipment                                      (1,114)       (451)
    Net investing activities from discontinued operations                      604        (158)
    Other                                                                      (42)         44
                                                                               ---          --
NET CASH PROVIDED BY INVESTING ACTIVITIES                                   12,737      13,321
                                                                            ------      ------
Cash flow from financing activities net of assets acquired:
    Net financing activities from discontinued operations                     (317)    (14,133)
    Loans from (advances to) related parties                                   819      (1,477)
                                                                               ---      ------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                            502     (15,610)
                                                                               ---     -------
Increase (decrease) in cash and cash equivalents                             1,425      (1,866)
Cash and cash equivalents, beginning of period                               3,230       2,215
                                                                             -----       -----
Cash and cash equivalents, end of period                                  $  4,655    $    349
                                                                          ========    ========
</TABLE>


SEE CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       6
<PAGE>

                               GORAN CAPITAL INC.
            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                    For the Three Months Ended March 31, 2001


1.   BASIS OF PRESENTATION
     The financial statements included in this report are the consolidated
     financial statements of Goran Capital Inc. and its subsidiaries (the
     "Company"). The consolidated financial statements have been prepared
     pursuant to the rules and regulations of the Securities and Exchange
     Commission ("SEC"). In management's opinion, these financial statements
     include all adjustments (consisting only of normal recurring adjustments)
     necessary for a fair presentation of the results of operations for the
     interim periods presented. Pursuant to SEC rules and regulations, certain
     information and footnote disclosures normally included in financial
     statements prepared in accordance with generally accepted accounting
     principles have been condensed or omitted from these statements unless
     significant changes have taken place since the end of the most recent
     fiscal year. For this reason, the accompanying consolidated financial
     statements and notes thereto should be read in conjunction with the
     financial statements and notes for the year ended December 31, 2000
     included in the Company's 2000 Annual Report on Form 10-K. Results for any
     interim period are not necessarily indicative of results to be expected for
     the year.

     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 8. All material intercompany amounts
     have been eliminated.

2.   PREFERRED SECURITIES
     The preferred securities represent company-obligated mandatorily redeemable
     preferred securities of a trust subsidiary holding solely parent debentures
     which have a term of 30 years with semi-annual interest payments commencing
     February 15, 1998 (the "Preferred Securities"). The holder may redeem the
     Preferred Securities in whole or in part after 10 years. Symons
     International Group, Inc. ("SIG"), a 73% owned subsidiary of Goran, began
     deferring the semi-annual interest payments in February 2000. Under the
     terms of the indenture, SIG is permitted to defer the semi-annual interest
     payments for up to five years.

     The trust indenture for the Preferred Securities contains certain
     restrictive covenants. Some of these covenants are based upon SIG's
     consolidated coverage ratio of earnings before interest, taxes,
     depreciation and amortization ("EBITDA") whereby if SIG's EBITDA falls
     below 2.5 times consolidated interest expense (including Preferred Security
     distributions) for the most recent four quarters, the following
     restrictions become effective:

          o    SIG may not incur additional indebtedness or guarantee additional
               indebtedness.
          o    SIG may not make certain restricted payments including making
               loans or advances to affiliates, repurchasing common stock and
               the payment of dividends in excess of a stated limitation.
          o    SIG may not increase its level of non-investment grade securities
               defined as equities, mortgage loans, real estate, real estate
               loans and non-investment grade fixed income securities.

     These restrictions currently apply as SIG's consolidated coverage ratio
     was (1.3) as of March 31, 2001, and will continue to apply until SIG's
     consolidated coverage ratio exceeds the amount set forth in the indenture.
     SIG is in compliance with these additional restrictions.

3.   REGULATORY AFFAIRS
     Two of the Company's insurance company subsidiaries, Pafco Insurance
     Company ("Pafco") and IGF Insurance Company ("IGF") are domiciled in
     Indiana, prepare their statutory

                                       7
<PAGE>

     financial statements in accordance with accounting practices prescribed or
     permitted by the Indiana Department of Insurance ("IDOI"). Statutory
     requirements place limitations on the amount of funds that can be remitted
     to the Company from Pafco and IGF. The Indiana statute allows 10% of
     surplus as regard to policyholders or 100% of net income, whichever is
     greater, to be paid as dividends only from earned surplus. Another
     insurance company subsidiary, Superior Insurance Company ("Superior"), and
     related entities are domiciled in Florida, and prepare their statutory
     financial statements in accordance with accounting practices prescribed or
     permitted by the Florida Department of Insurance ("FDOI"). Florida statute
     contains limitations with regard to payment of dividends. Superior may pay
     dividends of up to 10% of surplus or 100% of net income; whichever is
     greater, from earned surplus. Prescribed statutory accounting practices
     include a variety of publications of the National Association of Insurance
     Commissioners ("NAIC"), as well as state laws, regulations, and general
     administrative rules. Permitted statutory accounting practices encompass
     all accounting practices not so prescribed.

