<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549
                                    FORM 10-K

(Mark One)
[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934 (FEE REQUIRED)

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE TRANSITION PERIOD FROM               TO

COMMISSION FILE NUMBER 0-8162

                         ACCEL INTERNATIONAL CORPORATION
             (Exact name of registrant as specified in its charter)

              DELAWARE                                            31-0788334
   (State or other jurisdiction of                            (I.R.S. Employer
    incorporation or organization)                           Identification No.)

     75 WEST STREET, SIMSBURY, CONNECTICUT                         06070__
    (Address of principal executive offices)                      (Zip Code)

                                  860-843-7600
                         (Registrant's Telephone Number)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:  None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                               Title of each class
                          COMMON STOCK, $.10 PAR VALUE

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____

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
                                       ---    ---

The aggregate market value of Common Stock held by non-affiliates on February
29, 2000 was approximately $9,084,000.

As of February 29, 2000, there were 9,084,004 shares of Common Stock, $.10 par
value per share outstanding.


                      DOCUMENTS INCORPORATED BY REFERENCE:

Not applicable.
<PAGE>   2
                                     PART I

ITEM 1.  BUSINESS

(a)              GENERAL DEVELOPMENT OF BUSINESS

ACCEL International Corporation ("ACCEL") is an insurance holding company
incorporated in Delaware in June 1978 as the successor to an Ohio corporation,
formerly Acceleration Corporation, organized in 1969. Unless the context
requires otherwise, the "Company" includes ACCEL and its subsidiaries. The
Company, through its subsidiary, Acceleration National Insurance Company
("ANIC"), is engaged in the underwriting and sale of property/casualty insurance
products. The Company announced on July 2, 1999 its intent of exiting its then
current lines of commercial property and casualty business due to its loss
experience from 1998 and the current year. Except for a certain aviation risks
program, the Company ceased writing new policies of insurance and non-renewed
its in-force policies upon expiration date. The net unearned premium reserve at
December 31, 1999 is $1.2 million, a reduction of $11.2 million from December
31, 1998. Management is restructuring the Company so that it can re-enter other
areas of the insurance market, especially the non-standard automobile line, in
which the Company's new subsidiary, as of January 14, 2000, Allegiance Insurance
Managers, Ltd. ("AIM"), has a recognized expertise. The Company is also
concentrating its efforts to capture fee related business using ANIC's property
and casualty insurance licenses and strategic insurance services related
acquisitions. See NARRATIVE DESCRIPTION OF BUSINESS for further information.

In addition to property and casualty insurance products, the Company
historically sold, principally through automobile dealers, credit life and
credit accident and health insurance and extended service contracts
(collectively the "Auto Aftermarket Group"). Effective December 31, 1997, the
Company sold its entire Auto Aftermarket Group to Lyndon Insurance Group, Inc.,
Lyndon Life Insurance Company and Lyndon Property Insurance Company, all of
which are subsidiaries of Frontier Insurance Group, Inc. (collectively,
"Lyndon"), for approximately $41 million (the "Lyndon Transaction"). As a result
of the Lyndon Transaction, the Company ceased to be engaged in the Auto
Aftermarket Group, which businesses are described below under "NARRATIVE
DESCRIPTION OF BUSINESS - Disposed Lines of Business".

(b)              FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company has operated predominantly in the property and casualty insurance
segment with a second segment for Corporate which, prior to its sale on August
9, 1999, included ACCEL's equity method investment in USA Insurance Group, Inc.
(see "Note C" in the Notes to Consolidated Financial Statements) and other
corporate investments. See NARRATIVE DESCRIPTION OF BUSINESS and "Note K" in the
Notes to Consolidated Financial Statements.

(c)              NARRATIVE DESCRIPTION OF BUSINESS

GENERAL

The Company's property and casualty segment currently consists of a 100%-ceded
active aviation risks program, and run-off operations for long haul trucking,
charter buses and limousines, crane operators and gun dealers, all of which were
coverages previously sold through general agents. Also included in this segment,
are lines previously discontinued which include commercial multi-peril,
farmowners' multi-peril, ancillary inland marine and realtors' errors and
omissions coverages ("REO"). The Company's property and casualty segment also
includes extended service contracts which were insured by ANIC and sold
primarily through automobile dealers, and which were wholly reinsured on January
1, 1998 as part of the Company's sale of the Auto Aftermarket Group to Lyndon.

Premiums for the Company's now non-renewed long haul trucking and charter bus
line comprised 79.4%, 82.4 % and 74.1% of the Company's gross premiums written
in 1999, 1998 and 1997, respectively. Extended service contracts (which the
Company sold as a result of the Lyndon Transaction) represented 1.9%, 15.4% and
23.8% of the Company's gross premiums written in 1999, 1998 and 1997,
respectively. The extended service contract business was ceded 100% to Lyndon
effective as of January 1, 1998. The Company's only active business, a
100%-ceded aviation risks program, comprised 9.9% of the Company's gross
premiums written in 1999.

OPERATIONS

General. As a result of the Lyndon Transaction, the Company ceased to be engaged
in the Auto Aftermarket Group, which is described below under Disposed Lines of
Business. Further, as a result of the Company's loss experience from 1998 and
1999, the Company ceased writing new policies and has non-renewed its entire
in-force book of commercial property and casualty business, except for a
100%-ceded aviation risks program. Management intends to use its remaining
resources to re-enter other areas of the insurance market, especially the
non-standard automobile line. The Company is also concentrating its efforts to
capture fee related business using ANIC's property and casualty insurance
licenses and strategic insurance services related acquisitions as described
below.

Commercial Auto Liability. In 1999, the Company ceased new business production
and began non-renewing coverage to operators of long-haul trucks and charter
buses. The program is in run-off. Gross premiums written by the Company for this
product line were approximately


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$17.6 million, $35.7 million and $30.3 million in 1999, 1998 and 1997
respectively (see "Note F" in the Notes to Consolidated Financial Statements).

Other Property and Casualty Products. In 1999, the Company ceased new business
production and began non-renewing other property and casualty products including
a package policy for crane operators consisting of general liability, inland
marine and commercial auto coverages, that began in 1997. Direct premiums
written by the Company for this product line were $322,000, $485,000 and
$198,000 in 1999, 1998 and 1997, respectively. The Company's property and
casualty business is conducted through ANIC. ANIC has licenses to conduct
business in 47 states and the District of Columbia. The majority of the
Company's direct premiums written in 1999, 1998 and 1997 were derived from sales
in Florida (19.2%, 16.2% and 16.7%, respectively), New York (10.4%, 19.2% and
11.8%, respectively), Texas (7.9%, 2.6% and 3.6%, respectively), Arizona (7.6%,
4.7% and 1.8%, respectively), Ohio (4.6%, 6.8% and 12.5%, respectively), and
Arkansas (4.4%, 4.9% and 3.8%, respectively).

Business Restructuring. On January 14, 2000, the Company acquired 100% of the
stock of AIM. Gerald H. Pastor, FCAS, President, CEO and principal shareholder
of AIM was elected President & CEO of ACCEL's subsidiary, ANIC in October, 1999
and of ACCEL in November, 1999. In consideration for the acquisition, ACCEL has
issued 529,040 shares of its common stock to shareholders of AIM, other than
Pastor, and will issue an additional 997,036 shares to Pastor upon, and subject
to receipt of clearance by the Ohio Department of Insurance. Should the
foregoing clearance not be received, ACCEL will issue to Pastor such other
consideration as may be mutually agreed upon by ACCEL and Pastor, which may
include a lesser number of shares of ACCEL common stock (subject to the
foregoing clearance) and/or other securities. Under the terms of the
transaction, ACCEL will also issue up to an additional 2,180,110 shares of its
common stock to the shareholders of AIM if the combined business meets certain
performance criteria over the six years after the acquisition. If the business
does not achieve certain cumulative earnings by December 21, 2002, the former
AIM shareholders will return 763,038 shares to ACCEL.

AIM operates as an underwriting manager, managing general agency, and claims
administrator for various programs, companies and clients. It will continue to
expand its operations in these areas. ANIC is presently running off all of its
underperforming products. Going forward, the primary focus of ACCEL and ANIC
will be the non-standard automobile line of business, a business in which AIM
and Pastor are proficient. ANIC has consolidated its administrative offices with
AIM in Simsbury, Connecticut.

Also on January 14, 2000, ACCEL completed arrangements for a credit facility of
$5,000,000. Terms of the facility are 10% interest payable quarterly, plus
280,000 warrants per $1,000,000 borrowed, at a price of $2.00 per share. All
monies owed under the facility will be due in full by December 31, 2003.
Applicable warrants will expire on December 31, 2004.

On January 19, 2000 ACCEL acquired the assets of Payless Insurance Agencies
("Payless"). Payless is comprised of two locations in the Fort
Lauderdale/Broward County area, specializing in non-standard automobile
insurance. On January 20, 2000 ACCEL acquired substantially all of the assets of
Unistar Florida Holdings, Inc. ("Unistar"), representing 49 agency locations
throughout the State of Florida, also specializing in non-standard automobile
insurance.

DISPOSED LINES OF BUSINESS

The Lyndon Transaction. As noted above, effective as of December 31, 1997, the
Company consummated the sale of its entire Auto Aftermarket Group, consisting of
credit insurance and extended service contracts sold primarily through
automobile dealers, to Lyndon for approximately $41 million in cash. More
specifically, such transaction included (i) the sale by the Company to Lyndon
Insurance Group, Inc. and Lyndon Life Insurance Company of all the outstanding
capital stock of the Company's wholly owned subsidiaries, Acceleration Life
Insurance Company ("ALIC"), Acceleration National Service Corporation ("ANSC")
and Dublin International Limited ("Dublin") and (ii) the sale by the Company's
wholly owned subsidiary, ANIC, to Lyndon Property Insurance Company ("Lyndon
Property"), of ANIC's vehicle extended service contract business. See "Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and "Note B" to the Notes to Consolidated Financial Statements. As a
result of the Lyndon Transaction, the Company ceased to be engaged in the Auto
Aftermarket Group businesses. In connection with the Lyndon Transaction, Lyndon
Property and ANIC entered into two reinsurance agreements effective January 1,
1998 pursuant to which ANIC ceded to Lyndon Property the extended service
programs and all insurance policies issued after the closing date of the Lyndon
Transaction by Lyndon Property in the name of ANIC.

The Company recognized a gain on the sale of the Auto Aftermarket Group in 1997
totaling $3.2 million after federal income taxes. The gain on sale was reflected
in the accompanying Consolidated Statement of Operations in 1997 as a gain from
continuing operations of $10.3 million from the sale of ANIC's vehicle extended
service contract business and ANSC and a loss from discontinued operations of
$7.1 million from the sale of ALIC and Dublin (excluding the provision for
operating loss of $495,000 during the phase-out period). See "Note B" in the
Notes to Consolidated Financial Statements.

Extended Service Contracts. Prior to the sale of the Company's Auto Aftermarket
Group to Lyndon, the Company sold extended service contracts under the name
"Co$tguard" which covered the cost of labor and certain parts for the repair of
automobiles and watercraft. In addition, the Company agreed to sell extended
service contracts for a period of eighteen months following closing of the sale
to Lyndon


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which period expired in July 1999 with the underlying business being fully ceded
to Lyndon Property. The Company's product covered towing, rental car
reimbursement and other benefits during the entire contract term and enabled a
purchaser to obtain from the selling dealer a service contract covering the cost
(in excess of a deductible amount where applicable) of repairs to covered parts
subsequent to the expiration of the applicable manufacturer's warranty. The
Company marketed its extended service contracts primarily through the same group
of automobile dealers who marketed the Company's credit insurance. The extended
service contract program was marketed on a net cost basis to automobile dealers
who then established the retail price for the contract. The net cost paid by the
dealer included (i) the premiums for a contractual liability policy provided the
dealer by ANIC and (ii) administrative and marketing fees. In 1999, 1998, and
1997, the program accounted for approximately 1.9%, 15.4%, and 23.8%,
respectively, of the Company's gross premiums written. There will be no gross
written premium on this business on ANIC's books in the year 2000 and forward.

EMPLOYEES

As of December 31, 1999, the Company employed 8 full-time equivalent employees
compared to 28 full-time equivalent employees as of December 31, 1998. After the
purchase of AIM on January 14, 2000, the Company employed 16 full-time
equivalent employees. After the purchase of Payless and Unistar on January 19
and 20, 2000 respectively, the company employs 140 full-time equivalent
employees.

REINSURANCE WITH UNAFFILIATED INSURANCE COMPANIES

Reinsurance enables insurance companies to provide greater diversification of
risks and at the same time minimize risk exposure. The reinsurer reimburses the
Company for any claims on the reinsured portion of the risk. Reinsurance does
not discharge the Company from primary liability to the insured for the full
amount of the insurance coverage.

COMPETITION

In the property and casualty insurance business, the Company competes with
insurance companies which are larger and have greater capital resources
available and whose industry ratings are at higher levels than ANIC. The
Company's strategy with respect to the property-casualty business is to attempt
to focus on product categories and market areas in which the major
property-casualty insurance companies are not fully addressing.

REGULATION

The Company is subject to regulation in the states in which it conducts
business. The extent of such regulation varies from state to state; but in
general, all states have statutory restrictions and a supervisory agency that
has broad discretionary administrative powers. Such regulation is designed
primarily to protect policyholders and relates to the licensing of insurers and
their agents, the approval of policy forms, the methods of computing reserves,
the form and content of financial reports and the type and concentration of
permitted investments. Ohio and other jurisdictions in which the Company
conducts business have enacted legislation providing for specific regulation of
the relationship between licensed insurers and affiliated members of a holding
company group. Such legislation generally (1) establishes requirements and
procedures relative to the approval or disapproval of mergers and other
acquisitions of control, (2) prescribes the filing of registration statements by
insurers which are members of the holding company group, (3) subjects the
holding company to reporting requirements, (4) establishes standards for
transactions between insurers and their holding companies and between members of
a holding company group and (5) controls the payment of extraordinary dividends.
The dividends, which the Company may receive from ANIC, are subject to
regulatory requirements as to minimum capital and surplus. In addition to
regulatory considerations, management considers the overall financial strength
of an operating entity before dividends are paid to ACCEL.

Generally, the net assets of ANIC available for transfer to ACCEL are limited to
the amounts that ANIC's net assets, as determined in accordance with statutory
accounting practices, exceed minimum statutory capital and surplus requirements;
however, payments of such amounts as dividends are currently subject to
regulation by Ohio law. The regulation limits the annual dividend or
distribution of an insurer to the greater of (1) net income of the previous year
or (2) 10% of unassigned surplus as of the end of the previous year. In
addition, all dividends must come from earned surplus to qualify as a
non-extraordinary dividend. Amounts greater than this would be considered
extraordinary dividends and could not be paid without permission of the
Department of Insurance of the State of Ohio ("Ohio Department"). Based on this
regulation, any dividend distribution by ANIC in 2000 would be subject to the
approval of the Ohio Department.

The Ohio Department imposes risk based capital ("RBC") requirements on insurance
enterprises, including ANIC. The RBC Model serves as a benchmark for the
regulation of property/casualty insurance companies by state insurance
regulators. RBC provides for targeted surplus levels based on formulas which
specify various weighting factors that are applied to financial balances or
various levels of activity based on the perceived degree of risk, and are set
forth in the RBC requirements. Such formulas focus on four general types of
risk: (a) the risk with respect to the company's assets (asset or default risk);
(b) the risk of default on amounts due from reinsurers, policyholders or other
creditors (credit risk); (c) the risk of under-estimating liabilities from
business already written or inadequately pricing business to be written in the
coming year (underwriting risk); and, (d) the risk associated with items such as
excessive premium growth, contingent liabilities and other items not reflected
on the balance sheet (off-balance sheet risk). The amount determined under such
formulas is called the authorized control level RBC ("ACLC").