     To address IDOI concerns relating to Pafco, on February 17, 2000, Pafco
     agreed to an order under which the IDOI may monitor more closely the
     ongoing operations of Pafco. Among other matters, Pafco must:

     o    Refrain from doing any of the following without the IDOI's prior
          written consent: selling assets or business in force or transferring
          property, except in the ordinary course of business; disbursing funds,
          other than for specified purposes or for normal operating expenses and
          in the ordinary course of business (which does not include payments to
          affiliates, other than under written contracts previously approved by
          the IDOI, and does not include payments in excess of $10,000); lending
          funds; making investments, except in specified types of investments;
          incurring debt, except in the ordinary course of business and to
          unaffiliated parties; merging or consolidating with another company;
          or entering into new, or modifying existing, reinsurance contracts.

     o    Reduce its monthly auto premium writings, or obtain additional
          statutory capital or surplus, such that the ratio of gross written
          premium to surplus and net written premium to surplus does not exceed
          4.0 and 2.4, respectively; and provide the IDOI with regular reports
          demonstrating compliance with these monthly writings limitations.
          Restrictions on premium writings result in lower premium volume.
          Management fees payable to Superior Group are based on gross written
          premium; therefore lower premium volume results in reduced management
          fees paid by Pafco.

     o    Continue to comply with prior IDOI agreements and orders to correct
          business practices, under which (as previously disclosed) Pafco must
          provide monthly financial statements to the IDOI, obtain prior IDOI
          approval of reinsurance arrangements and of affiliated party
          transactions, submit business plans to the IDOI that address levels of
          surplus and net premiums written, and consult with the IDOI on a
          monthly basis.

     Pafco's inability or failure to comply with any of the above could result
     in the IDOI requiring further reductions in Pafco's permitted premium
     writings or in the IDOI instituting future proceedings against Pafco.

     Pafco informed the Iowa Department of Insurance ("IADOI") of its decision
     to stop writing new automobile business in Iowa while Pafco reviews and
     revises its program in the state. Pafco has agreed with the IADOI that it
     will not write any new nonstandard business, until such time as Pafco has
     reduced its overall nonstandard automobile policy counts in the state or
     has: (i) increased surplus; or (ii) a net written premium to surplus ratio
     of less than three to one; and (iii) surplus reasonable to its risk. Pafco
     has continued to service existing policyholders and renew policies in Iowa
     and provide policy count information on a monthly basis in conformance with
     IADOI requirements.

     With regard to IGF and as a result of the losses experienced by IGF in the
     discontinued crop insurance operations, IGF has agreed with the IDOI to
     provide monthly financial statements and consult monthly with the IDOI, and
     obtain prior approval for affiliated party transactions. The IDOI and other
     departments of insurance in states where IGF writes business are closely
     monitoring IGF. In the event a sale of the crop business is not concluded
     during the second quarter of 2001, it could necessitate various departments
     of insurance to take regulatory action against IGF.

     The financial review of Superior for the year ended December 31, 1999 by
     the FDOI has been completed and no report has yet been issued thereon.

     The FDOI issued a notice of its intent to issue an order (the "Notice")
     which principally addressed certain policy and finance fee payments by
     Superior to Superior Insurance Group, Inc. ("Superior Group"), another
     subsidiary of the Company. A formal administrative hearing to review the
     Notice and a determination that the order contemplated by the Notice not be
     issued was held February 2001. The administrative law judge has not yet
     rendered a recommended order. The FDOI could reject findings in a
     recommended order and issue an order which could restrict Superior from
     paying certain billing and policy fees to Superior Group and include a

                                       8
<PAGE>

     requirement that Superior Group repay to its subsidiary, Superior, billing
     and policy fees from prior years in an amount of approximately $35.2
     million. A restriction on the ability of Superior to pay future billing and
     policy fees to Superior Group may necessitate that the Company take certain
     actions, which may be subject to regulatory approvals, to reallocate
     operating revenues and expenses between its subsidiaries. The Company would
     vigorously contest the issuance of any such order.

     Pafco, IGF and Superior also provide monthly financial information to the
     departments of insurance in certain states in which they write business,
     and Pafco and IGF have agreed to obtain IDOI prior approval of any new
     affiliated party transactions.

     The Company's operating subsidiaries, their business operations, and their
     transactions with affiliates, including the Company, are subject to
     regulation and oversight by the IDOI, the FDOI, and the insurance
     regulators of other states in which the subsidiaries write business. The
     Company is a holding company and all of its operations are conducted by its
     subsidiaries. Regulation and oversight of insurance companies and their
     transactions with affiliates is conducted by state insurance regulators
     primarily for the protection of policyholders and not for the protection of
     other creditors or of shareholders. Failure to resolve issues with the IDOI
     and the FDOI in a manner satisfactory to the Company could result in future
     regulatory actions or proceedings that materially and adversely affect the
     Company.

     IGF records certain reinsurance transactions related to the discontinued
     crop insurance business transacted with the federal government in a manner
     that differs from prescribed statutory accounting practices. This is a
     permitted practice by IDOI that has no effect on statutory surplus or net
     income.

     The NAIC adopted the Codification of Statutory Accounting Principles
     guidance ("Codification"), which replaces the Accounting Practices and
     Procedures manual as the NAIC's primary guidance on statutory accounting
     effective January 1, 2001. The IDOI and FDOI have adopted Codification.

     The changes in statutory accounting principles resulting from Codification
     which impacts the Company's insurance subsidiaries will, among other
     things, limit the statutory carrying value of electronic data processing
     equipment and deferred tax assets in determining statutory surplus. The
     consolidated statutory surplus of insurance subsidiaries as of December 31,
     2000 is $39.4 million. Effective January 1, 2001, the consolidated
     statutory surplus was reduced by $11.4 million to $28.0 million, giving
     recognition to the new accounting principles.