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The RBC guidelines define specific capital levels based on a company's ACLC that
are determined by the ratio of the company's total adjusted capital ("TAC") to
its ACLC. TAC is equal to statutory capital, plus or minus certain other
specified adjustments. The specific capital levels, in declining order, and
applicable ratios are generally as follows: "Company Action Level" where TAC is
less than or equal to 2.0 times ACLC; "Regulatory Action Level" where TAC is
less than or equal to 1.5 ACLC; "Authorized Control Level" where TAC is less
than or equal to 1.0 times ACLC; and, "Mandatory Control Level" where TAC is
less than or equal to 0.7 times ACLC. Companies at the Company Action Level must
submit a comprehensive financial plan to the insurance commissioner of the state
of domicile. Companies at the Regulatory Action Level are subject to a mandatory
examination or analysis by the commissioner and possible required corrective
actions. At the Authorized Control Level, a company is subject to, among other
things, the commissioner placing it under regulatory control. At the Mandatory
Control Level, the insurance commissioner is required to place a company under
regulatory control.

At December 31, 1999, ANIC's TAC was $4,105,000 or 0.97 times its ACLC.
Accordingly, ANIC is within the Authorized Control Level. This RBC level is
based on ANIC's recording of additional incurred losses and loss adjustment
expenses of $1.4 million above the amounts reflected in the 1999 statutory
annual statement as filed with the Ohio Department of Insurance. ANIC has not
been required to file an amended 1999 statutory annual statement. The Company
was already in discussion with the Ohio Insurance Department regarding its 1998
RBC calculation, and its expected December 31, 1999 calculation. Following a
targeted examination held in January, 2000 by the Ohio Department, the
Department is planning to visit the Company in the early Spring, 2000 for a
mandatory examination to review and comment on corrective actions already taken
and further planned by the Company's new management. On March 8, 2000, ANIC
received a letter from the Department requesting that the Company file a RBC
plan by April 18, 2000.

On March 29, 2000, management met with the Ohio Department of Insurance. As a
result of the meeting, ANIC has agreed to take the following corrective steps:
(1) beginning in March 2000, ANIC will file an abbreviated monthly statutory
financial report with the Ohio Department of Insurance; (2) ANIC will continue
its current strategy to no longer write any new or renewal business in any state
until a further agreement can be made with the Department; and (3) ANIC will
file a RBC financial plan which includes the run-off of the existing business as
well as management's expected plan for both raising capital and entering into
the non-standard auto business. In the future, the Company intends for ANIC to
insure a portion of the non-standard auto business produced by the Company's
recently acquired agencies. The Company expects this owned agency business to
grow and be successful both in terms of producing after-tax profits for its own
agency operating segment, as well as producing profitable non-standard auto
business for ANIC. The Company also expects the AIM acquisition will produce
profitable service-fee business from underwriting management, managing general
agency fees, and claims administration. Finally, management acknowledges the
need for additional capital for ANIC and is considering various alternatives,
including utilization of the credit facility described in "Note Q" in the Notes
to Consolidated Financial Statements and other sources of capital.

ITEM 2.  PROPERTIES

The Company's main administrative offices are located at 75 West Street,
Simsbury, Connecticut. This office space was previously solely occupied by one
of the Company's new subsidiaries, AIM. The jointly occupied leased space is
approximately 6,000 square feet at this location with annual rental on a
five-year lease expiring in April 30, 2004. As of December 31, 1999, the
Company's information systems are provided through a month-to-month arrangement
with Data-Tech, Inc. at 2550 Corporate Exchange Drive, Columbus, Ohio.

ITEM 3.  LEGAL PROCEEDINGS

Due to the nature of its operations, the Company is at all times subject to
pending and threatened legal actions that arise in the normal course of its
activities. In management's evaluation of certain pending matters, based on the
advice or information and analysis of outside counsel, the accompanying
consolidated financial statements would not be materially affected by the
outcome of any legal proceedings or contingent liabilities.

In July 1991, the Company acquired 100% of RGL. Galaxy Insurance Company
("Galaxy"), a wholly owned subsidiary of RGL, wrote commercial property
insurance, property and casualty, and assumed treaty reinsurance. Galaxy became
statutorily insolvent at June 30, 1994. Due to the insolvency of Galaxy, the
Company wrote its investment in RGL to zero and deconsolidated RGL as of April
1, 1994.

On October 7, 1994, the Liquidation Bureau took control of Galaxy pursuant to an
order of liquidation of the New York Supreme Court. Prior to the liquidation of
Galaxy, ANIC had issued certain certificates of suretyship ("Certificates") with
respect to certain Galaxy insurance policies each of which provided that ANIC
would assume the responsibilities of Galaxy under the specified policy if Galaxy
became insolvent or financially unable to meet its obligations on the underlying
policy, but only if certain conditions were met. In particular, the Certificates
provided that ANIC's assumption of liability was contingent upon the insured's
executing and delivering all agreements, assignments or evidences of subrogation
satisfactory to ANIC respecting payments made or liabilities assumed.

In May 1996, the Liquidation Bureau, acting on behalf of the New York
Property/Casualty Insurance Security Funds (the "Guaranty Fund"), informally
advised the Company that on behalf of the Guaranty Fund it intended to seek
indemnification or reimbursement from ANIC for claims paid by the Guaranty Fund
to Galaxy insureds on policies which may have been covered by the Certificates.
The


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company has taken the position that the Guaranty Fund has no right to seek
indemnification unless Galaxy insureds who hold properly issued Certificates
have executed assignments and evidences of subrogation to ANIC. Even if any
Galaxy insured properly made such a claim directly to ANIC, the Company has been
advised by counsel that if ANIC paid any such claim, it would have the right,
under assignment and subrogation agreements with its insureds, to assert all
rights that the insureds could have asserted to recover the loss amounts from
any other source, including the Guaranty Fund.

In early 1998, the Superintendent of Insurance of the State of New York, as
Liquidator of Galaxy and Administrator of the Guaranty Fund ("Superintendent"),
filed suit against ANIC in New York State Supreme Court. The complaint alleged,
among other things, breach of contract and demanded that ANIC specifically
perform its alleged obligations under the Certificates. The complaint asked for
an amount in excess of $6.5 million in damages.

As reflected above, the suit requested indemnification or reimbursement for the
claims paid or to be paid by the Guaranty Fund to Galaxy insureds on policies
which may have been covered by the Certificates. ANIC has maintained that the
Guaranty Fund does not have the right to seek indemnification unless the terms
and conditions of validly issued Certificates have been strictly complied with.
Accordingly, ANIC filed for dismissal of the suit which motion was granted by
the Court on October 6, 1998. Thereafter, the Superintendent moved to reargue
and renew his opposition to ANIC's motion to dismiss. By an Order dated February
23, 1999, the Court denied the Superintendent's motion. The Superintendent has
filed a Notice of Appeal of the Court's Decision and Order dismissing the
complaint, and has filed a brief in support of the appeal. ANIC will continue to
defend vigorously against the Superintendent's lawsuit.

On October 1, 1999 settlement was reached regarding a November 1997 suit that
was filed against ALIC by three long-term care policyholders seeking to
represent a class of North Dakota policyholders alleging breach of contract,
fraud and misrepresentation.

Pursuant to the settlement agreement, ALIC paid $4.0 million toward a global,
nationwide settlement. ACCEL, which had conditionally contracted with Lyndon
Life (to whom ALIC was sold), agreed to pay $2.3 million plus the proceeds from
a suit against Lyndon Life that was expected to produce in excess of $.7
million, previously carried as a receivable. The total reimbursement to Lyndon
was therefore in excess of $3.0 million. Lyndon maintains that ACCEL owes at
least $.7 million additional, that ACCEL refuses to pay on the grounds that it
only authorized a total of $3.0 million in accordance with the sale contract.
ACCEL will vigorously oppose making any additional payments.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable


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<PAGE>   7
                                     PART II

ITEM 5.  MARKET FOR ACCEL'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

(a)      ACCEL's common stock is traded over-the-counter National Market Issues,
         under the NASDAQ symbol ACLE.

The following table sets forth the quarterly range of over-the-counter prices
for ACCEL's stock during the last two years. These prices have been adjusted for
common stock dividends, if any, and do not include retail mark-up, mark-down, or
commissions and do not always necessarily represent actual transactions.

<TABLE>
<CAPTION>
    1999            High         Low          1998             High         Low
    ----            ----         ---          ----             ----         ---
<S>                <C>          <C>         <C>              <C>          <C>
4th Quarter        $1.188       $0.563      4th Quarter      $3.375       $2.125
3rd Quarter         1.875        0.875      3rd Quarter       3.375        2.188
2nd Quarter         2.688        1.625      2nd Quarter       3.500        2.875
1st Quarter         3.125        2.500      1st Quarter       3.500        3.063
</TABLE>

(b)      The approximate number of holders of record of ACCEL's common stock
         ($.10 par value) as of January 31, 2000, was 552 holders.

(c)      Dividends paid on common stock:

         1999, 1998 and 1997-- $0.00 per share

Restrictions on present or future ability to pay dividends: Since June 1992,
ACCEL's Board of Directors have suspended payment of cash dividends on the
common stock until the Company returns to a level of profitability which will
sustain such payments.


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<PAGE>   8
ITEM 6. SELECTED FINANCIAL DATA

                            ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                     1999          1998          1997         1996         1995
                                                  ---------------------------------------------------------------
                                                       (Thousands of dollars, except per share data & ratios)
<S>                                               <C>           <C>           <C>          <C>          <C>
Gross premiums written                            $  21,759     $  43,285     $  40,897    $  25,629    $  12,371
Premiums ceded                                       (6,789)      (27,300)      (17,118)      (9,416)      (5,435)
Net premiums written                                 14,970        15,985        23,779       16,213        6,936
Premiums earned                                      20,299        16,000        18,717       12,466        7,459
Net investment income:
     Interest and dividends                           1,772         2,150         1,939        1,692        1,570
     Realized gains (losses)                            101           (44)        1,051          432          201
Total revenue                                        22,438        18,483        35,286       21,529       11,653
Loss and loss adjustment expenses                    23,922        19,227        15,373       10,145        6,878
Income (loss) before taxes
     and other items                                (17,245)      (10,721)        8,116        1,370       (3,601)
Income (loss) from operations                       (17,245)      (10,451)        7,015        1,327       (2,964)
Income (loss) from discontinued operations             --            --          (5,900)         646        1,504
Extraordinary item                                     --            --            --            131         --
Net income (loss)                                   (17,245)      (10,451)        1,115        2,104       (1,460)
Earnings per common share--basic:
     Income (loss) from operations                    (2.02)        (1.22)          .82          .23         (.67)
     Income (loss) from discontinued operations        --            --            (.69)         .11          .34
     Extraordinary item                                --            --            --            .02         --
     Net income (loss)                                (2.02)        (1.22)          .13          .36         (.33)
Earnings per common share--assuming dilution:
     Income (loss) from operations                    (2.02)        (1.22)          .82          .23         (.67)
     Income (loss) from discontinued operations        --            --            (.69)         .11          .34
     Extraordinary item                                --            --            --            .02         --
     Net income (loss)                                (2.02)        (1.22)          .13          .36         (.33)
At end of year:
     Invested assets                                 22,370        36,294        33,921       30,302       23,697
     Total assets                                    73,035        97,442       104,094      191,325      183,507
     Policy reserves and liabilities                 62,546        61,984        52,014       31,945       21,942
     Notes payable                                     --            --            --         15,000       22,531
     Common stockholders' equity                      4,886        23,101        33,589       31,641       20,560

Return on average common
     stockholders' equity                           (123.24)%      (36.87)%       3.42%         8.06%       (8.13)%

Book value per common share                       $    0.57     $    2.70     $    3.88    $    3.68    $    4.62
</TABLE>

Note:    Net income (loss) per share reflects the adoption of the Financial
         Accounting Standards Board's Statement of Financial Accounting
         Standards No. 128, Earnings per Share ("EPS"). Both basic EPS and EPS
         assuming dilution have been presented accordingly.


                                       8
<PAGE>   9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OPERATING RESULTS FOR THE THREE YEARS ENDED DECEMBER 31, 1999

OPERATING RESULTS AND DISCONTINUED OPERATIONS

The Company's loss before income taxes for 1999 was $17.2 million. A major
factor affecting the loss was adverse development of insurance losses (excluding
unallocated loss adjustment expense) of $4.4 million, all of which was
commercial auto business. The adverse development for commercial auto consisted
primarily of a revision of the actuarial ultimate losses in 1999 for the 1997
and 1998 loss years. This adverse development was attributable to certain types
of commercial auto insurance that the Company is no longer writing, including
large and small fleets, paratransit vehicles and charter buses. The Company is
focusing its ongoing efforts in substandard auto, and in obtaining fees for
insurance services. Commercial auto produced a negative underwriting margin of
$7.2 and $6.4 million in 1999 and 1998, respectively, including the effects of
loss development.

Also contributing to the loss before income taxes in 1999 were $2.4 million of
losses incurred on other discontinued lines of business, primarily consisting of
agriculture, realtors' errors and omissions and auto dealership coverages;
general and administrative expenses of $7.2 million; commission and selling
expenses net of reinsurance expense recoveries of $1.9 million; taxes, licenses
and fees other than premium taxes of $0.8 million; and a legal settlement
agreement expense of $3.0 million offset by net investment gain of $1.9 million
and other income of $0.3 million.

Commercial auto produced gross premiums of $17.6 million in 1999 compared to
$35.7 and $30.3 million in 1998 and 1997, respectively. The Company's other
discontinued products within the property and casualty segment (excluding
extended service contracts which were sold to Lyndon effective December 31,
1997) produced $3.8 million in gross premiums written in 1999 compared to $1.5
million and $.4 million in 1998 and 1997, respectively. Of the $3.8 million of
other gross premiums written in 1999, $2.2 million were from the 100%-ceded
aviation business.

On October 20, 1997, ACCEL entered into agreements to sell to Lyndon Insurance
Group, Inc. and Lyndon Life Insurance Company (collectively, "Lyndon") the
outstanding capital stock of ALIC, ANSC and Dublin (collectively, the "Target
Corporations") for $30.2 million in cash and to sell to Lyndon Property
Insurance Company ("Lyndon Property") the vehicle extended service contract
business of ACCEL's wholly owned subsidiary, ANIC, for $10.3 million in cash.
The sale was effective December 31, 1997.

As discussed further below, the after-tax net gain in 1997 on the sale of the
Auto Aftermarket Group was $3.2 million which was comprised of a gain of $10.3
million in continuing operations and a loss of $7.1 million in discontinued
operations (excluding the provision for operating loss of $495,000 during the
phase-out period). The gain was based upon the purchase price of approximately
$41 million offset by the Company's equity in the sold subsidiaries of
approximately $32.1 million, the write-off of goodwill related to ALIC of $.6
million, costs associated with the sale of $.8 million and federal income taxes
related to the sale of $4.3 million.

Upon consummation of the aforementioned sale, the Company ceased to be engaged
in the Auto Aftermarket Group business. The consolidated financial statements of
the Company for 1997 reflect the disposition of ALIC and Dublin which comprised
the Life/Health business segment. Accordingly, the revenues, benefits and
expenses, assets and liabilities, and cash flows of ALIC and Dublin have been
excluded from the respective captions in the consolidated statements of
operations and consolidated statements of cash flows. The net operating results
of these entities have been reported, net of applicable income taxes, as "Income
from discontinued operations" and the net cash flows of these entities have been
reported as "Net cash (used in) provided by discontinued operations."

The gain of $10.3 million from the sale of the vehicle extended service contract
business was reflected within continuing operations of the Company in 1997 as a
result of this business comprising only a portion of the Company's property and
casualty business segment. Income before federal income taxes related to the
vehicle extended service contract business included in continuing operations was
$360,000 for 1997.

Effective January 1, 1998, ANIC ceded to Lyndon via quota share reinsurance 100%
of its liability related to existing and future vehicle extended service
business written on ANIC's policy forms. In connection with the sale, ANIC
granted Lyndon the authority to write new vehicle extended service contracts
insured by contractual liability policies issued in the name of ANIC for a
maximum period of eighteen months which expired in July 1999. All new business
written by Lyndon utilizing ANIC's policy forms was automatically reinsured by
Lyndon under the terms of the aforementioned reinsurance agreements.

The Company's income before income taxes and discontinued operations for 1997
was $8.1 million. This income was primarily the result of the gain on the sale
of the vehicle extended service contract business to Lyndon which amounted to
$10.3 million.


                                       9
<PAGE>   10
The operating results for 1997 were impacted by the write-off of approximately
$150,000 in capitalized software costs related to software which was included in
the sale of assets for the vehicle extended service contract business and the
write-off of approximately $1.25 million in deferred tax assets for ACCEL and
ANIC in order to reflect deferred tax realizable values as a result of the sale
of the Auto Aftermarket Group.