4.   COMMITMENTS AND CONTINGENCIES
     During 2000, the discontinued crop operations sold a product that insured
     potato producers against lost revenue caused by depressed commodity prices
     for potatoes. The liability attributable to these policies will be known in
     August 2001 and is dependent upon the market prices for potatoes sold. The
     commodity price of potatoes at December 31, 2000 was lower than the
     expected price; therefore, the Company established a $4,500,000 gross loss
     reserve for its unpaid loss obligations on this product. Although the
     Company believes the loss reserve is reasonable, the commodity price for
     potatoes could fluctuate, and the ultimate liability may vary from this
     estimate. There can be no assurance that the ultimate losses will not
     exceed the reserves established to date.

     As previously reported, the Company is a party to a Strategic Alliance
     Agreement ("SAA") with Continental Casualty Company ("CNA"). CNA gave
     notice pursuant to the SAA of its exercise of the "Put Mechanism" under the
     SAA effective February 19, 2001. According to the SAA, upon exercise of the
     Put Mechanism, IGFH is obligated to pay CNA an amount equal to 5.85 times
     an amount equal to "Average Pre Tax Income." The SAA further provides that
     within 30 days after exercise of the put, IGF will execute a promissory
     note payable six months after the exercise of the Put Mechanism in the
     principal amount equal to the amount owed, as specified by the SAA. CNA
     advised the Company that it calculated the principal amount due CNA to be
     $26,265,403. CNA also has asserted a claim for amounts allegedly due under
     certain reinsurance agreements with the Company for the 2000 crop year. The
     Company believes it has claims against CNA and defenses to CNA's exercise
     of the Put Mechanism that may offset or reduce amounts owed by the Company
     to CNA. The company is continuing discussions with CNA regarding various
     alternatives for the parties to resolve their claims. However, there can be
     no assurance that the ultimate resolution of the claims asserted by CNA
     will not have material adverse effects on the Company's, financial
     condition or results of operations.

                                       9
<PAGE>

     As previously reported, a complaint for a class action alleging violations
     of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 was
     filed against the Company and certain of its officers and directors in the
     United States District Court for the Southern District of Indiana. The
     Company intends to vigorously defend the claims brought against it. No
     material developments have occurred since last reported.

     As previously reported, the California Department of Insurance ("CDOI") has
     advised the Company that it is reviewing a possible assessment which could
     total $3,000,000. As the ultimate outcome of this potential assessment is
     not deemed probable, the Company has not accrued any amount in its
     consolidated financial statements. No assessment has been made by the CDOI
     and the Company will vigorously defend any potential assessment and
     believes it will prevail. No material developments have occurred since last
     reported.

     As previously reported, IGF is a party to a number of pending legal
     proceedings relating to a product sold in 1998 (AgPI) which has since been
     discontinued. Approximately $28,949,000 has been paid through March 31,
     2001 with payments totaling $161,000 in the first quarter of 2001, while a
     reserve of $10,751,000 remains. No material developments have occurred
     since last reported.

     As previously reported actions have been brought in Florida against
     Superior Guaranty Insurance Company (a subsidiary of Superior) purported to
     be brought on behalf of a class of persons alleging to be charged service
     charges or finance charges in violation of Florida law. No material
     developments have occurred since last reported.

     As previously reported, an action has been brought in Florida alleging that
     Superior improperly reduced medical benefits payable and improperly
     calculated interest in violation of Florida law. The case was brought on
     behalf of a purported class consisting of (i) healthcare providers that
     rendered treatment to Superior insureds and claimants of Superior insureds
     and (ii) such insureds and claimants. The Company believes the claim is
     without merit and intends to vigorously defend the charges brought against
     it. No material developments have occurred since last reported.

     As previously reported, an action has been brought in Florida against
     Superior on behalf of a purported class consisting of healthcare providers
     that rendered treatment to and obtained a valid assignment of benefits from
     Superior. The plaintiff alleges that Superior reduced or denied claims for
     medical expenses payable to the plaintiff without first obtaining a written
     report in violation of Florida law. The plaintiff also alleges that
     Superior inappropriately reduced the amount of benefits payable to the
     plaintiff in breach of Superior's contractual obligations to the plaintiff.
     Superior believes the allegations of wrongdoing in violation of law are
     without merit and intends to vigorously defend the claims brought against
     it. No material developments have occurred since last reported.

     The Company is a joint and several guarantor in a $7,250,000 debt
     collateralized by operating assets held in an entity in which the Company
     is a 50% owner. The estimated fair market value of the assets approximates
     the debt.

     The Company and its subsidiaries are named as defendants in various other
     lawsuits relating to their business. Legal actions arise from claims made
     under insurance policies issued by the Company's subsidiaries. The Company
     in establishing its loss reserves considered these actions. The Company
     believes that the ultimate disposition of these lawsuits will not
     materially affect the Company's operations or financial position.

5.   LOSS DEVELOPMENT ON PRIOR ACCIDENT YEARS
     During the first quarter of 2001, the Company experienced favorable
     development on its year-end 2000 loss and LAE reserves in the amount of
     $0.4 million. This was the result of favorable settlement of outstanding
     claims. This reduced the loss and loss adjustment expense ratio for the
     quarter by 2.1 percentage points.

6.   RECLASSIFICATIONS
     Certain prior period amounts have been reclassified to conform to the
     current year presentation.