REVENUE

Gross premium writings for 1999 were $21.8 million compared to $43.3 million and
$40.9 million for 1998 and 1997, respectively. Except for the 100%-ceded
aviation risks program, the Company ceased writing new and renewal business in
all other programs by no later than September 1999. Premiums written increased
in 1998 from 1997 by $5.4 million for commercial auto and $1.0 million for other
property and casualty programs offset by a decrease of $3.9 million for the
vehicle extended service contract program that was fully ceded to Lyndon
Property. See Table II following the narrative in Management's Discussion and
Analysis.

Net premium earned was $20.6 million, $16.0 million and $18.7 million for 1999,
1998 and 1997, respectively. Commercial auto net premium earned was $16.5
million, $18.3 million and $11.2 million in 1999, 1998 and 1997, respectively.
Despite the significant decrease in 1999 gross premiums written, the run-off of
the December 31, 1998 unearned premium reserve of $12.4 million to a balance of
only $1.2 million at December 31, 1999, as well as a significant decrease in
ceded premiums due to the termination of certain reinsurance coverages, provided
stable earned premium for 1999 comparable to 1998. The total net premium earned
was comparable in 1998 and 1997 as the increase in commercial auto net premium
earned offset the decrease of $6.2 million in the extended service contract
line.

LOSS, LOSS ADJUSTMENT AND OTHER EXPENSES

The net loss and loss adjustment expense ratios decreased to 117.8% in 1999 from
120.2% in 1998 and 82.1% in 1997. See Table I following the narrative in
Management's Discussion and Analysis for further information on key operating
ratios and see Table III for reserve development for the preceding ten years and
a reconciliation of the beginning and ending liability for unpaid losses and
loss adjustment expense.

The effect of the Company's other lines of business that are in runoff was as
follows for 1999: net incurred losses and loss adjustment expenses ("LAE") for
the discontinued REO line of business were $182,000 in relation to zero earned
premium. The total number of open claims at December 31, 1999 was 4 and the
related reserves were $35,000. Net incurred losses and LAE for the discontinued
agriculture lines of business at December 31, 1999 were $140,000. The net impact
on the Company's loss ratio and net loss for these two discontinued lines of
business in 1999 was approximately 2.2% and $300,000 loss, respectively.

The effect of the Company's other lines of business that are in runoff was as
follows for 1998: net incurred losses and loss adjustment expenses ("LAE") for
the discontinued REO line of business were $245,000 in relation to zero earned
premium. The total number of open claims at December 31, 1998 was 7 and the
related reserves were $90,000. Net incurred losses and LAE for the discontinued
agriculture lines of business at December 31, 1998 were $541,000. The net impact
on the Company's loss ratio and net loss for these two discontinued lines of
business in 1998 was approximately 4% and $.7 million loss, respectively.

The effect of the Company's other lines of business that are in runoff was as
follows for 1997: net incurred losses and loss adjustment expenses ("LAE") for
the discontinued REO line of business were ($355,000) in relation to zero earned
premium. This result was due in large part to a re-evaluation of LAE reserves
that lowered the reserve to the expected ultimate cost of settling the claims.
The total number of open claims at December 31, 1997 was 10 and the related
reserves were $351,000. Net incurred losses and LAE for the discontinued
agriculture lines of business at December 31, 1997 were ($77,000). The net
impact on the loss ratio and net income for these discontinued lines of business
in 1997 was immaterial.

A positive impact on 1997 earnings was the level of service fees on the extended
service contracts of $3.1 million in 1997. These service fees were non-recurring
in 1998 due to the sale of the extended service contract business to Lyndon
Property as discussed previously.

The Company's general and administrative expenses increased in 1999 by $1.8
million, or 31.4%, to $7.4 million from $5.6 million in 1998. In 1998, general
and administrative expenses increased by $.8 million, or 18%, from $4.8 million
in 1997. In 1999, the company accrued $1.8 million in restructuring costs that
are included in its general and administrative expenses. Of the $1.8 million,
$.7 million was severance and other employee termination costs, $.8 million was
for cancellation of a certain stop loss agreement, $.2 million was additional
commission for moving part of the company's book of business, and the remainder
was for various lease agreement accruals.

A factor affecting the comparison of general and administrative expenses in 1998
versus previous years, was the allocation of overhead expenses in previous years
among the Company and its subsidiaries that were sold effective December 31,
1997. In 1998, overhead expenses were fully absorbed by the Company. The
increase in 1998 was primarily due to increased salaries of $.6 million of which
the majority related to the change in allocation as previously discussed,
increased legal fees of $.2 million, increased underwriting costs and


                                       10
<PAGE>   11
association dues of $.1 million each which were both the result of increased
commercial auto premium writings since 1996 and various other expenses totaling
$.3 million. These increases were offset by decreased consulting fees of $.2
million and $.3 million in expense reimbursements received from Lyndon in
connection with Lyndon's usage of the Company's information systems.

Commissions and selling expenses net of reinsurance expense recoveries as a
percent of net premiums written decreased to 13.5% in 1999 from 15.6% in 1998.
This is due largely to changes in certain producer commission rates during 1999.
Commissions and selling expenses net of reinsurance expense recoveries as a
percent of net premiums written decreased to 15.6% in 1998 from 25.3% in 1997.
The decrease in 1998 is due largely to commercial auto becoming the predominant
product line for the Company. Commercial auto has significantly lower
acquisition costs than the Company's extended service contract business that was
fully ceded to Lyndon effective January 1, 1998.

On August 10, 1999, the Company sold its 25% interest in USA Insurance Group,
Inc. ("USAIG"), the parent company of Transportation Insurance Specialists, the
Company's former general agent, producing a capital gain of $0.3 million. The
Company also received interest income associated with the sale of approximately
$0.3 million from a put option available in the purchase documents. The original
purchase of the USAIG investment was April 1, 1998, for $5 million. This
investment was accounted for using the equity method. At December 31, 1998, the
investment in USAIG exceeded the Company's share of the underlying net assets by
$4.1 million and was being amortized on the straight-line method over 10 years
based upon a review of the operations, including a persistency review of USAIG's
producing sub-agents. The Company recorded a net expense of $65,000 and $189,000
in 1999 and 1998 respectively for its investment in USAIG that was comprised of
its share of USAIG's earnings of $156,000 and $142,000 offset by amortization of
$221,000 and $331,000 in 1999 and 1998 respectively.

LIQUIDITY, CAPITAL RESOURCES AND OTHER

The Company's cash flows from operations have generally been adequate for its
current operating needs. The Company's non-renewed long haul trucking, charter
bus and paratransit business was generally written for a term of one year, with
the casualty claim-related liabilities extending beyond that period. The
Company's liability on vehicle extended service contracts typically has extended
for either one-year or five-year periods. However as previously discussed, the
Company's existing vehicle extended service contract business was ceded to
Lyndon Property effective January 1, 1998.

The Company's gross amounts due from reinsurers increased $6.0 million in 1999,
to $45.7 million from $39.7 million at year end 1998. Therefore, the Company has
approximately 9.3 times its stockholders' equity in its amounts due from
reinsurers. The Company and its professional reinsurance intermediaries
carefully monitor cash call positions and the financial ability of its
reinsurers to fulfill their obligations to the Company.

The Company maintains liquidity in its investment portfolio to correspond with
the liabilities outstanding on its lines of business. At December 31, 1999, the
estimated duration of the Company's fixed income investment portfolio was 2.4
years while the estimated liability duration was approximately 1.6 years.
Currently, an interest rate increase of 1% would negatively impact the fair
value of the fixed maturity portfolio and stockholders' equity by a decline of
approximately $.6 million. Conversely, an interest rate decrease of 1%, would
positively impact the same two accounts by approximately $.5 million

The Company's "available for sale" fixed maturity securities at December 31,
1999 included $2.8 million of mortgage-backed securities, $.8 million of
collateralized mortgage obligation securities, and $6.5 million of asset-backed
collateralized securities. The mortgage and asset-backed securities are subject
to risks associated with variable prepayments. As such, those securities may
have a different actual maturity and yield than planned at the time of purchase.
The degree to which a security is susceptible to either gains or losses is
influenced by the difference between its amortized cost and par value, relative
sensitivity of the underlying mortgages to prepayment risk in a changing
interest rate environment and relative priority of the securities in the overall
securitization.

The Company limits the extent of its risks on fixed maturity securities by
generally avoiding securities whose cost significantly exceeds par, by
purchasing securities that are backed by stable collateral, and by concentrating
on securities that have either a planned amortization or sequential pay classes.
The collateralized mortgage obligations and asset backed securities owned have
primarily short to intermediate average lives. At December 31, 1999, the Company
did not have a significant amount of higher risk mortgage or asset backed
securities, which had a significant risk of loss or principal. There are
negligible default risks on the mortgage and asset backed security portfolios as
a whole as the vast majority of the assets are either guaranteed by U. S.
government-sponsored entities or are supported in the securitization structure
by junior securities enabling the assets to achieve high investment grade
status. The Company's collateralized mortgage obligations and asset backed
securities are predominantly sequential pay with little or no exposure to
interest only obligations ("IOs") or inverse IOs.

Ohio domiciled insurance companies are subject to Ohio law which regulates the
ability of insurance companies to pay dividends. The regulation limits the
annual dividend or distribution of an insurer to the greater of (1) net income
of the previous year or (2) 10% of unassigned surplus as of the end of the
previous year. In addition, all dividends must come from earned surplus to
qualify as a non-extraordinary dividend. Amounts greater than this would be
considered extraordinary dividends and could not be paid without permission of


                                       11
<PAGE>   12
the Ohio Department. Based on this regulation, ANIC would require Ohio
Department approval to pay any dividend to ACCEL during 2000. See "Note O" in
the Notes to Consolidated Financial Statements for a discussion regarding Risk
Based Capital.

In January 1998, upon closing the sale of the Auto Aftermarket Group, the
Company used a portion of the proceeds to retire the outstanding balance of $15
million of senior notes held by ALIC. ALIC had received these senior notes from
an unaffiliated company, along with accrued interest of approximately $1.1
million. The Company utilized a portion of the sale proceeds to make a capital
contribution of $3.5 million to ANIC, to pay taxes on the sale of approximately
$4.3 million, to transfer $8.8 million in cash to Lyndon in connection with the
ceding of the existing vehicle extended service contract business on January 1,
1998 and utilized the remainder for general corporate purposes.

The estimates for the Company's policy reserves are continually under review and
adjusted as necessary as experience develops or new information becomes known;
such adjustments are included in current operations. These liabilities are
necessarily subject to the impact of future changes in claim severity, frequency
and other factors. Although considerable variability is inherent in such
estimates, based on recent evaluations, management believes that the current
level of policy reserves will be adequate to cover anticipated claim
liabilities. Accordingly, the ultimate amounts required for settlement of policy
benefits may vary significantly from the amounts included in the accompanying
consolidated financial statements.

Due to the nature of its operations, the Company is at all times subject to
pending and threatened legal actions that arise in the normal course of its
activities. For information regarding legal proceedings involving the Company
including developments relating to the insolvency of Galaxy Insurance Company (a
former subsidiary of the Company) see "Note M" in the Notes to Consolidated
Financial Statements.

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designed as part of a hedge transaction and, if it is, the type of
hedge transaction. The Company does not expect the adoption of SFAS No. 133 to
have a material impact on its consolidated financial statements because the
Company does not currently hold any derivative instruments.

Although the cumulative effects of inflation on premium growth cannot be fully
determined, increases in the value of commercial property results in increased
premiums for property coverages. The combination of severity (which is affected
by inflation) and frequency of loss trends in commercial auto and general
liability are recognized in premium increases or decreases by the adoption of
filed premium rates.

The National Association of Insurance Commissioners ("NAIC") has completed and
adopted a project to codify statutory accounting principles with a provision for
commissioner discretion in the determination of appropriate statutory accounting
for insurers. Although the NAIC has indicated that January 1, 2001 is the
expected date of implementation, the implementation is ultimately dependent upon
the insurer's state of domicile. Implementation of the codified statutory
principles may affect the surplus level of ANIC on a statutory basis. Management
has not determined what impact, if any, this project will have on the statutory
surplus of ANIC.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

The 1995 Private Securities Litigation Reform Act provides issuers the
opportunity to make cautionary statements regarding forward-looking statements.
Accordingly, any forward-looking statement contained herein or in any other oral
or written statement by the Company or any of its officers, directors or
employees is qualified by the fact that actual results of the Company may differ
materially from such statement due to the following important factors, among
other risks and uncertainties inherent in the Company's business: state
insurance regulations, rate competition, adverse changes in interest rates,
unforeseen losses with respect to loss and settlement expense reserves for
unreported and reported claims, and catastrophic events.


                                       12
<PAGE>   13
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                                     TABLE I

Several key operating ratios of the Company are as follows:

<TABLE>
<CAPTION>
                                                             Consolidated Results
                                                     (Thousands of dollars, except ratios)
                                                        1999         1998          1997
                                                     ---------    ---------     ---------
<S>                                                  <C>          <C>           <C>
Gross premiums written                               $  21,759    $  43,285     $  40,897
Net premiums earned                                  $  20,299    $  16,000     $  18,717
RATIOS:
    Loss and LAE incurred to net premiums earned         117.8%       120.2%         82.1%
    Commissions and selling expenses and
        general and administrative expenses
        to gross premiums written(1)                      53.2%        30.0%         33.9%
    Commissions and selling expenses,
        reinsurance expense recovery
        and change in deferred policy
        acquisition costs to net premiums earned          22.5%        17.5%         22.9%
    Taxes, licenses and fees to gross
        premiums written                                   3.7%         3.6%          3.2%
</TABLE>

(1) Excluding restructuring expense of $1,844 in 1999.


                                       13
<PAGE>   14
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                                    TABLE II
                        Changes in Gross Premiums Written
                             Year Ended December 31
                      (Thousands of dollars, except ratios)

<TABLE>
<CAPTION>
                                                                            1999                    1998
                                                                             vs.          %          vs.       %
Gross Premiums Written                   1999       1998        1997        1998        Change      1997     Change
---------------------------------------------------------------------------------------------------------------------
<S>                                    <C>        <C>         <C>         <C>           <C>       <C>          <C>
Continuing lines of business:
   Commercial auto                     $ 17,571   $ 35,678    $ 30,293    $(18,107)     (50.8)%   $  5,385     17.8%
   Commercial multi-peril                   594        543         215          51        9.4%         328    152.6%
   Extended service contracts               414      5,821       9,744      (5,407)     (92.9)%     (3,923)   (40.3)%
   Aircraft                               2,157       --          --         2,157        --           --       --
   Other property/casualty lines            661        958         230        (297)     (31.0)%        527    229.1%
                                       --------   --------    --------    --------     ------     --------    -----
       Total continuing lines            21,397     43,000      40,482     (21,603)     (50.2)%      2,317      5.7%
                                       --------   --------    --------    --------     ------     --------    -----

Discontinued lines of business
  included in continuing operations:
   Medical and miscellaneous
       life and health                      362        306         441          56       18.3%        (135)     (30.6)%
   Vendor's single interest                --          (21)        (35)         21     (100.0)%         14      (40.0)%
   Agriculture, REO and other
       property & casualty                 --         --             1        --          --            (1)    (100.0)%
   Other                                   --         --             8        --          --            (8)    (100.0)%
                                       --------   --------    --------    --------     ------     --------    -------
Total discontinued lines                    362        285         415          77       27.0%        (130)     (31.3)%
                                       --------   --------    --------    --------     ------     --------    -------
Gross premiums written
   from continuing operations          $ 21,759   $ 43,285    $ 40,897    $(21,526)     (49.7)%   $  2,187        5.3%
                                       ========   ========    ========    ========    =======     ========    =======
</TABLE>


                                       14
<PAGE>   15
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                                    TABLE III
 Analysis of Loss and Loss Adjustment Expense Development (Thousands of dollars)


<TABLE>
<CAPTION>
                                             1988       1989       1990       1991      1992        1993       1994       1995
                                           ======================================================================================
<S>                                        <C>        <C>        <C>       <C>        <C>         <C>        <C>        <C>
Reserves for unpaid losses and loss
     adjustment expenses, net of
     reinsurance recoverable               $ 2,266    $ 2,978    $ 3,415   $ 26,038   $ 15,689    $ 9,380    $ 5,489    $ 5,413

Liability reestimated as of:
     One year later                        $ 2,281    $ 2,416    $ 2,871   $ 31,548   $ 14,945    $ 9,335    $ 6,146    $ 5,606
     Two years later                         2,262        979      5,386     31,791     15,552     10,036      7,473      5,216
     Three years later                       1,495      2,054      5,966     32,387     16,345     11,132      7,100      6,227
     Four years later                        2,248      2,172      6,245     32,963     17,195     10,776      8,077      6,168
     Five years later                        2,365      2,054      6,502     33,751     16,916     11,240      8,017
     Six years later                         2,302      2,083      6,952     33,529     17,369     11,083
     Seven years later                       2,323      2,121      6,871     33,842     17,239
     Eight years later                       2,372      2,116      7,195     33,712
     Nine years later                        2,418      2,126      7,150
     Ten years later                         2,418      2,081

Cumulative redundancy (deficiency)          $ (152)     $ 897   $ (3,735)  $ (7,674)  $ (1,550)  $ (1,703)  $ (2,528)    $ (755)

Cumulative amount of liability paid,
     net of reinsurance recoverables,
     paid through:
     One year later                        $ 1,866    $ 1,235   $ (9,966)  $ 19,319    $ 8,802    $ 5,779    $ 2,702    $ 3,280
     Two years later                         1,953     (3,875)      (492)    26,487     12,442      7,346      5,561      4,532
     Three years later                         367       (164)     3,313     29,815     13,820      9,624      6,594      5,837
     Four years later                        1,551      1,373      4,726     30,949     15,834     10,337      7,687      5,989
     Five years later                        2,096      1,681      5,477     32,622     16,493     11,040      7,839
     Six years later                         2,207      1,708      6,330     33,126     17,199     11,040
     Seven years later                       2,312      1,921      6,727     33,672     17,199
     Eight years later                       2,323      2,046      7,150     33,672
     Nine years later                        2,418      2,081      7,150
     Ten years later                         2,418      2,081

Net reserve - December 31                                                                         $ 9,380    $ 5,489    $ 5,413
Reinsurance recoverables                                                                            1,400        891      2,238
                                                                                               ----------------------------------
Gross reserve                                                                                    $ 10,780    $ 6,380    $ 7,651
                                                                                               ==================================
</TABLE>

<TABLE>
<CAPTION>
                                               1996       1997       1998       1999
                                           ==========================================
<S>                                          <C>        <C>       <C>        <C>
Reserves for unpaid losses and loss
     adjustment expenses, net of
     reinsurance recoverable                 $ 5,198    $ 7,778   $ 13,326   $ 19,428

Liability reestimated as of:
     One year later                          $ 5,124   $ 12,429   $ 15,996
     Two years later                           7,468     13,191
     Three years later                         7,098
     Four years later
     Five years later
     Six years later
     Seven years later
     Eight years later
     Nine years later
     Ten years later

Cumulative redundancy (deficiency)          $ (1,900)  $ (5,413)  $ (2,670)

Cumulative amount of liability paid,
     net of reinsurance recoverables,
     paid through:
     One year later                          $ 3,490    $ 6,008    $ 8,917
     Two years later                           5,567      8,484
     Three years later                         6,392
     Four years later
     Five years later
     Six years later
     Seven years later
     Eight years later
     Nine years later
     Ten years later

Net reserve - December 31                    $ 5,198    $ 7,778   $ 13,326   $ 19,428
Reinsurance recoverables                       5,818     14,250     36,209     39,993
                                           -------------------------------------------
Gross reserve                               $ 11,016   $ 22,028   $ 49,535   $ 59,421
                                           ===========================================
</TABLE>

Note: This table excludes the consolidated reserves of Randjill Group, Ltd which
was acquired by the Company in 1991 and deconsolidated by the Company in 1994.


                                       15
<PAGE>   16
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                             TABLE III - (CONTINUED)
    Reconciliation of Liability for Unpaid Losses and Loss Adjustment Expense

<TABLE>
<CAPTION>
                                                                                     1999        1998         1997
                                                                                   ---------------------------------
                                                                                       (Thousands of dollars)
<S>                                                                                <C>         <C>          <C>
Liability for insurance claims at beginning of year                                $ 49,535    $ 22,028     $ 11,016

Less reinsurance recoverables                                                       (36,209)    (14,250)      (5,820)
                                                                                   ---------------------------------

Net balances at beginning of year                                                    13,326       7,778        5,196

Loss and loss adjustment expenses incurred:
  Loss and loss adjustment expense incurred for events of the current year           21,252      14,507       15,705

  Loss and loss adjustment expense incurred for events of prior years                 2,670       4,720         (332)
                                                                                   ---------------------------------

Total loss and loss adjustment expenses incurred                                     23,922      19,227       15,373

Payments:
  Loss and loss adjustment expenses for insured events
     of the current year                                                              8,918       7,616        9,558
  Loss and loss adjustment expenses for insured events
     in prior years                                                                   8,902       6,063        3,233
                                                                                   ---------------------------------

Total payments                                                                       17,820      13,679       12,791
                                                                                   ---------------------------------

Net balances at end of year                                                          19,428      13,326        7,778

Plus reinsurance recoverables                                                        39,993      36,209       14,250
                                                                                   ---------------------------------

Liability for insurance claims at end of year                                      $ 59,421    $ 49,535     $ 22,028
                                                                                   =================================
</TABLE>


The table above reflects increases in the liability for insurance claims
resulting from the Company's continued expansion into the Commercial Auto line
of business (until all programs were discontinued in mid-1999). Maturity of
claims for this line of business has resulted in recording, in 1999 and 1998,
$2,670,000 and $3,667,000, respectively, in additional losses incurred for prior
policy years. Additionally, lines of business discontinued prior to 1995
reevaluated in 1998, resulted in the recording, in 1998, of $859,000 in
additional losses incurred.


                                       16
<PAGE>   17
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK MANAGEMENT

The Company is exposed to market risk, including changes in interest rates. To
manage the volatility relating to this exposure, the Company manages the
duration of its invested assets to stay within a reasonable range of the
duration of its liabilities. The Company does not hold or issue derivative
instruments. The table below provides information about the Company's other
financial instruments that are sensitive to changes in interest rates. The
financial instruments are grouped by market risk exposure category. All
instruments are denominated in U.S. dollars.

Significant interest rate risk sensitive instruments as of December 31, 1999
were:


<TABLE>
<CAPTION>
                                                                                                             TOTAL
                                                                                                             FAIR
                                2000      2001       2002      2003       2004    Thereafter     TOTAL       VALUE
------------------------------------------------------------------------------------------------------------------
                                                           (Millions of dollars)
<S>                             <C>       <C>        <C>       <C>        <C>     <C>           <C>         <C>
INVESTMENTS IN FIXED
MATURITY SECURITIES

Principal Amount                $1.93     $4.76      $6.19     $3.04      $0.36      $4.72      $21.01      $21.01

Book Value                       1.94      4.79       6.27      3.07       0.36       5.16       21.59

Average Interest Rate            6.64%     6.26%      6.18%     6.14%      6.06%      6.72%       6.36%       7.18%

SHORT-TERM INVESTMENTS

Principal Amount                $1.36      -          -         -          -          -          $1.36       $1.36

Book Value                       1.36      -          -         -          -          -           1.36

Average Interest Rate            5.25%     -          -         -          -          -           5.25%       5.25%
</TABLE>


                                       17
<PAGE>   18
                           ANNUAL REPORT ON FORM 10-K

                  ITEM 8, ITEM 14 (a) (1) and (2), (c) and (d)

                   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

                                CERTAIN EXHIBITS

                          FINANCIAL STATEMENT SCHEDULES

                          YEAR ENDED DECEMBER 31, 1999

                         ACCEL INTERNATIONAL CORPORATION

                              SIMSBURY, CONNECTICUT


                                       18
<PAGE>   19
                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
ACCEL International Corporation:

We have audited the consolidated financial statements of ACCEL International
Corporation and subsidiaries (the Company) as listed in the accompanying index.
In connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the accompanying
index. These consolidated financial statements and financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements and financial
statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ACCEL International
Corporation and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1999, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.

The accompanying consolidated financial statements and financial statement
schedules have been prepared assuming that the Company will continue as a going
concern. As discussed in Note N to the consolidated financial statements, the
Ohio Department of Insurance imposes risk-based capital requirements on
insurance enterprises, including the Company's wholly-owned subsidiary,
Acceleration National Insurance Company (ANIC). The net assets of ANIC represent
approximately 97% of the Company's total consolidated stockholders' equity at
December 31, 1999. At December 31, 1999, ANIC's total adjusted capital is at the
Authorized Control Level based on the risk-based capital calculation required by
the Ohio Department of Insurance. ANIC will file a comprehensive financial plan
with the Ohio Department of Insurance outlining its plan for attaining the
required levels of capital and surplus. Failure to meet the capital and surplus
requirements included in this comprehensive financial plan would expose ANIC to
regulatory sanctions that may include restrictions on operations and growth,
mandatory asset dispositions, and placing ANIC under regulatory control. These
matters raise substantial doubt about the ability of the Company to continue as
a going concern. The ability of the Company to continue as a going concern is
dependent on many factors, one of which is regulatory action, including ultimate
acceptance of ANIC's comprehensive financial plan. Management's plans in regard
to these matters are described in Note N to the consolidated financial
statements. The accompanying consolidated financial statements do not include
any adjustment that might result from the outcome of this uncertainty.


                                                            KPMG LLP




Houston, Texas
April 14, 2000


                                       19
<PAGE>   20
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                         1999             1998
                                                                         ----             ----
                                                                        (Thousands of dollars)
<S>                                                                    <C>              <C>
ASSETS

Investments
     Investments available for sale, at fair value:
         Fixed maturities (cost: 1999--$21,592,000;
            1998--$29,953,000)                                         $ 21,012         $ 30,343
         Short-term investments
            (cost:  1999--$1,358,000; 1998--$1,204,000)                   1,358            1,204
     Other invested assets                                                   --            4,747
                                                                       --------         --------
                                                                         22,370           36,294

Cash                                                                         --            2,587

Receivables:
     Premiums in process of transmittal, less
         allowance (1999--$359,000; 1998--$200,000)                       1,637            7,975
     Amounts due from reinsurers                                         45,671           39,701
     Amounts due from former subsidiaries                                    --               65
                                                                       --------         --------
                                                                         47,308           47,741

Accrued investment income                                                   234              282
Prepaid reinsurance premiums                                              1,918            5,913
Deferred policy acquisition costs                                           280            2,803
Equipment--at cost, less accumulated
     depreciation (1999--$1,066,000; 1998--$1,673,000)                      444              474
Leasehold improvements, less accumulated amortization
     (1999--$0; 1998--$13,000)                                               --               24
Receivable from sale of discontinued and disposed
     of operations                                                           --              703
Other assets                                                                481              621
                                                                       --------         --------
                                                                          3,357           10,820
                                                                       --------         --------


Total assets                                                           $ 73,035         $ 97,442
                                                                       ========         ========
</TABLE>

                                                                     (Continued)


                                       20
<PAGE>   21
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS -- (CONTINUED)


<TABLE>
<CAPTION>
                                                                 December 31,
                                                              1999        1998
                                                              ----        ----
                                                           (Thousands of dollars)
<S>                                                         <C>         <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Policy Reserves and Liabilities:
    Unearned premium reserves                               $  3.125    $ 12,449
    Insurance claim reserves                                  59,421      49,535
                                                            --------    --------
                                                              62,546      61,984
Other Liabilities:
    Bank overdrafts                                            3,714        --
    Amounts withheld for others                                  122       2,118
    Deferred reinsurance commissions                             114       1,508
    Amounts due reinsurers                                       828       6,407
    Accounts payable and other liabilities                       653       2,165
    Current federal income taxes                                 172         159
                                                            --------    --------
                                                               5,603      12,357
                                                            --------    --------
                                                              68,149      74,341
                                                            --------    --------


Commitments and Contingencies

Redeemable Preferred Stock:
    Authorized shares--1,000,000;
       no issued or outstanding shares                          --          --

Common stockholders' equity:
    Common stock, $.10 par value
       Authorized shares (1999 and 1998--15,000,000)
       Issued shares (1999 and 1998--9,468,196)                  947         947
    Additional paid-in capital                                32,659      32,659
    Accumulated deficit                                      (21,178)     (3,933)
    Less treasury shares at cost (1999 and 1998--913,230)     (6,962)     (6,962)
    Accumulated other comprehensive income (loss)               (580)        390
                                                            --------    --------
                      Net stockholders' equity                 4,886      23,101
                                                            --------    --------


    Total liabilities & stockholders' equity                $ 73,035    $ 97,442
                                                            ========    ========
</TABLE>


See notes to consolidated financial statements.


                                       21
<PAGE>   22
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                                    1999          1998          1997
                                                                    ----          ----          ----
                                                                         (thousands of dollars)
<S>                                                               <C>           <C>           <C>
REVENUE:
     Gross premiums written                                       $ 21,759      $ 43,285      $ 40,897
     Less reinsurance ceded                                          6,789        27,300        17,118
                                                                  --------      --------      --------
         Net premiums written                                       14,970        15,985        23,779
     Decrease (increase) in unearned premium reserves                5,329            15        (5,062)
                                                                  --------      --------      --------
         Net premiums earned                                        20,299        16,000        18,717
     Net investment income:
         Interest and dividends                                      1,772         2,150         1,939
         Realized gains (loss)                                         101           (44)        1,051
     Equity in loss of affiliated company                               --          (189)           --
     Service fees on extended service
         contracts                                                      --            --         3,051
     Other income                                                      266           566        10,528
                                                                  --------      --------      --------
                                                                    22,438        18,483        35,286
                                                                  --------      --------      --------
BENEFITS AND EXPENSES:
     Loss and loss adjustment expenses                              23,922        19,227        15,373
     Commissions and selling expenses                                4,197         7,355         9,100
     Reinsurance expense recovery                                   (2,147)       (4,868)       (3,083)
     General and administrative                                      7,377         5,615         4,776
     Taxes, licenses and fees                                          808         1,567         1,312
     Legal settlement agreement                                      3,003            --            --
     Interest                                                           --            --         1,425
     Decrease (increase) in deferred policy
         acquisition costs                                           2,523           308        (1,733)
                                                                  --------      --------      --------
                                                                    39,683        29,204        27,170
                                                                  --------      --------      --------
INCOME (LOSS) BEFORE FEDERAL INCOME
     TAXES AND DISCONTINUED OPERATIONS                             (17,245)      (10,721)        8,116

     Federal income taxes:
         Current (benefit)                                              --          (270)          (52)
         Deferred expense                                               --            --         1,153
                                                                  --------      --------      --------
                                                                        --          (270)        1,101
                                                                  --------      --------      --------

INCOME (LOSS) FROM OPERATIONS                                      (17,245)      (10,451)        7,015

Discontinued operations:
       Income from operations of discontinued business
           segment (net of income tax of $93,000)                       --            --         1,744

      Loss on disposal of business segment, including
           provision for operating loss of  $495,000 during
           phase-out period (net of income tax of $2,020,000)           --            --        (7,644)
                                                                  --------      --------      --------


NET INCOME (LOSS)                                                 $(17,245)     $(10,451)     $  1,115
                                                                  ========      ========      ========
</TABLE>



                                                                     (Continued)




                                       22
<PAGE>   23
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF OPERATIONS - (CONTINUED)


<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                       1999              1998              1997
                                                       ----              ----              ----
<S>                                               <C>               <C>               <C>
Earnings per common share--basic:
     Income (loss) from operations                $       (2.02)    $       (1.22)    $        0.82
     Income from discontinued operations                     --                --              0.20
     Loss on disposal of business segment                    --                --             (0.89)
                                                  =============     =============     =============
     Net income (loss)                            $       (2.02)    $       (1.22)    $        0.13
                                                  =============     =============     =============
Earnings per common share--assuming dilution:
     Income (loss) from continuing operations     $       (2.02)    $       (1.22)    $        0.82
     Income from discontinued operations                     --                --              0.20
     Loss on disposal of business segment                    --                --             (0.89)
                                                  =============     =============     =============
     Net income (loss)                            $       (2.02)    $       (1.22)    $        0.13
                                                  =============     =============     =============
Weighted average number of common
     shares outstanding                               8,554,966         8,573,574         8,610,757
                                                  =============     =============     =============
</TABLE>



See notes to consolidated financial statements.