                                       10
<PAGE>


7.   EARNINGS PER SHARE
     Basic and diluted net earnings (loss) per share are computed by dividing
     net earnings (loss) as reported by the average number of shares outstanding
     as follows:

<TABLE>
<CAPTION>
                                                                              Three Months Ended
                                                                                   March 31
                                                                          ----------------------------
         (in thousands)                                                      2001            2000
                                                                          ------------    ------------
<S>                                                                             <C>             <C>
         Basic:
           Weighted-average common shares outstanding                           5,776           5,876
                                                                                =====           =====

         Diluted:
           Weighted-average common shares outstanding                           5,776           5,876
                                                                                =====           =====
</TABLE>


     The Company has 743,708 stock options outstanding as of March 31, 2001.
     Common stock equivalents are anti-dilutive; therefore, fully diluted
     earnings per share are the same as basic earnings per share.

8.   UNITED STATES ACCOUNTING PRINCIPLES
     These unaudited consolidated financial statements have been prepared in
     accordance with CDN GAAP. There are no differences between CDN GAAP and US
     GAAP for both the net loss and the net loss per share. The differences
     between CDN GAAP and US GAAP for stockholders' (deficit) are as follows (in
     thousands):

<TABLE>
<CAPTION>
                                                                     MARCH 31, 2001      DECEMBER 31, 2000
                                                                     --------------      -----------------
<S>                                                                    <C>                   <C>
         Stockholders'  (deficit) in accordance  with                  $(82,456)             $(72,668)
         Canadian GAAP

         Add (deduct) effect of difference in accounting for:

             Receivable from sale of capital stock                       (1,258)               (1,258)

             Unrealized gain (loss) on investments                      $(2,783)              $(3,602)
                                                                        --------              --------
         Stockholders' (deficit) in accordance with
         US GAAP                                                       $(86,497)             $(77,528)
                                                                       =========             =========
</TABLE>


9.   DISCONTINUED OPERATIONS
     In December 2000, the Company initiated the divestiture of its crop
     insurance segment. This business was predominantly written through IGF. The
     transaction, if completed, will transfer ownership of certain crop
     insurance accounts, effective with the 2001 crop cycle. Management does not
     expect any remaining crop business to be material to the consolidated
     financial statements and accordingly has discontinued reporting crop
     insurance as a business segment. The results of the crop insurance segment
     have been reflected as "Discontinued Operations" in the accompanying
     unaudited consolidated financial statements.


                                       11
<PAGE>

     Summarized results of operations and financial position for discontinued
operations were as follows:


<TABLE>
<CAPTION>
        STATEMENTS OF EARNINGS (LOSSES):
        (in thousands)
                                                                             Three Months Ended
                                                                                  March 31
                                                                    ----------------------------------
                                                                         2001                2000
                                                                    ----------------     -------------
<S>                                                                     <C>                  <C>
Gross premiums written                                                  $94,390              $84,360
                                                                        =======              =======
Net premiums written                                                     $7,888               $7,570
                                                                         ======               ======

     Net premiums earned                                                 $2,798               $2,933
     Net investment and fee income                                         (316)                 (33)
     Net realized capital gain                                                2                    1
                                                                              -                    -
Total revenues                                                            2,484                2,901
                                                                          -----                -----

     Loss and loss adjustment expenses                                    5,870                2,440
     Policy acquisition and general and administrative expenses          (3,623)              (3,792)
     Interest and amortization expense                                      237                  243
                                                                            ---                  ---
Total expenses                                                            2,484               (1,109)
                                                                          -----               -------

Income before income taxes                                                    0                4,010

Income tax expense (benefit)                                                  0                    0
                                                                              -                    -

Net income from discontinued operations                                      $0               $4,010
                                                                             ==               ======

<CAPTION>

        NET ASSETS OF DISCONTINUED OPERATIONS:                                MARCH 31, 2001
        (in thousands)                                                        --------------
<S>                                                                              <C>
        Assets:
          Cash and invested assets                                               $7,173
          Receivables, net of allowance for doubtful accounts                    74,933
          Reinsurance recoverable on paid and unpaid losses, net                 42,664
          Prepaid reinsurance premiums                                           85,590
          Property and equipment, net of accumulated depreciation                 4,327
          Intangible assets                                                       4,115
          Other assets                                                            3,295
                                                                                  -----
            Assets of discontinued operations                                  $222,097
                                                                               ========

        Liabilities:
          Losses and loss adjustment expenses                                    48,091
          Unearned premiums                                                      90,679
          Reinsurance payables                                                   54,609
          Notes payable                                                           1,478
          Other liabilities                                                      25,971
                                                                                 ------
            Liabilities of discontinued operations                             $220,828
                                                                               ========
</TABLE>


                                       12
<PAGE>

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


OVERVIEW OF THE COMPANY
The Company owns approximately 73% of Symons International Group, Inc. ("SIG").
SIG owns insurance companies that underwrite and market nonstandard private
passenger automobile insurance. SIG's principal insurance company subsidiaries
are Pafco General Insurance Company ("Pafco"), Superior Insurance Company
("Superior") and IGF Insurance Company ("IGF"). Additionally, the Company owns
100% of Granite Reinsurance Company Ltd. ("Granite Re"), Granite Insurance
Company ("Granite") and Symons International Group, Inc. Florida ("SIGF").

As previously announced, the Company is currently pursuing the sale of its crop
insurance operations. Management expects to complete the sale during the second
quarter of 2001.