                                       23
<PAGE>   24
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY


                  Years Ended December 31, 1999, 1998 and 1997
                             (Thousands of dollars)


<TABLE>
<CAPTION>
                                                                                Retained
                                                                                earnings        Common stock
                                                              Additional      (accumulated        held in
                                            Common stock    paid-in capital     deficit)          treasury          ESOP loan
                                            ------------    ---------------     --------          --------          ---------
<S>                                         <C>             <C>               <C>               <C>                 <C>
Balances at December 31, 1996                 $    940         $ 32,507         $  5,403          $ (6,599)         $    (32)
     Comprehensive income:
         Net income                                 --               --            1,115                --                --
         Other comprehensive income -
             change in net unrealized
             gains (losses) on
              investment securities                 --               --               --                --                --
                                              --------         --------         --------          --------          --------
     Comprehensive income                           --               --            1,115                --                --
     Payments on ESOP loan                          --               --               --                --                32
     Issuance of 44,021 shares of
         Common Stock under
         Common Stock Option Plan
              (Note J)                               4              103               --                --                --
                                              --------         --------         --------          --------          --------
Balances at December 31, 1997                      944           32,610            6,518            (6,599)               --
     Comprehensive income (loss):
         Net loss                                   --               --          (10,451)               --                --
         Other comprehensive income -
             change in net unrealized
             gains (losses) on
             investment securities                  --               --               --                --                --
                                              --------         --------         --------          --------          --------
     Comprehensive income (loss)                                                 (10,451)
     Purchase of 115,810 shares as
         treasury stock                             --               --               --              (363)               --
     Issuance of 23,013 shares of
         Common Stock under
         Common Stock Option Plan                    3               49               --                --                --
                                              --------         --------         --------          --------          --------
Balances at December 31, 1998                 $    947         $ 32,659         $ (3,933)         $ (6,962)         $     --
</TABLE>

<TABLE>
<CAPTION>

                                              Accumulated other
                                                comprehensive
                                                income (loss)          Net
                                                -------------          ---
<S>                                           <C>                   <C>
Balances at December 31, 1996                     $   (578)         $ 31,641
     Comprehensive income:
         Net income                                     --             1,115
         Other comprehensive income -
             change in net unrealized
             gains (losses) on
              investment securities                    694               694
                                                  --------          --------
     Comprehensive income                              694             1,809
     Payments on ESOP loan                              --                32
     Issuance of 44,021 shares of
         Common Stock under
         Common Stock Option Plan
              (Note J)                                  --               107
                                                  --------          --------
Balances at December 31, 1997                          116            33,589
     Comprehensive income (loss):                                         --
         Net loss                                       --           (10,451)
         Other comprehensive income -
             change in net unrealized
             gains (losses) on
             investment securities                     274               274
                                                  --------          --------
     Comprehensive income (loss)                       274           (10,177)
     Purchase of 115,810 shares as
         treasury stock                                 --              (363)
     Issuance of 23,013 shares of
         Common Stock under
         Common Stock Option Plan                       --                52
                                                  --------          --------
Balances at December 31, 1998                     $    390          $ 23,101
</TABLE>


                                                                     (Continued)



                                       24
<PAGE>   25
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY - (CONTINUED)
                  Years Ended December 31, 1999, 1998 and 1997
                             (Thousands of dollars)


<TABLE>
<CAPTION>
                                                                                Retained
                                                                                earnings        Common stock
                                                              Additional      (accumulated        held in
                                            Common stock    paid-in capital     deficit)          treasury          ESOP loan
                                            ------------    ---------------     --------          --------          ---------
<S>                                         <C>             <C>               <C>               <C>                 <C>
Balances at December 31, 1998                 $    947         $ 32,659         $ (3,933)         $ (6,962)         $     --
     Comprehensive loss:
         Net loss                                   --               --          (17,245)               --                --
         Other comprehensive
           income--change in net
           unrealized gains (losses)
           on investment securities                 --               --               --                --                --
                                              --------         --------         --------          --------          --------
         Comprehensive loss                         --               --          (17,245)               --                --
                                              --------         --------         --------          --------          --------
Balances at December 31, 1999                 $    947         $ 32,659         $(21,178)         $ (6,962)         $     --
                                              ========         ========         ========          ========          ========
</TABLE>

<TABLE>
<CAPTION>

                                            Accumulated other
                                              comprehensive
                                              income (loss)          Net
                                              -------------          ---
<S>                                         <C>                   <C>
Balances at December 31, 1998                   $    390          $ 23,101
     Comprehensive loss:
         Net loss                                     --           (17,245)
         Other comprehensive
           income--change in net
           unrealized gains (losses)
           on investment securities                 (970)             (970)
                                                --------          --------
         Comprehensive loss                         (970)          (18,215)
                                                --------          --------
Balances at December 31, 1999                   $   (580)         $  4,886
                                                ========          ========
</TABLE>



See notes to consolidated financial statements.




                                       25
<PAGE>   26
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                          Year Ended December 31,
                                                                                 1999              1998              1997
                                                                                 ----              ----              ----
                                                                                           (Thousands of dollars)
<S>                                                                            <C>               <C>               <C>
OPERATING ACTIVITIES:
     Income (loss) from continuing operations                                  $(17,245)         $(10,451)         $  7,015
     Adjustments to reconcile income (loss) from continuing operations
         to net cash (used in) provided by operating activities:
             Equity method investment, net                                           --               189                --
             Change in premiums receivable                                        6,338             3,658            (5,174)
             Change in accrued investment income                                     48               (30)               11
             Change in prepaid reinsurance premiums                               3,995             3,654            (3,995)
             Change in amounts withheld for others                               (1,996)               42             1,713
             Change in unearned premium reserves                                 (9,324)          (17,537)            9,057
             Change in insurance claim reserves                                   9,886            27,507            11,012
             Change in amounts due to and from reinsurers                       (11,549)          (21,118)           (8,087)
             Change in other assets, other liabilities
                and accrued income taxes                                           (554)           (6,729)              935
             Accrual of discount on fixed maturity securities                        (6)              (40)              (51)
             Amortization of premium on fixed maturity securities                    75                79                52
             Amortization of deferred policy acquisition  costs                   3,844             7,925             4,457
             Policy acquisition costs deferred                                   (1,321)           (7,616)           (6,151)
             Reinsurance commissions earned                                      (4,355)           (4,870)           (3,122)
             Reinsurance commissions received                                     2,961             4,743             4,102
             Provision for depreciation and amortization                            265               267               110
             Net realized gains on investments                                      101               (44)           (1,051)
                                                                               --------          --------          --------
     Net cash (used in) provided by continuing operations                       (18,887)          (20,371)           10,833
     Net cash (used in) provided by discontinued operations                          --            39,431            (7,605)
                                                                               --------          --------          --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                             (18,887)           19,060             3,228

INVESTING ACTIVITIES:
     Sale of investments available for sale                                      12,601            15,824            17,677
     Purchase of investments available for sale                                  (4,093)          (13,318)          (19,552)
     Equity method investment, net                                                4,747            (4,936)               --
     Other, net                                                                    (719)             (321)             (318)
                                                                               --------          --------          --------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES                              12,536            (2,751)           (2,193)
                                                                               --------          --------          --------

FINANCING ACTIVITIES:
     Change in Drafts Outstanding                                                 3,714                --                --
     Payment of ESOP loan                                                            --                --                32
     Repayment of notes payable                                                      --           (15,000)               --
     Issuance of Common Stock under Stock Option Plan                                --                52               107
     Issuance of Common Stock under Rights Offering                                  --                --                --
     Repurchase of Treasury Shares                                                   --              (363)               --
                                                                               --------          --------          --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                               3,714           (15,311)              139
                                                                               --------          --------          --------
NET INCREASE (DECREASE) IN CASH                                                  (2,587)              998             1,174
Cash at beginning of year                                                         2,587             1,589               415
                                                                               --------          --------          --------
CASH AT END OF YEAR                                                            $     --          $  2,587          $  1,589
                                                                               ========          ========          ========

     Transfer of note payable to ALIC--Note E                                        --                --          $ 15,000
                                                                               ========          ========          ========
</TABLE>

See notes to consolidated financial statements.




                                       26
<PAGE>   27
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1999, 1998 AND 1997


NOTE A--SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION: The accompanying consolidated financial statements of
ACCEL International Corporation ("ACCEL") and subsidiaries (collectively
referred to herein as the "Company") have been prepared in accordance with
generally accepted accounting principles ("GAAP") which, as to the insurance
company subsidiaries, differ in some respects from statutory accounting
practices prescribed or permitted by state insurance departments. The
significant accounting policies followed by the Company that materially affect
financial reporting are summarized below.

PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements
include the accounts of ACCEL and its wholly-owned subsidiaries except for
Randjill Group, Ltd ("RGL") (see Note M). As discussed more fully in Note B,
Acceleration Life Insurance Company ("ALIC") and Dublin International Limited
("Dublin") are presented as discontinued operations. All significant
intercompany accounts and transactions have been eliminated in the consolidated
financial statements.

DESCRIPTION OF BUSINESS: ACCEL is an insurance holding company incorporated in
Delaware. The Company is engaged in the underwriting and sale of property and
casualty insurance products, primarily concentrating, up to mid-1999, on the
commercial auto line of business. Before the Company announced its full exit
from its current lines of business, it offered various policies covering
long-haul trucking, charter bus, limousine and paratransit vehicle fleets, as
well as other specialized products tailored to other groups such as crane
operators and gun dealers. The Company offered these products through general
agents. The Company is subject to competition from other insurers throughout the
states in which it writes business. The Company is also subject to regulation by
the insurance departments of states in which it is licensed, and undergoes
periodic examinations by those departments (see note N).

In addition to the property and casualty insurance products described above, the
Company historically sold, principally through automobile dealers, credit life
and credit accident and health insurance and extended service contracts ("Auto
Aftermarket Group"). Effective December 31, 1997, the Company sold its Auto
Aftermarket Group as discussed more fully in Note B. As a result of this
transaction, the Company ceased to be engaged in the auto aftermarket credit
insurance and extended service contract businesses.

The following is a description of the most significant risks facing property and
casualty insurers and how the Company mitigates those risks:

     LEGAL/REGULATORY RISK is the risk that changes in the legal or regulatory
     environment in which an insurer operates may result in additional expenses
     not anticipated by the insurer in pricing its products. That is, regulatory
     initiatives, new legal theories or insurance company insolvencies through
     guaranty fund assessments may create costs for the insurer beyond those
     currently recorded in the consolidated financial statements. The Company
     mitigated this risk by operating throughout the United States, thus
     reducing its exposure to any single jurisdiction and also by employing
     underwriting and loss adjusting practices which identify and minimize the
     adverse impact of this risk.

     CREDIT RISK is the risk that issuers of securities owned by the Company
     will default or that other parties, including reinsurers, which owe the
     Company money, will not pay. The Company minimizes this risk by adhering to
     a conservative investment strategy, by maintaining reinsurance and credit
     and collection policies and by providing for any amounts deemed
     uncollectible.

     INTEREST RATE RISK is the risk that interest rates will change and cause a
     decrease in the value of an insurer's investments. The Company mitigates
     this risk by attempting to match the maturity schedule of its assets with
     the expected payouts of its liabilities. To the extent that liabilities
     come due more quickly than assets mature, an insurer would have to borrow
     funds or sell assets prior to maturity and potentially recognize a gain or
     loss.

ACCOUNTING ESTIMATES: In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial statements
and revenues and expenses for the reporting period. Actual results could differ
significantly from those estimates.




                                       27
<PAGE>   28
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE A--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

The most significant estimates include those used in determining deferred policy
acquisition costs and the liability for insurance claims. Although some
variability is inherent in these estimates, management believes the amounts
provided are adequate. The estimates are continually reviewed and adjusted as
necessary. Such adjustments are generally reflected in current operations.

INVESTMENTS: The Company classifies its fixed maturity and equity securities as
available for sale, therefore these securities are carried at fair value and the
unrealized appreciation or depreciation is reported in accumulated other
comprehensive income as a separate component of stockholders' equity after
giving effect to applicable income taxes.

Short-term investments, which include U. S. Treasury securities, commercial
paper and certificates of deposit are carried at cost which approximates fair
value.

Realized gains and losses on the disposal of investments are determined by
specific identification and are included in the consolidated statements of
operations.

When an other than temporary decline in value is recognized, the specific
investment is carried at estimated realizable value and its original book value
is reduced to reflect such impairment of the investment. Such reductions in book
value are reflected in realized investment losses for the period in which they
were written down. For mortgage backed securities, when the present value of
estimated future cash flows discounted at a risk-free rate of return is less
than the cost basis of the investment, an impairment loss is recognized by
writing the investment down to its fair value.

FAIR VALUES OF FINANCIAL INSTRUMENTS: The fair value of a financial instrument
is the amount at which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market prices are not
available, fair value is based on estimates using present value or other
valuation techniques.

These techniques are significantly affected by the assumptions used, including
the discount rate and estimates of future cash flows. Although fair value
estimates are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could not
be realized in the immediate settlement of the instruments. The disclosure
requirements related to financial instruments exclude certain assets and
liabilities. Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.

The tax ramifications of the related unrealized gains and losses may have a
significant effect on fair value estimates and have not been considered in the
estimates.

The carrying amounts reported in the consolidated balance sheets for cash,
short-term investments, accrued investment income, premiums in process of
transmittal, and amounts due from reinsurers approximate their fair value.

Fair values for fixed maturity, equity and asset and mortgage-backed securities
are based on quoted market prices, where available. If quoted market prices are
not available, fair values are based on quoted market prices of comparable
instruments at amortized value (see Note C).

DEFERRED POLICY ACQUISITION COSTS: The costs (principally commissions and
certain expenses of policy issuance) of acquiring or renewing insurance
business, all of which vary with and are directly related to the production of
business, have been deferred. These deferred policy acquisition costs are
amortized in a manner related to the recognition of premiums earned. Anticipated
investment income is considered in determining recoverability of deferred costs.

EQUIPMENT AND DEPRECIATION: Equipment is carried at cost less accumulated
depreciation. Depreciation is provided using the straight-line method over an
estimated useful asset life of five years.

LEASEHOLD IMPROVEMENTS: Net leasehold improvements on previously occupied office
space were written off through general and administrative expense in 1999, as
the company is no longer utilizing this office space.



                                       28
<PAGE>   29
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE A--SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)

PREMIUM INCOME RECOGNITION AND UNEARNED PREMIUM RESERVES: Unearned premium
reserves on property and casualty products are calculated on the pro rata
method. Unearned premium reserves on the extended service contracts are based on
the historical emergence pattern of claims. The Company's primary liability on
new car contracts exists subsequent to the expiration of manufacturers'
warranties. This method results in premium being recognized in direct proportion
to the emergence of benefits on these contracts.

INSURANCE CLAIMS: The liabilities for insurance claims are determined using
statistical analyses and represent estimates of the ultimate net cost of all
reported and unreported claims that are unpaid at year end. Considerable
variability is inherent in such estimates and actual results will likely differ
from those estimates.

FEDERAL INCOME TAXES: ACCEL and its subsidiaries file a consolidated federal
income tax return. The provision for income taxes is based on income for
financial reporting purposes, after permanent differences. Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under this
method, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the deferred tax
assets to the amounts expected to be realized.

REINSURANCE: Reinsurance premiums ceded and reinsurance recoveries on losses and
loss adjustment expenses incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance ceded are
reported on a gross basis.

DEFERRED REINSURANCE COMMISSIONS: Commissions and ceding fees received in
connection with premiums ceded are deferred and amortized in a manner related to
the recognition of premiums earned. Earned ceding fees, commissions and
experience refunds are reported as reinsurance expense recoveries in the
consolidated statements of operations.

STOCK OPTION PLANS: Prior to January 1, 1996, the Company accounted for its
stock option plans in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock exceeded
the exercise price. On January 1, 1996, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made in 1995 and
future years as if the fair-value-based method defined in SFAS No. 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123
(see Note J).