Pafco, Superior, Superior Guaranty Insurance Company ("Superior Guaranty"),
Superior American Insurance Company ("Superior American") and IGF, are engaged
in the writing of insurance coverage for automobile physical damage and
liability policies for nonstandard risks. Nonstandard risk 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
or violations, particular occupation or type of vehicle. The Company offers
several different policies that 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 carriers become 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.

Granite Re is a finite risk reinsurance company based in Barbados.

Granite is a Canadian federally licensed insurance company that ceased writing
new insurance policies on January 1, 1990.

SIGF is a Florida based surplus lines insurance agency whose operations have
been discontinued effective January 1, 1999.

FORWARD LOOKING STATEMENTS AND CERTAIN RISKS
All statements, trend analyses, and other information herein contained, relative
to markets for the Company's products and/or trends in the Company's operations
or financial results, as well as other statements including words such as
"anticipate," "could," "feel(s)," "believe," "believes," "plan," "estimate,"
"expect," "should," "intend," "will," and other similar expressions, constitute
forward-looking statements under the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to known and unknown risks;
uncertainties and other factors which may cause actual results to be materially
different from those contemplated by the forward-looking statements. Such
factors include, among other things: (i) general economic conditions, including
prevailing interest rate levels and stock market performance; (ii) factors
affecting the Company's nonstandard automobile operations such as rate increase
approval, policy renewals, new business written, and premium volume; and (iii)
the factors described in this section and elsewhere in this report.

TIMELY DISPOSITION OF THE DISCONTINUED CROP OPERATION IS ESSENTIAL
As previously announced, the Company is pursuing a disposition for the
discontinued crop operations predominantly written by IGF. If completed, the
transaction is expected to transfer ownership of substantially all crop
insurance accounts, effective with the 2001 crop cycle. Management has conducted
negotiations with a number of interested parties and is presently focusing its
efforts on a transaction which management believes will be completed during the
second quarter. Failure to complete the transaction on a timely basis could have
an adverse impact on the value ultimately realized by the Company from a sale.
The Company would be required to pursue another possible transaction or
implement alternative plans for the discontinued crop operations in order to
continue as a significant competitor in the 2002 crop cycle. Additionally,
further regulatory actions with regard to IGF might become more likely.


                                       13
<PAGE>

THE TERMS OF THE STRATEGIC ALLIANCE AGREEMENT MAY ADVERSELY AFFECT THE COMPANY'S
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As previously reported, the Company and two of its subsidiaries, IGF Holdings,
Inc. ("IGFH") and IGF, are parties to a Strategic Alliance Agreement ("SAA")
dated February 28, 1998 with Continental Casualty Company ("CNA"). By letter
dated January 3, 2001, CNA gave notice pursuant to the SAA of its exercise of
the "Put Mechanism" under the SAA effective February 19, 2001. According to the
SAA, upon exercise of the Put Mechanism, IGFH is obligated to pay CNA an amount
equal to 5.85 times an amount equal to "Average Pre Tax Income." The SAA further
provides that within 30 days after exercise of the put, IGF will execute a
promissory note payable six months after the exercise of the Put in the
principal amount equal to the amount owed, as specified by the SAA. In a letter
dated March 20, 2001, CNA advised the Company that it calculated the principal
amount due CNA to be $26,265,403. CNA also has asserted a claim for amounts
allegedly due under certain reinsurance agreements with the Company for the 2000
crop year.

The Company believes it has claims against CNA and defenses to CNA's exercise of
the Put Mechanism that may offset or reduce amounts owed by the Company to CNA.
The Company believes the sale of its crop insurance business will provide an
opportunity for it and CNA to resolve their claims. However, there can be no
assurance that the ultimate resolution of the claims asserted by CNA will not
have material adverse effects on the Company's financial condition or results of
operations.

SIGNIFICANT LOSSES HAVE BEEN REPORTED AND ARE LIKELY TO CONTINUE
For the quarter ended March 31, 2001, losses from continuing operations were
$(9,547,000) versus a loss of $(7,422,000) for the same period of 2000. The
Company previously reported losses from continuing operations of $(63,224,000)
for the year 2000 compared to losses from continuing operations of $(47,000,000)
for 1999. The 2000 loss includes a one-time charge for the write-off of goodwill
of $33.5 million. The nonstandard automobile operations results prior to this
write-off improved over 1999; however, results continue to be unprofitable. The
Company is continuing to seek and implement rate increases and other
underwriting actions to further improve profitability. A number of systems have
been automated and service problems have been eliminated or significantly
reduced. Although the Company has taken a number of actions to address factors
contributing to these past losses, there can be no assurance that operating
losses will not continue. Management currently expects losses to continue
through the third quarter of this year.

RECENT AND FURTHER REGULATORY ACTIONS MAY AFFECT THE COMPANY'S FUTURE OPERATIONS
The Company's insurance company subsidiaries, their business operations, and
their transactions with affiliates, including the Company, are subject to
extensive regulation and oversight by the IDOI, the FDOI and the insurance
regulators of other states in which the insurance company subsidiaries write
business. Moreover, the insurance company subsidiaries' losses, adverse trends
and uncertainties discussed in this report have been and continue to be matters
of concern to the domiciliary and other insurance regulators of the Company's
insurance company subsidiaries and have resulted in enhanced scrutiny and
regulatory actions by several regulators. The primary purpose of insurance
regulation is the protection of policyholders rather than stockholders. Failure
to resolve issues with the IDOI and the FDOI, and with other regulators, in a
manner satisfactory to the Company could impair the Company's ability to execute
its business strategies or result in future regulatory actions or proceedings
that could have a material adverse effect on the Company's operations.