RECLASSIFICATIONS: The Company has reclassified reinsurance premiums ceded of
approximately $2,824,000 in the accompanying consolidated financial statements
as of and for the year ended December 31, 1998. The effect of this
reclassification was to increase ceded reinsurance premiums and ceded loss and
loss adjustment expenses. Additionally, this increased amounts due from
reinsurers and amounts due from reinsurers on the accompanying consolidated
balance sheet. Certain other amounts in the 1998 and 1997 consolidated financial
statements have been reclassified to conform with the 1999 presentation. All of
these reclassifications had no impact on the net income (loss) and stockholder's
equity as previously reported.

NOTE B - SALE OF AUTO AFTERMARKET GROUP

On October 20, 1997, ACCEL entered into agreements to sell to Lyndon Insurance
Group, Inc. and Lyndon Life Insurance Company (collectively, "Lyndon") the
outstanding capital stock of ALIC, Acceleration National Service Company
("ANSC") and Dublin (collectively, the "Target Corporations") for $30.2 million
in cash and to sell to Lyndon Property Insurance Company ("Lyndon Property")
assets related to the vehicle extended service contract business of ACCEL's
wholly owned subsidiary, Acceleration National Insurance Company ("ANIC"), for
$10.3 million in cash. The sale was effective December 31, 1997.

The "Receivable from sale of discontinued and disposed of operations" of
approximately $703,000 as of December 31, 1998 in the Consolidated Balance
Sheets, represented the remaining unpaid portion of the adjusted sales price
determined by the Company under the sales agreements. This receivable was
utilized in connection with the settlement of a lawsuit in 1999. (see note M)




                                       29
<PAGE>   30
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE B - SALE OF AUTO AFTERMARKET GROUP (CONTINUED)


The after-tax net gain on sale of the Auto Aftermarket Group in 1997 was $3.2
million, which was comprised of a gain of $10.3 million in continuing operations
(included in "Other income" in the 1997 Consolidated Statement of Operations)
and a loss of $7.1 million in discontinued operations (excluding the provision
for operating loss of $495,000 during the phase-out period). The income tax
expense of $2.0 million included in the loss on disposal of business segment in
the 1997 Consolidated Statement of Operations includes $1.5 million of current
tax expense for the distribution of the policyholders' surplus account as a
result of the sale of ALIC (see Note H), current tax expense of $2.8 million for
the gain on the sale of the subsidiaries included in discontinued operations,
and $2.5 million deferred tax benefit and $.2 million current tax expense,
respectively, related to the operations during the phase-out period of the
subsidiaries included in discontinued operations.

In conjunction with the sale, on January 1, 1998, ANIC ceded via a quota share
reinsurance agreement 100% of its liability related to the vehicle extended
service contract business to Lyndon Property. Upon consummation of the
aforementioned sale, the Company ceased to be engaged in the auto aftermarket
credit insurance and extended service contract businesses. The consolidated
financial statements of the Company have been reclassified to reflect the
disposition of ALIC, ANSC and Dublin that comprised the Life/Health business
segment. Accordingly, the assets, liabilities, revenues, benefits and expenses,
and cash flows of ALIC and Dublin have been excluded from the respective
captions in the consolidated balance sheets, consolidated statements of
operations, and consolidated statements of cash flows for periods presented
prior to 1998. The net operating results of these entities have been reported,
net of applicable income taxes, as "Income from discontinued operations", the
assets and liabilities of these entities have been reported as "Assets of
discontinued operations" and "Liabilities of discontinued operations", and the
net cash flows of these entities have been reported as "Net cash (used in)
provided by discontinued operations."

Summarized information for the discontinued operations is as follows:

<TABLE>
<CAPTION>
                                                                     Year Ended
                                                                  December 31, 1997
                                                                  -----------------
                                                                (Thousands of dollars)
<S>                                                             <C>
Revenue                                                                $ 31,815
Income before provision for
     income taxes                                                        (3,787)
Income from discontinued operations, including loss
     on disposal, net of income taxes                                    (5,900)
</TABLE>


<TABLE>
<CAPTION>
                                                                    Prior to Sale on
                                                                      December 31,
                                                                          1997
                                                                          ----
                                                                 (Thousands of dollars)
<S>                                                              <C>
Total assets, consisting primarily of investments,
     receivables, prepaid reinsurance premiums and
     deposits, and deferred policy acquisition costs                    $124,011
Total liabilities, consisting primarily of policy
     reserves and claims                                                  91,855
                                                                        --------
Net assets of discontinued operations                                   $ 32,156
                                                                        ========
</TABLE>

The vehicle extended service contract business sold to Lyndon Property and ANSC
were components of the Company's property/casualty business segment, and
therefore are included in continuing operations for all periods presented.



                                       30

<PAGE>   31
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE B - SALE OF AUTO AFTERMARKET GROUP (CONTINUED)

Total assets consisting primarily of investments, cash, premiums receivable and
amounts due from affiliates for the vehicle extended service contract business
were $17.6 million as of December 31, 1997. Total liabilities consisting
primarily of unearned premium reserves, loss reserves and commissions payable
for the vehicle extended service contract business were $17.6 million as of
December 31, 1997. Other summarized financial information for the vehicle
extended service contract business is as follows:

<TABLE>
<CAPTION>
                                                        Year Ended
                                                     December 31, 1997
                                                     -----------------
                                                        (Thousands
                                                        of dollars)
<S>                                                  <C>
Revenue, primarily premiums and fee income on
  vehicle extended service contracts                      $9,223
Net income                                                   360
</TABLE>

NOTE C--INVESTMENTS

At December 31, 1999 and 1998, investments in cash and securities with a
carrying value of $5,886,000 and $5,458,000 respectively, were on deposit with
state insurance departments to satisfy regulatory requirements.

<TABLE>
<CAPTION>
                                                                                          Year Ended December 31,
                                                                              1999                1998                1997
                                                                             -------             -------             -------
                                                                                          (Thousands of dollars)
<S>                                                                          <C>                 <C>                 <C>
The change in net unrealized gains (losses) on fixed maturity
  and equity securities, is summarized as follows:

        Securities available for sale:
          Fixed maturities                                                   $  (970)            $   274             $   250
          Equity securities                                                     --                  --                   444
                                                                             -------             -------             -------
                                                                             $  (970)            $   274             $   694
                                                                             =======             =======             =======

Realized gains (losses) on investments are summarized as follows:

        Securities available for sale:
          Fixed maturities:
            Gross realized gains                                             $     5             $    20             $   102
            Gross realized losses                                               (129)               --                   (14)
          Equity securities:
            Gross realized gains                                                --                    77               1,206
            Gross realized losses                                               --                  (131)               (243)
        Short-term investments:
            Gross realized losses                                                (27)                (10)               --
        Other Invested Assets
            Gross realized gains                                                 252                --                  --
                                                                             -------             -------             -------
                                                                             $   101             $   (44)            $ 1,051
                                                                             =======             =======             =======


The major sources of investment income are summarized as follows:

        Fixed maturities                                                     $ 1,785             $ 1,847             $ 1,465
        Equity securities                                                       --                  --                   312
        Short-term investments                                                    72                 505                 297
        Other                                                                   --                  --                  --
                                                                             -------             -------             -------
                                                                               1,857               2,352               2,074
        Investment expenses                                                      (85)               (202)               (135)
                                                                             -------             -------             -------
           Net investment income                                             $ 1,772             $ 2,150             $ 1,939
                                                                             =======             =======             =======
</TABLE>


                                       31
<PAGE>   32
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

NOTE C--INVESTMENTS--(CONTINUED)

The amortized cost and estimated fair value of fixed maturity securities by
category, all of which were available for sale, are as follows:

<TABLE>
<CAPTION>
                                                                         Gross              Gross
                                                     Amortized         unrealized         unrealized             Fair
                                                        cost              gains             losses               value
                                                      -------            -------            -------             -------
                                                                              (Thousands of dollars)
<S>                                                  <C>                <C>               <C>              <C>
December 31, 1999
U. S. Treasury and U. S. government
   agency securities                                  $ 8,521            $     8            $   (84)            $ 8,445
State and political subdivision securities                 40                  1               --                    41
Mortgage-backed securities                              2,753               --                 (109)              2,644
Collateralized mortgage obligations                       887               --                  (49)                838
Asset-backed securities                                 6,463                  3               (220)              6,246
U. S. corporate securities                              2,928               --                 (130)              2,798
                                                      -------            -------            -------             -------
      Total                                           $21,592            $    12            $  (592)            $21,012
                                                      =======            =======            =======             =======

December 31, 1998
U. S. Treasury and U. S. government
   agency securities                                  $ 6,688            $   195            $  --               $ 6,883
State and political subdivision securities                110                  5               --                   115
Mortgage-backed securities                              4,499                 68                 (2)              4,565
Collateralized mortgage obligations                     2,031                 15               --                 2,046
Asset-backed securities                                12,655                 94                (18)             12,731
U. S. corporate securities                              3,970                 41                 (8)              4,003
                                                      -------            -------            -------             -------
      Total                                           $29,953            $   418            $   (28)            $30,343
                                                      =======            =======            =======             =======
</TABLE>

The amortized cost and estimated fair value of fixed maturity securities, all of
which were available for sale, at December 31, 1999, by contractual maturity,
are summarized as follows:

<TABLE>
<CAPTION>
                                                 Amortized            Fair
Maturity                                           cost               value
                                                  -------            -------
                                                    (Thousands of dollars)
<S>                                               <C>                <C>
Due in one year or less                           $   792            $   790
Due after one year through five years               8,452              8,355
Due after five years through ten years              2,245              2,139
Due after ten years                                  --                 --
Mortgage-backed securities                          2,753              2,644
Collateralized mortgage obligations                   887                838
Asset-backed securities                             6,463              6,246
                                                  -------            -------
        Total                                     $21,592            $21,012
                                                  =======            =======
</TABLE>

The expected maturities in the foregoing table will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without penalty. Mortgage-backed securities owned have an expected
weighted average maturity of over 10 years.

Proceeds from the sale of securities available-for-sale during 1999, 1998 and
1997 were $25,207,000, $70,234,000 and $80,615,000, respectively. Gross gains of
$5,000 ($97,000 in 1998 and $1,308,000 in 1997) and gross losses of $129,000 in
1999 ($131,000 in 1998 and $257,000 in 1997) were realized on those sales.

On August 10, 1999, the Company sold its 25% interest in USA Insurance Group,
Inc., the parent company of Transportation Insurance Specialists, the Company's
former general agent, producing a capital gain of $252,000. The Company also
received interest income associated with the sale of approximately $300,000. The
Company originally purchased the USAIG investment on April 1, 1998 for $5
million. This investment was accounted for using the equity method. At December
31, 1998, the investment in USAIG exceeded the Company's share of the underlying
net assets by $4.1 million and was being amortized on the straight-line method
over 10 years. At December 31, 1998, the investment in USAIG was included in
other invested assets. The Company recorded a net expense of $65,000 and
$189,000 in 1999 and 1998 respectively for its investment in USAIG that is
comprised of its share of USAIG's earnings of $(166,000) and $142,000 in 1999
and 1998 respectively, offset by amortization of $221,000 and $331,000 in 1999
and 1998 respectively.


                                       32
<PAGE>   33
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE D--STOCKHOLDERS' EQUITY AND TRANSFER LIMITATIONS

Generally, the net assets of ANIC available for transfer to ACCEL are limited to
the amounts that ANIC's net assets, as determined in accordance with statutory
accounting practices, exceed minimum statutory capital and surplus requirements;
however, payments of such amounts as dividends are currently subject to
regulation by Ohio law. The regulation limits the annual dividend or
distribution of an insurer to the greater of (1) net income of the previous year
or (2) 10% of unassigned surplus as of the end of the previous year. In
addition, all dividends must come from earned surplus to qualify as a
non-extraordinary dividend. Amounts greater than this would be considered
extraordinary dividends and could not be paid without permission of the
Department of Insurance of the State of Ohio ("Ohio Department"). Based on this
regulation, ANIC would require Ohio Department approval to pay any dividend to
ACCEL during 2000. See Note N regarding the Company's Risk Based Capital
position at the Authorized Control level.

The statutory basis capital and surplus and net income (loss) of ANIC, as
reported to insurance regulatory authorities, are summarized as follows:

<TABLE>
<CAPTION>
                                                                            ANIC
                                                                            ----
                                                                     (Thousands of dollars)
<S>                                                                  <C>
        Statutory capital and surplus at December 31:
                            1999                                            $ 4,105
                            1998                                             16,010

        Statutory net income (loss) for year ended December 31:
                            1999                                          $ (11,001)
                            1998                                             (9,173)
                            1997                                              8,826
</TABLE>

NOTE E - NOTES PAYABLE

On December 29, 1995, the Company issued senior notes (the "Senior Notes")
totaling $16.5 million at 9.50%, maturing on April 1, 2001. The proceeds from
these notes were used to retire a previous loan outstanding and to liquidate an
intercompany loan between ACCEL and an insurance subsidiary. The Senior Notes
were payable to the same unaffiliated company which was a party to a reinsurance
agreement with ALIC. This reinsurance agreement was structured such, that as
future profits emerged on the reinsured block of business, the profits would be
held by the reinsurance company, and ultimately applied to pay interest on and
to redeem the Senior Notes. Profits in excess of the amount required to retire
the Senior Notes were to be returned to ALIC. As of December 31, 1996, $1.5
million of the profits on this block of business were released to ALIC in the
form of the aforementioned Senior Notes. This release resulted in a balance of
$15.0 million of Senior Notes outstanding as of December 31, 1996. The
reinsurance agreement between ALIC and the unaffiliated company was commuted on
December 31, 1997 as a condition of the sale of the Auto Aftermarket Group. The
Senior Notes were transferred from the unaffiliated company to ALIC in
connection with the commutation of the reinsurance agreement on December 31,
1997 and retired with proceeds from the sale.

During 1997, ACCEL paid interest on notes of $1,069,000.

NOTE F--BUSINESS CONCENTRATION

Commercial Auto was the primary product line for the Company since its
introduction as a new product in 1996. The program was marketed by a general
agent located in Florida, Transportation Insurance Specialists ("TIS"), and its
affiliate, Countrywide Insurance Agency, Inc. ("Countrywide"). Gross written
premium was $17.6 million, $35.7 million and $30.3 million, respectively for
1999, 1998 and 1997. Gross earned premium was $26.8 million, $37.2 million and
$23.6 million, respectively, for 1999, 1998 and 1997, while premium receivable,
net of commission, due from the general agents was $1.0 million and $7.7
million, respectively, as of December 31, 1999 and 1998.


                                       33
<PAGE>   34
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

NOTE G--REINSURANCE

The ceding of insurance through reinsurance agreements does not discharge the
primary liability of the original underwriter to the insured, but it is the
practice of insurers to treat risks that have been reinsured with other
companies, to the extent of the reinsurance, as though they were not risks for
which the original insurer is liable. Should the reinsurer not be able to meet
its obligations, those obligations are the ultimate responsibility of the
Company. Therefore, in financial statement presentation, premiums earned and
loss and loss adjustment expenses are presented net of that portion of risks
reinsured with other companies.

In 1996, the Company entered into reinsurance contracts associated with its
property and casualty lines. Under these agreements, the Company transfers a
percentage of risk to the related reinsurer. The Company also has agreements
that transfer risks after a predetermined loss has been reached. Premiums ceded
amounted to $6.5 million, $27.3 million and $17.1 million for 1999, 1998 and
1997, respectively. Unearned premium reserves associated with these agreements
at December 31, 1999 and 1998 are $11.0 million and $19.8 million, respectively;
and the liability for reinsurance claims is $40.0 million and $33.4 million at
December 31, 1999 and 1998, respectively.

Premiums written and earned in 1999, 1998 and 1997 are summarized as follows:

<TABLE>
<CAPTION>
                                 1999                                 1998                                   1997
                               --------                             --------                               --------
                      Written             Earned            Written             Earned            Written             Earned
                      --------           --------           --------           --------           --------           --------
                                                               (Thousands of dollars)
<S>                   <C>                <C>                <C>                <C>                <C>                <C>
Direct                $ 17,140           $ 29,984           $ 37,872           $ 42,297           $ 38,848           $ 30,885
Assumed                  4,619              6,120              5,413              4,660              2,049                957
Ceded                   (6,789)           (15,805)           (27,300)           (30,957)           (17,118)           (13,125)
                      --------           --------           --------           --------           --------           --------
Net premiums          $ 14,970           $ 20,299           $ 15,985           $ 16,000           $ 23,779           $ 18,717
                      ========           ========           ========           ========           ========           ========
</TABLE>

Loss and loss adjustment expenses incurred in 1999, 1998 and 1997 are summarized
as follows:


<TABLE>
<CAPTION>
                                        1999               1998               1997
                                      --------           --------           --------
                                                  (Thousands of dollars)
<S>                                   <C>                <C>                <C>
Direct                                $ 47,091           $ 48,296           $ 27,593
Assumed                                  5,620              5,007              1,150
Ceded                                  (23,922)           (34,076)           (13,370)
                                      --------           --------           --------
Net loss and loss adjustment
  expenses                            $ 23,922           $ 19,227           $ 15,373
                                      ========           ========           ========
</TABLE>

NOTE H--FEDERAL INCOME TAXES

The Company files a consolidated federal income tax return with its
subsidiaries.

In 1998 and 1997 the Company paid $3,856,000 and $825,000, respectively, in
federal income taxes. During 1999, the Company did not pay any federal income
taxes.

Total income tax expense (benefit) differed from the amount computed by applying
the statutory federal income tax rate to income (loss) before taxes as follows:

<TABLE>
<CAPTION>
                                                                 Year Ended December 31,
                                                         1999              1998              1997
                                                        -------           -------           -------
                                                                   (Thousands of dollars)
<S>                                                     <C>               <C>               <C>
        Income tax (benefit) at statutory rate          $(5,863)          $(3,645)          $ 2,769
        Amortization of goodwill                             75               104                36
        Dividends-received deduction                       --                --                 (50)
        Tax-exempt interest                                --                --                 (10)
        Net operating loss                                 --                --              (1,656)
        Net operating loss for future use                  --                --              (2,353)
        Valuation allowance                               5,788             3,553             2,329
        Refund of prior year taxes                         --                (270)             --
        Other, net                                         --                 (12)               36
                                                        -------           -------           -------
        Federal income tax expense (benefit)            $  --             $  (270)          $ 1,101
                                                        -------           =======           =======
</TABLE>



                                       34
<PAGE>   35
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE H--FEDERAL INCOME TAXES--(CONTINUED)

The tax effects of temporary differences that give rise to significant
components of the deferred tax assets and liabilities at December 31, 1999 and
1998 are summarized as follows:

<TABLE>
<CAPTION>
                                                               December 31,
                                                         1999               1998
                                                       --------           --------
                                                          (Thousands of dollars)
<S>                                                    <C>                <C>
        Deferred Tax Liabilities:
            Deferred policy acquisition costs          $     95           $    953
            Other                                          --                  293
                                                       --------           --------
                                                             95              1,246
                                                       --------           --------
        Deferred Tax Assets:
            Unearned premium reserves                        82                444
            Deferred reinsurance commissions                 39                513
            Net operating loss carryforward              11,939              6,660
            Insurance reserves                            1,202                275
            Other                                           263                 36
                                                       --------           --------
        Total deferred tax assets                        13,525              7,928
            Valuation allowance                         (13,430)            (6,682)
                                                       --------           --------
                                                             95              1,246
                                                       --------           --------
        Net deferred tax assets                        $      0           $      0
                                                       ========           ========

</TABLE>


The Company has $35.1 million of net operating losses that are available to
reduce future income taxes and will expire as follows: $6.9 million in 2009,
$11.6 million in 2018, and $16.6 million in 2019.

The Company has determined the valuation allowance related to the deferred tax
assets based on its analysis of future deductible amounts. This analysis
included a schedule of the deductibility of non-life items pursuant to Section
801 of the Internal Revenue Code and a determination of the realization of
losses generated by available for sale securities. The Company recorded a
valuation allowance of $13,430,000 and $6,682,000 as of December 31, 1999 and
1998, respectively.

A portion of the change in the valuation allowance in both 1999 and 1998 is due
to an increase in the deferred tax liability for unrealized gains on
investments. This decrease in the valuation allowance is reflected as an
increase to accumulated other comprehensive income in the accompanying
consolidated statement of stockholders' equity.


                                       35
<PAGE>   36
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

NOTE I--LIABILITY FOR INSURANCE CLAIMS

The following table provides a reconciliation of beginning and ending liability
balances for the Company's insurance claims for 1999, 1998 and 1997.

<TABLE>
<CAPTION>
                                                                 1999               1998               1997
                                                               --------           --------           --------
                                                                          (Thousands of dollars)
<S>                                                            <C>                <C>                <C>
     Liability for insurance claims
       at beginning of year                                    $ 49,535           $ 22,028           $ 11,016

       Less reinsurance recoverables                            (36,209)           (14,250)            (5,820)
                                                               --------           --------           --------

     Net balances at beginning of year                           13,326              7,778              5,196

     Loss and loss adjustment expenses incurred:

       Loss and loss adjustment expenses incurred for
         events of the current year                              21,252             14,506             15,705

       Loss and loss adjustment expenses incurred for
         events of prior years                                    2,670              4,721               (332)
                                                               --------           --------           --------

     Total loss and loss adjustment expenses incurred            23,922             19,227             15,373
                                                               --------           --------           --------


     Payments:

       Loss and loss adjustment expenses for insured
         events of the current year                               8,918              7,616              9,558

       Loss and loss adjustment expenses for insured
         events in prior years                                    8,902              6,063              3,233
                                                               --------           --------           --------

     Total payments                                              17,820             13,679             12,791
                                                               --------           --------           --------

     Net balances at end of year                                 19,428             13,326              7,778

     Plus reinsurance recoverables                               39,993             36,209             14,250
                                                               --------           --------           --------

     Liability for insurance claims
       at end of year                                          $ 59,421           $ 49,535           $ 22,028
                                                               ========           ========           ========
</TABLE>

The table above reflects increases in the liability for insurance claims
resulting from the Company's continued expansion into the Commercial Auto
business (until all programs were discontinued in mid-1999). Maturity of claims
for this line of business has resulted in recording, in 1999 and 1998,
$2,670,000 and $3,667,000, respectively, in additional loss and loss adjustment
expenses incurred for prior policy years.

In establishing the liability for insurance claims, management considers facts
currently known and the current state of the law and coverage litigation.
Liabilities are recognized for known claims (including the cost of related
litigation) when sufficient information has been developed to indicate the
involvement of a specific insurance policy, and management can reasonably
estimate its liability. In addition, liabilities have been established to cover
additional exposures on both known and unasserted claims. Estimates of the
liabilities are reviewed and updated continually.


NOTE J--COMMON STOCKS AND COMMON STOCK OPTIONS

In 1992, the Board of Directors voted to suspend payment of cash dividends on
the common stock until the Company returns to a level of profitability that will
sustain the payment of cash dividends.


                                       36
<PAGE>   37
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

NOTE J--COMMON STOCKS AND COMMON STOCK OPTIONS--(CONTINUED)

ACCEL's Board of Directors approved an Employee Stock Ownership Plan ("ESOP")
during 1989. In 1990, the ESOP entered into an agreement with ALIC to borrow up
to $1.0 million for the purchase of ACCEL's common stock. This loan was retired
in 1997.

During 1982, ACCEL adopted a stock option plan (the "82 Plan") under which
shares of common stock were made available to eligible officers and key
personnel. Under the terms of the 82 Plan, the option price had to be at least
100% of the fair value at the date of grant, and, accordingly, there were no
charges to income resulting from grants. Options were granted at prices ranging
from $2.769 to $11.750 per share from April 1982 through April 1992. The options
become exercisable after one year of continuous employment in installments of
50% at the end of the first and the second year from the date of grant and
expired ten years from the date of grant. A total of 300,000 (349,672 after
giving effect to all subsequent stock dividends) shares had been reserved for
options under the 82 Plan. No additional shares may be granted under the 82
Plan.

During 1987, ACCEL adopted the 1987 Incentive Stock Option Plan (the "87 Plan").
The 87 Plan provided for incentive stock options with respect to a maximum of
300,000 (347,287 after giving effect to all subsequent stock dividends) shares
of common stock of ACCEL prior to the expiration of the 87 Plan in April 1997.
During June of 1991, ACCEL's Board of Directors and shareholders approved the
First Restatement of the 1987 Stock Incentive Plan (the "Restated Plan"). The
Restated Plan replaced the 87 Plan except as to options granted and outstanding
under the 87 Plan. The Restated Plan reserved an additional 450,000 shares for
key employees and 50,000 shares for non-employee directors. Options could be
granted prior to expiration of the Restated Plan covering shares subject to
lapsed or terminated options. No additional shares may be granted under the 87
Plan or the Restated Plan.

During May 1995, two new key employees were granted stock options under ACCEL's
Restated Plan. Under the terms of their arrangement with ACCEL, both were
granted stock options for ACCEL's common stock in lieu of salary for their first
year of service. Options for 150,000 shares were granted at an option price per
share of $2.125, the fair value of ACCEL's common stock on the date of grant.
The options vest immediately and become exercisable one year following the date
of grant; however, they would become exercisable immediately upon either a)
change of control of ACCEL, or b) involuntary termination. The options would be
forfeited if employment with ACCEL was voluntarily terminated prior to May 23,
1996. The options will lapse five years from the effective date of grant.

At the end of their first and second years of service, the status of these two
key employees was evaluated by the Compensation Committee and based on the value
of their services, began receiving compensation effective June 1, 1996. As part
of their compensation both were granted stock options pursuant to the 1996 Stock
Incentive Plan (the "96 Plan"). In 1996, options for 165,000 shares were granted
at an option price per share of $2.50, the fair value of ACCEL's common stock on
the date of grant. In 1997, options for 90,000 shares were granted at an option
price per share of $2.75, the fair value of ACCEL's common stock on the date of
grant. The terms are identical to the aforementioned options granted in May
1995.

In June 1996, ACCEL stockholders approved the adoption of the 96 Plan. The 96
Plan provides for stock options, stock appreciation rights, restricted stock,
phantom stock and performance awards. No award may be granted after June 11,
2006, the expiration date of the 96 Plan. The total number of shares of common
stock available under the 96 Plan is 1,000,000 shares and up to 100,000 shares
may be issued pursuant to the exercise of outside directors' stock options.

    Options granted to employees or independent agents of the Company under the
96 Plan will be priced at not less than 100% of the fair value of the common
stock on the date of grant and will become exercisable as to 25% of the shares
subject to the option upon completion of each full year of employment until
fully vested. Grants of options to outside directors under the 96 Plan will also
be priced at 100% of fair value on the date of grant but, in the absence of any
provisions in an option to the contrary, the options will become exercisable as
to 50% of the shares subject to the option upon completion of each full year
until vested. In substantially all other respects, the 96 Plan contains
provisions similar to the previous plans.


                                       37
<PAGE>   38
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE J--COMMON STOCKS AND COMMON STOCK OPTIONS--(CONTINUED)

On August 28, 1996, the Board of Directors of the Company approved a resolution
to offer to all key employees holding options outstanding that were priced in
excess of the current market value the opportunity to receive "re-priced"
options. Such key employees were permitted to surrender, cancel and terminate
any or all outstanding options (whether vested or not) and receive options for
an equal number of shares under the 96 Plan at the then current price of $2.50
per share. The re-priced or "replacement" options would be newly granted options
and become exercisable in accordance with the vesting provisions of the 96 Plan.
A total of 161,371 shares were surrendered by key employees as part of the
re-pricing opportunity and 4,500 shares were not surrendered.

The following table summarizes activity under the respective plans.

<TABLE>
<CAPTION>
                                            1999                           1998                           1997
                                 -------------------------      --------------------------      -------------------------
                                  Number         Weighted         Number         Weighted        Number         Weighted
                                 of Shares      Avg. Price      of Shares       Avg. Price      Of Shares      Avg. Price
                                 ---------      ----------      ---------       ----------      ---------      ----------
<S>                              <C>            <C>             <C>             <C>             <C>            <C>
1996 Plan
Outstanding at
   Beginning of year               858,623         $2.720         558,054         $2.595         430,371         $2.514
Outstanding at
   End of year                     480,868         $2.635         858,623         $2.720         558,054         $2.595
Exercisable                        255,262         $2.635         368,359         $2.589         205,821         $2.509
Granted                             80,000         $0.688         338,500         $2.933         207,000         $2.750
Exercised                             --             --             4,513         $2.569          28,021         $2.554
Forfeited                          457,755         $2.740          33,418         $2.798          51,296         $2.563
Expired                               --             --              --             --              --             --

1987 Restated Plan-Employees
Outstanding at
    beginning of year               67,500         $2.238         122,285         $3.347         191,881         $4.503
Outstanding at
    end of year                     54,250         $2.238          67,500         $2.238         122,285         $3.347
Exercisable                         54,250         $2.238          67,500         $2.238         122,285         $3.328
Granted                               --             --              --             --              --             --
Exercised                             --             --            19,500         $2.125          12,000         $2.125
Forfeited                           13,250         $2.391          35,285         $6.035            --           $ --
Expired                               --             --              --             --            57,596         $7.451
</TABLE>


                                       38
<PAGE>   39
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

NOTE J--COMMON STOCKS AND COMMON STOCK OPTIONS--(CONTINUED)

<TABLE>
<CAPTION>
                                      1999                                1998                                1997
                         -------------------------------     -------------------------------     -------------------------------
                            Number           Weighted           Number           Weighted           Number           Weighted
                          of Shares         Avg. Price        of Shares         Avg. Price        of Shares         Avg. Price
                          ---------         ----------        ---------         ----------        ---------         ----------
<S>                       <C>               <C>               <C>               <C>               <C>               <C>
1987 Restated Plan-Non
    Employee Directors
Outstanding at
    beginning of year          35,000          $  6.025            36,000          $  6.025            49,000          $  5.860
Outstanding at
    end of year                30,000          $  5.916            35,000          $  6.025            36,000          $  6.025
Exercisable                    30,000          $  5.916            35,000          $  6.025            36,000          $  6.025
Granted                             -                 -                 -                 -                 -                 -
Exercised                           -                 -                 -                 -             4,000          $  2.375
Forfeited                       5,000          $  6.675             1,000          $  6.025             9,000          $  6.347
Expired                             -                 -                 -                 -                 -                 -

1982 Plan
Outstanding at
    beginning of year               -                 -            15,049          $  6.263            18,524          $  6.486
Outstanding at
    end of year                     -                 -                 -                 -            15,049          $  6.263
Exercisable                         -                 -                 -                 -            15,049          $  6.263
Granted                             -                 -                 -                 -                 -                 -
Exercised                           -                 -                 -                 -                 -                 -
Forfeited                           -                 -                 -                 -                 -                 -
Expired                             -                 -            15,049          $  6.263             3,475          $  7.451
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 1999:

<TABLE>
<CAPTION>
        Range of           # Outstanding          Weighted Avg.        Weighted Avg.           # Exercisable          Weighted Avg.
    Exercise Prices         at 12/31/99          Remaining Life       Exercise Prices           at 12/31/99          Exercise Prices
    ---------------         -----------          --------------       ---------------           -----------         ----------------
<S>                        <C>                   <C>                  <C>                       <C>                 <C>
        $2 - $4               545,118                    7.0                $2.341                319,512                 $2.193
        $4 - $6                10,000                    3.5                $5.188                 10,000                 $5.188
        $6 - $8                     -                      -                     -                      -                      -
        $8 - $10               10,000                    1.5                $9.750                 10,000                 $9.750
                               ------                    ---                ------                 ------                 ------
         Total                565,118                    6.8                $2.771                339,512                  2.861
                              =======                    ===                ======                =======                  =====
</TABLE>

The per share weighted-average fair value of stock options granted during 1999,
1998 and 1997 was $0.94, $1.56 and $1.42, respectively, on the date of grant
using the Black Scholes option-pricing model with the following weighted-average
assumptions: 1999 - expected dividend yield 0%, risk-free interest rate of 6.00%
and expected lives of 10 years (based on the terms of the grant); 1998 -
expected dividend yield 0%, risk-free interest rate of 6.00%, and expected lives
of 5 to 10 years (based on the terms of the grant); 1997 - expected dividend
yield 0%, risk-free interest rate of 6.00%, and expected lives of 5 to 10 years
(based on the terms of the grant). The Company used a volatility factor of 25%
in determining the fair value of options for pro forma purposes.

The Company applies APB Opinion No. 25 in accounting for these plans and,
accordingly, no compensation cost has been recognized for its stock options in
the consolidated financial statements.