THE COMPANY IS SUBJECT TO A NUMBER OF PENDING LEGAL PROCEEDINGS
The Company is involved in a number of pending legal proceedings. Although the
Company believes that these actions are without merit and intends to vigorously
defend the claims brought against it, there can be no assurance that such
proceedings will not have a materially adverse effect on the Company's
operations.

THE TERMS OF THE TRUST PREFERRED SECURITIES MAY RESTRICT THE COMPANY'S ABILITY
TO ACT
SIG has issued through a wholly owned trust subsidiary $135 million aggregate
principal amount in Trust Originated Preferred Securities ("Preferred
Securities"). The Preferred Securities have a term of 30 years with annual
interest


                                       14
<PAGE>

payments of 9.5% paid semi-annually. The obligations of the Preferred Securities
are funded from SIG's nonstandard automobile management company. SIG began
deferring the semi-annual interest payments in February 2000 and may continue to
defer such payments for up to five years as permitted by the indenture for the
Preferred Securities. Although there is no present default under the indenture
that would accelerate the payment of the Preferred Securities, the indenture
contains a number of covenants that may restrict SIG's ability to act in the
future. These covenants include restrictions on SIG's ability to: incur or
guarantee debt; make payment to affiliates; repurchase its common stock; pay
dividends on common stock; and increases its level of certain investments other
than investment grade fixed income securities. There can be no assurance that
compliance with these restrictions and other provisions of the indenture for the
Preferred Securities will not adversely affect the cash flow of SIG.


REVIEW OF CONSOLIDATED OPERATIONS

NET LOSS
For the three months ended March 31, 2001, the Company recorded a net loss of
$(9,547,000), or $(1.65) per share (basic and diluted). The net loss increased
over the same quarter in 2000 by $(6,135,000) or $(1.07) per share (basic and
diluted).

Income before taxes and distributions on Preferred Securities for the
nonstandard automobile segment showed a loss of $(6,552,000) for the three
months ended March 31, 2001 compared to a loss of $(3,671,000) for the three
months ended March 31, 2000. These losses were driven primarily by a decrease in
net premiums earned.

GROSS PREMIUMS WRITTEN
Gross premiums written have decreased 19.2% or $11,521,000, for the quarter
ended March 31, 2001 compared to the same period in 2000. This reduction is the
result of a 31.8% decrease in policies in force for the twelve months ended
March 31, 2001 offset by rate increases implemented during 2000. Policy
reductions were a result of increasing rates in a highly competitive market.

NET PREMIUMS WRITTEN
Net premiums written represent the portion of premiums that are being retained
by the Company after consideration for risk sharing through reinsurance
contracts. As a result of losses in the Company's insurance subsidiaries and to
manage overall risk retention, the Company entered into a reinsurance agreement
to cede a portion of the gross written premiums to a third party. The Company
ceded approximately 62% of its gross written premiums under a quota share
reinsurance contract that was effective January 1, 2000.

NET PREMIUMS EARNED
Premiums are earned ratably over the term of the underlying insurance contracts.
The reduction in net premiums earned is a result of the overall reduction in
gross premiums written and the increase in ceded premiums.

FEE INCOME
Fee income is derived from installment billings and other services provided to
policyholders. The reduction in fee income of 25.0% in the first quarter of 2001
is partially attributed to the 19.2% reduction in gross premiums written and the
timing of earned premiums.

NET INVESTMENT INCOME
Net investment income decreased 42.1% for the first quarter of 2001 compared to
the same period in 2000. This is reflective of the decline in invested assets
during a period of declining premiums and the payout of the prior year losses
when settled in 2001.



                                       15
<PAGE>

NET REALIZED CAPITAL LOSSES
Net realized capital losses were $(703,000) in the first quarter of 2001 as
compared to net realized capital gains of $364,000 in the same period of 2000.
Capital losses were realized due to the continued liquidation of investments to
fund operations under unfavorable market conditions.

LOSSES AND LOSS ADJUSTMENT EXPENSES
The loss and loss adjustment expense (LAE) ratio for the Company for the three
months ended March 31, 2001, was 94.2% of net premiums earned as compared to
81.8% for the first quarter of 2000 and to 78.2% for the entire year of 2000.
During the first quarter of 2001, the Company experienced favorable development
on its loss and loss adjustment expense reserves for accidents occurring in 2000
and prior. This reduced the loss and loss adjustment expense ratio for the
quarter by 2.1 percentage points.

The loss and allocated loss adjustment expense ratio for the Company for the
three months ended March 31, 2001 was 74.1% compared to 77.4% for the same
period in 2000. The unallocated loss adjustment expense (ULAE) ratio for the
quarter was 20.7% compared to 9.1% for the first quarter of 2000. ULAE is not
ceded under the reinsurance agreement; therefore, such expense represents a
higher percentage of net earned premiums when compared to the same period last
year. ULAE as a percentage of gross written premiums was 8.0% for the first
quarter in 2001 as compared to 6.5% in 2000. This increase is a result of a
higher percentage of costs being allocated to ULAE in 2001.

POLICY ACQUISITION AND GENERAL AND ADMINISTRATIVE EXPENSE
Policy acquisition and general and administrative expenses for the first quarter
of 2001 declined to $11,673,000 or 37.7% from the first quarter of 2000 amount
of $18,730,000. This reflects the 19.2% decline in gross written premiums, an
increase in ceding commissions associated with the quota share reinsurance
contract, and overall operating expense reductions. As a percentage of gross
premiums written, the Company experienced a reduction in its expense ratio in
2001 from 31.3% to 24.1%. This decrease was the result of the Company continuing
to reduce operating expenses, the reduction from increased ULAE expense
allocated to losses, and an increase in ceding commissions earned under the
quota share reinsurance contract.

PROVISION (BENEFIT) FOR INCOME TAXES
At March 31, 2001 the Company's net tax assets are fully offset by a 100%
valuation allowance that resulted in no tax benefit for the three months ended
March 31, 2001.


REVIEW OF CONSOLIDATED FINANCIAL CONDITION

INVESTMENTS
Total investments as of March 31, 2001 and December 31, 2000 were $135.0 million
and $148.9 million, respectively. The reduction in invested assets for the
quarter results from liquidations to fund claim payments and operating expenses.
Composition of investments is comparable between these periods. The Company's
market risk exposure has not changed materially since December 31, 2000.

INVESTMENTS IN AND ADVANCES TO RELATED PARTIES
Investments in and advances to related parties decreased from $4,254,000 at
December 31, 2000, to $3,435,000 at March 31, 2001. The reduction is primarily
due to the establishment in the first quarter of 2001 of an $800,000 reserve for
doubtful accounts related to certain shareholder loans.

REINSURANCE BALANCES
The Company negotiated a third-party quota share reinsurance agreement that
became effective January 1, 2000. Under the quota share agreement, the Company
may cede a portion of its nonstandard automobile insurance premiums and related
losses based on a variable percentage of up to 75% of earned premiums in 2001.
The average ceding percentage over the year 2000 was 33%, with 41% being ceded
in the fourth quarter of 2000. The ceding percentage for the first quarter of
2001 was increased to 55%. The increase in the amount of premiums and losses
ceded under this contract directly affects reinsurance balances due and payable
on the face of the financial statements.

                                       16
<PAGE>

RECEIVABLES
The receivables have increased by $12,414,000, or 22.8%, from December 31, 2000.
This increase is attributable to the increase in gross premiums written of
$40,055,000 compared to $48,338,000 for the quarters ended December 31, 2000 and
March 31, 2001, respectively.

LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE
Total loss and loss adjustment expense reserves decreased from $113,149,000 as
of December 31, 2000 to $103,677,000 as of March 31, 2001, a reduction of
approximately $9.5 million. This decrease is consistent with the Company's
declining volume of business.

OTHER LIABILITIES
Other liabilities increased by $4,182,000 from December 31, 2000 to March 31,
2001. However, payables as of March 31, 2001 of $19,086,000 are more comparable
to payables of $20,986,000 as of March 31, 2000.

STOCKHOLDERS' (DEFICIT)
Stockholders' (deficit) has increased by $(9,788,000) from December 31, 2000.
This increase is primarily the result of the net loss of $(9,547,000) for the
three months ended March 31, 2001.


LIQUIDITY AND CAPITAL RESOURCES

The primary source of funds available to the management and holding companies
are fees from policyholders, management fees and dividends from its primary
subsidiaries.

The Company collects billing fees charged to policyholders that elect to make
their premium payments in installments. Superior Insurance Group, Inc.
("Superior Group") also receives management fees under its management agreement
with its insurance subsidiaries. When the Florida Department of Insurance
("FDOI") approved the acquisition of Superior by Superior Group Management, it
prohibited Superior from paying any dividends (whether extraordinary or not) for
four years from the date of acquisition (May 1, 1996) without the prior written
approval of the FDOI, which restriction expired in April 2000. As a result of
regulatory actions taken by the Indiana Department of Insurance ("IDOI") with
respect to Pafco and IGF, those subsidiaries may not pay dividends without prior
approval by the IDOI. Extraordinary dividends, within the meaning of the Indiana
Insurance Code, cannot be paid by Pafco without the prior approval of the
Indiana Insurance Commissioner. The management fees charged to Pafco, IGF and
Superior are subject to review by the IDOI and FDOI.

The non-standard automobile insurance subsidiaries' primary sources of funds are
premiums, investment income and proceeds from the maturity or sale of invested
assets. Such funds are used principally for the payment of claims, payment of
claims settlement costs, operating expenses (primarily management fees),
commissions to independent agents, premium taxes, dividends and the purchase of
investments. There is variability to cash outflows because of uncertainties
regarding settlement dates for liabilities for unpaid losses. Accordingly, the
Company maintains investment programs intended to provide adequate funds to pay
claims. During the first quarter of 2001 and 2000, due to reduced premium
volume, the Company has liquidated investments to pay claims. The Company
historically has tried to maintain duration averages of 3.5 years. However, the
reduction in new funds due to lower premium volume has and will cause the
Company to shorten duration. The Company may incur the cost of selling longer
bonds to pay claims as claim payments tend to lag premium receipts. Due to the
decline in premium volume, the Company has experienced a reduction in its
investment portfolio, but to date has not experienced any problems meeting its
obligations for claims payments.

On August 12, 1997, the Company issued through a wholly owned trust subsidiary
$135 million aggregate principal amount in Trust Originated Preferred Securities
("Preferred Securities"). The Preferred Securities have a term of 30 years with
annual interest payments of $6.5 million, which commenced February 15, 1998. The
Preferred Securities may be redeemed in whole or in part after 10 years.

                                       17
<PAGE>

SIG began deferring the semi annual interest payments in February 2000. SIG may
continue to defer interest payments in accordance with the terms of the trust
indenture for up to five years. The unpaid interest installment amounts accrue
interest at 9.5%. SIG expects to defer the interest payments due in August 2001.

The trust indenture contains certain restrictive covenants. These covenants are
based upon SIG's consolidated coverage ratio of earnings before interest, taxes,
depreciation and amortization (EBITDA) whereby if SIG's EBITDA falls below 2.5
times consolidated interest expense (including Preferred Security distributions)
for the most recent four quarters, the following restrictions become effective:

o    SIG may not incur additional indebtedness or guarantee additional
     indebtedness.
o    SIG may not make certain restricted payments including making loans or
     advances to affiliates, repurchasing common stock and the payment of
     dividends in excess of a stated limitation.
o    SIG may not increase its level of non-investment grade securities defined
     as equities, mortgage loans, real estate, real estate loans and
     non-investment grade fixed income securities.

These restrictions currently apply as SIG's consolidated coverage ratio was
(1.3) at March 31, 2001, and will continue to apply until SIG's consolidated
coverage ratio is in compliance with the terms of the trust indenture. SIG is in
compliance with these additional restrictions.

Net cash used in operating activities in the first quarter of 2001 aggregated
$(11,814,000) compared to cash provided of $423,000 in the comparable period of
2000. The reduction is due to reduced cash provided by operations as a result of
lower premium volumes and continued losses.

The seasonality of the discontinued crop operations and the resultant cash flows
have been historically insufficient to fund crop insurance operations during
certain periods of the crop cycle. As previously reported, during 2000, IGF's
working capital line of credit expired and the Company sought to obtain a
replacement credit facility or other alternative financing. The Company was not
able to secure a third-party credit arrangement; however, intercompany loans
approved by regulators were made to IGF to fund short-term cash flow needs
during the first quarter of 2001. These loans were paid in full as of March 31,
2001. As discussed under "Risk Factors", management believes a sale of the
discontinued crop operations will occur during the second quarter; however, in
the event that a sale of the discontinued crop insurance operations is not
completed on a timely basis, the value of the crop insurance assets could be
adversely affected and IGF might not be able to continue in the crop insurance
business as a viable competitor.

Management expects that the discontinued crop insurance business will be sold on
a timely basis and the Company believes cash flows in the nonstandard automobile
operations from premiums, investment income and billing fees will be sufficient
to meet obligations to policyholders and operating expenses for the foreseeable
future. This is due primarily to the lag time between receipt of premiums and
claims payments. Accordingly, while there can be no assurance as to the
sufficiency of the Company's cash flow in future periods, the Company believes
that its cash flow will be sufficient to meet all of the Company's operating
expenses and operating debt service (not including the Preferred Securities) for
the foreseeable future.

GAAP stockholders' equity reflected a (deficit) of $(82.5) million at March 31,
2001, which does not reflect the statutory equity upon which the Company
conducts its various insurance operations. The Company's insurance subsidiaries,
after the effects of Codification (See Note 3 to the consolidated financial
statements), had statutory surplus of approximately $30.8 million at March 31,
2001.


ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
Information related to Qualitative and Quantitative Disclosures about Market
Risk was included under Item 1. Business in the December 31, 2000 Form 10-K. No
material changes have occurred in market risk since this information was
disclosed in the December 31, 2000 Form 10-K.

                                       18
<PAGE>



PART II - OTHER INFORMATION
ITEM 1.   LEGAL PROCEEDINGS

          There have been no material developments in any of the pending legal
          proceedings previously reported by the Company in the December 31,
          2000 Form 10-K.

          The Company's insurance subsidiaries are parties to other 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 estimate
          costs of litigation.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS
          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
          Exhibits:                 None
          Reports on Form 8-K:      During the first quarter of 2001, the
                                    Company filed no reports on Form 8-K.

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 21, 2001                             By:     /s/ Alan G. Symons
                                                       ------------------------
                                                       Alan G. Symons
                                                       Chief Executive Officer



Dated: May 21, 2001                             By:       /s/ Earl R. Fonville
                                                       ------------------------
                                                       Earl R. Fonville
                                                       Vice President and
                                                       Chief Financial Officer


                                       19
<PAGE>

Goran Capital Inc. - Consolidated
Analysis of Loss Per Share
US GAAP - Treasury Method

<TABLE>
<CAPTION>
                                                                 Three Months             Three Months
                                                                     Ended                    Ended
                                                                March 31, 2001           March 31, 2000
                                                               ------------------       ------------------
<S>                                                            <C>                      <C>
Average Price (US $)                                                         N/A                      N/A

Proceeds from Exercise of Warrants and Options (US $)                        Nil                      Nil

Shares Repurchased - Treasury Method                                         Nil                      Nil

Shares Outstanding - Weighted Average                                  5,776,398                5,876,398

Add:  Options and Warrants Outstanding (1)                                   Nil                      Nil

Less:  Treasury Method - Shares Repurchased                                  Nil                      Nil

Shares Outstanding for US GAAP Purposes                                5,776,398                5,876,398

Net Loss in Accordance with US GAAP                                 $(9,547,000)             $(3,412,000)

Net Loss Per Share - US GAAP - Basic and Fully Diluted                   $(1.65)                  $(0.58)
</TABLE>

(1) Only those options with a dilutive effect were included above for the three
months ended March 31, 2001 and 2000.

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