                                       39
<PAGE>   40
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

NOTE J--COMMON STOCKS AND COMMON STOCK OPTIONS--(CONTINUED)

Had the Company determined compensation cost based on the fair value at the
grant date for its stock options under SFAS No. 123, the Company's net income
(loss) would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                               1999               1998               1997
                                                                            ----------         ----------         ----------
<S>                                                                         <C>                <C>                <C>
         Net income (loss) as reported (in millions)                        $  (17,245)        $  (10,451)        $    1,115
         Pro forma net income (loss) (in millions)                             (17,245)           (10,603)             1,044

         Net income (loss) per share as reported - basic                    $    (2.02)        $    (1.22)        $      .13
         Net income (loss) per share as reported - assuming dilution             (2.02)             (1.22)               .13
         Pro forma net income (loss) per share - basic                           (2.02)             (1.24)               .12
         Pro forma net income (loss) per share - assuming dilution               (2.02)             (1.24)               .12
</TABLE>

Pro forma net income reflects only options granted subsequent to 1994.
Therefore, the full impact of calculating compensation cost for stock options
under SFAS No. 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options' vesting
periods from one to four years and compensation cost for options granted prior
to January 1, 1995 is not considered.

The Company's stock options were not included in diluted earnings per share
because their effect on the periods presented was antidilutive.

NOTE K--SEGMENT INFORMATION

The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information, in 1998. This standard, which does not have an effect
on net income, established standards for disclosing segment information.

The Company operated primarily in the property & casualty insurance industry
within the United States with a second segment for Corporate which includes the
Company's equity method of accounting for the former investment in USAIG (see
Note C) and other corporate investments. The Company's management has determined
the operating segments based upon how the business is managed and operated.
There are no intersegment sales. The allocations of certain general expenses and
investment income within segments are based on a number of assumptions, and the
reported operating results would change if different methods were applied.
Depreciation and capital expenditures are not considered material.

Segment information is summarized as follows:

<TABLE>
<CAPTION>
                                                                            Year Ended December 31,
                                                                    1999              1998              1997
                                                                  ---------         ---------         ---------
                                                                         (Thousands of dollars)
<S>                                                               <C>               <C>               <C>
Revenue:
        Property/Casualty                                         $  21,901         $  21,058         $  35,055
        Corporate                                                       537               249               231
                                                                  ---------         ---------         ---------
           Total                                                  $  22,438         $  21,307         $  35,286
                                                                  =========         =========         =========
Equity in net income (loss) of equity method investees:
        Property/Casualty                                              --                --                --
        Corporate                                                 $    --           $    (189)             --
                                                                  ---------         ---------         ---------
           Total                                                  $    --           $    (189)             --
                                                                  =========         =========         =========
Income (loss) before federal income taxes and discontinued
  operations:
        Property/Casualty                                         $ (12,725)        $  (9,682)        $   9,901
        Corporate                                                    (4,520)           (1,039)           (1,785)
                                                                  ---------         ---------         ---------
           Total                                                  $ (17,245)        $ (10,721)        $   8,116
                                                                  =========         =========         =========
Identifiable assets:
        Property/Casualty                                         $  72,629         $  90,758         $  89,303
        Corporate                                                       406             6,684            14,791
                                                                  ---------         ---------         ---------
           Total                                                  $  73,035         $  97,442         $ 104,094
                                                                  =========         =========         =========
Investment in equity method investees:
        Property/Casualty                                         $    --           $    --           $    --
        Corporate                                                      --               4,747
                                                                  ---------         ---------
           Total                                                  $    --           $   4,747         $    --
                                                                  =========         =========         =========
</TABLE>


                                       40
<PAGE>   41
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE L--RETIREMENT SAVINGS AND STOCK OWNERSHIP PLAN

The Acceleration Retirement Savings Plan became effective in 1985. During 1989,
ACCEL's Board of Directors approved changes to this plan to include an ESOP and
concurrently changed the plan name to the "Acceleration Retirement Savings and
Stock Ownership Plan" ("Plan"). For the first six months of 1997, the Board
authorized contributions to the Plan at a level that would fund a 100% match of
the first 6% of each participating employee's tax deferred contributions.

Effective July 1, 1997, the Company reorganized the Plan into two separate
Plans. One plan, the ACCEL International Corporation 401K Plan ("401K Plan"),
authorized contributions at a level that would fund a 75% match of the first 6%
of each participating employee's tax deferred contributions. The second plan,
the ACCEL International Corporation Stock Ownership Plan ("ESOP Plan"),
authorized a 2% discretionary funding to the plan for each eligible employee.
The Company incurred contribution expense for 1999, 1998, and 1997 of $70,070,
$111,000 and $209,000, respectively.

The 401K Plan allowed all employees who meet certain eligibility requirements
and choose to participate to defer a percentage of their salary and contribute
to the 401K Plan on a tax deferred basis. Company contributions to the ESOP Plan
were used to purchase shares of ACCEL's common stock. As a result of the
reorganization of the 401K and ESOP Plans, the Company funded $68,000 as a
partial termination in 1997.

As of December 31, 1999 the 401K and ESOP Plans were still operative, but no
further contributions are being made to either of the plans as of year-end. The
plans are in the process of termination pending receipt of determination letters
from the IRS.

NOTE M--COMMITMENTS AND CONTINGENCIES

Due to the nature of its operations, the Company is at all times subject to
pending and threatened legal actions that arise in the normal course of its
activities. In management's evaluation of certain pending matters, based on the
advice or information and analysis of outside counsel, the accompanying
consolidated financial statements would not be materially affected by the
outcome of any legal proceedings or contingent liabilities.

In July 1991, the Company acquired 100% of RGL. Galaxy Insurance Company
("Galaxy"), a wholly owned subsidiary of RGL, wrote commercial property
insurance, property and casualty, and assumed treaty reinsurance. Galaxy became
statutorily insolvent at June 30, 1994. Due to the insolvency of Galaxy, the
Company wrote its investment in RGL to zero and deconsolidated RGL as of April
1, 1994.

On October 7, 1994, the Liquidation Bureau took control of Galaxy pursuant to an
order of liquidation of the New York Supreme Court. Prior to the liquidation of
Galaxy, ANIC had issued certain certificates of suretyship ("Certificates") with
respect to certain Galaxy insurance policies each of which provided that ANIC
would assume the responsibilities of Galaxy under the specified policy if Galaxy
became insolvent or financially unable to meet its obligations on the underlying
policy, but only if certain conditions were met. In particular, the Certificates
provided that ANIC's assumption of liability was contingent upon the insured's
executing and delivering all agreements, assignments or evidences of subrogation
satisfactory to ANIC respecting payments made or liabilities assumed.

In May 1996, the Liquidation Bureau, acting on behalf of the New York
Property/Casualty Insurance Security Funds (the "Guaranty Fund"), informally
advised the Company that on behalf of the Guaranty Fund it intended to seek
indemnification or reimbursement from ANIC for claims paid by the Guaranty Fund
to Galaxy insureds on policies which may have been covered by the Certificates.
The company has taken the position that the Guaranty Fund has no right to seek
indemnification unless Galaxy insureds who hold properly issued Certificates
have executed assignments and evidences of subrogation to ANIC. Even if any
Galaxy insured properly made such a claim directly to ANIC, the Company has been
advised by counsel that if ANIC paid any such claim, it would have the right,
under assignment and subrogation agreements with its insureds, to assert all
rights that the insureds could have asserted to recover the loss amounts from
any other source, including the Guaranty Fund.

In early 1998, the Superintendent of Insurance of the State of New York, as
Liquidator of Galaxy and Administrator of the Guaranty Fund ("Superintendent"),
filed suit against ANIC in New York State Supreme Court. The complaint alleged,
among other things, breach of contract and demanded that ANIC specifically
perform its alleged obligations under the Certificates. The complaint asked for
an amount in excess of $6.5 million in damages.


                                       41
<PAGE>   42
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE M--COMMITMENTS AND CONTINGENCIES -- (CONTINUED)

As reflected above, the suit requested indemnification or reimbursement for the
claims paid or to be paid by the Guaranty Fund to Galaxy insureds on policies
which may have been covered by the Certificates. ANIC has maintained that the
Guaranty Fund does not have the right to seek indemnification unless the terms
and conditions of validly issued Certificates have been strictly complied with.
Accordingly, ANIC filed for dismissal of the suit which motion was granted by
the Court on October 6, 1998. Thereafter, the Superintendent moved to reargue
and renew his opposition to ANIC's motion to dismiss. By an Order dated February
23, 1999, the Court denied the Superintendent's motion. The Superintendent has
filed a Notice of Appeal of the Court's Decision and Order dismissing the
complaint, and has filed a brief in support of the appeal. ANIC will continue to
defend vigorously against the Superintendent's lawsuit.

On October 1, 1999 settlement was reached regarding a November 1997 suit that
was filed against ALIC by three long-term care policyholders seeking to
represent a class of North Dakota policyholders alleging breach of contract,
fraud and misrepresentation. Pursuant to the settlement agreement, ALIC paid
$4.0 million toward a global, nationwide settlement. ACCEL, which had
conditionally contracted with Lyndon Life (to whom ALIC was sold), agreed to pay
$2.3 million plus the proceeds from a suit against Lyndon Life that was expected
to produce in excess of $.7 million, previously carried as a receivable. The
total reimbursement to Lyndon was therefore in excess of $3.0 million. Lyndon
maintains that ACCEL owes at least an additional $.7 million, that ACCEL refuses
to pay on the grounds that ACCEL only authorized a total of $3.0 million in
accordance with the sale contract. ACCEL will vigorously oppose making any
additional payments.

Although the Company does not currently operate from certain office space, it is
still obligated under two operating leases that expire in 2000 and 2001. These
leases are accounted for as operating leases. Minimum rental commitments in
effect at December 31, 1999 are as follows:

<TABLE>
<CAPTION>
             Year Payable                      Annual Minimum Rentals
             ------------                      ----------------------
<S>                                            <C>
                 2000                                $ 125,000
                 2001                                   38,000
                                                     ---------
                 Total                               $ 163,000
                                                     =========
</TABLE>

The amount of rent charged to operations was $197,234 and $80,000 in 1999 and
1998, respectively.

NOTE N--RISK BASED CAPITAL

The Ohio Department imposes risk based capital ("RBC") requirements on insurance
enterprises, including ANIC. The RBC Model serves as a benchmark for the
regulation of property/casualty insurance companies by state insurance
regulators. RBC provides for targeted surplus levels based on formulas which
specify various weighting factors that are applied to financial balances or
various levels of activity based on the perceived degree of risk, and are set
forth in the RBC requirements. Such formulas focus on four general types of
risk: (a) the risk with respect to the company's assets (asset or default risk);
(b) the risk of default on amounts due from reinsurers, policyholders or other
creditors (credit risk); (c) the risk of under-estimating liabilities from
business already written or inadequately pricing business to be written in the
coming year (underwriting risk); and, (d) the risk associated with items such as
excessive premium growth, contingent liabilities and other items not reflected
on the balance sheet (off-balance sheet risk). The amount determined under such
formulas is called the authorized control level RBC ("ACLC").

The RBC guidelines define specific capital levels based on a company's ACLC that
are determined by the ratio of the company's total adjusted capital ("TAC") to
its ACLC. TAC is equal to statutory capital, plus or minus certain other
specified adjustments. The specific capital levels, in declining order, and
applicable ratios are generally as follows: "Company Action Level" where TAC is
less than or equal to 2.0 times ACLC; "Regulatory Action Level" where TAC is
less than or equal to 1.5 ACLC; "Authorized Control Level" where TAC is less
than or equal to 1.0 times ACLC; and, "Mandatory Control Level" where TAC is
less than or equal to 0.7 times ACLC. Companies at the Company Action Level must
submit a comprehensive financial plan to the insurance commissioner of the state
of domicile. Companies at the Regulatory Action Level are subject to a mandatory
examination or analysis by the commissioner and possible required corrective
actions. At the Authorized Control Level, a company is subject to, among other
things, the commissioner placing it under regulatory control. At the Mandatory
Control Level, the insurance commissioner is required to place a company under
regulatory control.

At December 31, 1999, ANIC's TAC was $4,105,000 or 0.97 times its ACLC.
Accordingly, ANIC is within the Authorized Control Level. This RBC level is
based on ANIC's recording of additional incurred losses and loss adjustment
expenses of $1.4 million above the


                                       42
<PAGE>   43
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)


NOTE N--RISK BASED CAPITAL -- (CONTINUED)

amounts reflected in the 1999 statutory annual statement as filed with the Ohio
Department of Insurance. ANIC has not been required to file an amended 1999
statutory annual statement. The Company was already in discussion with the Ohio
Insurance Department regarding its 1998 RBC calculation, and its expected
December 31, 1999 calculation. Following a targeted examination held in January,
2000 by the Ohio Department, the Department is planning to visit the Company in
the early Spring, 2000 for a mandatory examination to review and comment on
corrective actions already taken and further planned actions by the Company's
new management. On March 8, 2000, ANIC received a letter from the Department
requesting that the Company file a RBC plan by April 18, 2000.

On March 29, 2000, management met with the Ohio Department of Insurance. As a
result of the meeting, ANIC has agreed to take the following corrective steps:
(1) beginning in March 2000, ANIC will file an abbreviated monthly statutory
financial report with the Ohio Department of Insurance; (2) ANIC will continue
its current strategy to no longer write any new or renewal business in any state
until a further agreement can be made with the Department; and (3) ANIC will
file a RBC financial plan which includes the run-off of the existing business as
well as management's expected plan for both raising capital and entering into
the non-standard auto business. In the future, the Company intends for ANIC to
insure a portion of the non-standard auto business produced by the Company's
recently acquired agencies. The Company expects this owned agency business to
grow and be successful both in terms of producing after-tax profits for its own
agency operating segment, as well as producing profitable non-standard auto
business for ANIC. The Company also expects the AIM acquisition will produce
profitable service-fee business from underwriting management, managing general
agency fees, and claims administration. Finally, management acknowledges the
need for additional capital for ANIC and is considering various alternatives,
including utilization of the credit facility described in Note Q and other
sources of capital.


NOTE O - QUARTERLY CONSOLIDATED RESULTS OF OPERATIONS  (UNAUDITED)

Quarterly consolidated results of operations for 1999 and 1998 are summarized as
follows:

<TABLE>
<CAPTION>
                                                  First          Second           Third          Fourth
                                                 Quarter         Quarter         Quarter         Quarter
                                                 -------         -------         -------         -------
                                                      (Thousands of dollars, except per share data)
<S>                                              <C>             <C>             <C>             <C>
1999
Premiums written                                 $ 8,539         $ 6,689         $ 3,918         $ 2,613
Premiums earned                                    5,873           6,469           5,150           2,807

Loss and loss adjustment expense incurred          4,325           7,144           5,408           7,045

Net loss                                          (1,259)         (4,905)         (4,288)         (6,793)


Net loss per common share:
  Basic and assuming dilution                       (.15)           (.57)           (.50)           (.80)
</TABLE>


                                       43
<PAGE>   44
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(CONTINUED)

NOTE O -QUARTERLY CONSOLIDATED RESULTS OF OPERATIONS  (UNAUDITED) - (CONTINUED)

<TABLE>
<S>                                              <C>              <C>              <C>              <C>
1998
Premiums written                                 $ 13,791         $ 11,141         $  8,772         $  9,581
Premiums earned                                     4,883            5,413            3,746            1,958
Loss and loss adjustment expense incurred           3,869            4,368            3,570            7,420

Net loss                                             (508)            (851)            (647)          (8,445)

Net loss per common share:
  Basic and assuming dilution                        (.06)            (.10)            (.08)            (.99)
</TABLE>

The increase in loss and loss adjustment expense in the fourth quarters of 1999
and 1998 are the result of actuarial reviews of reserves which produced a
strengthening of reserves for continuing lines of business.


NOTE P - COMPREHENSIVE INCOME

The following reconciles the components of other comprehensive income for the
years ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                         1999              1998              1997
                                                         -----             -----             -----
                                                                   (Thousands of dollars)
<S>                                                      <C>               <C>               <C>
Net unrealized holding gains (losses)
        Arising during the period                        $(1,071)          $ 303             $ 283


Less:  Net  reclassification adjustments for
        gains (losses) included in net income            $  101            $ (29)            $ 411
                                                         ------            -----             -----
Net unrealized gains (losses) on securities
        Arising during the period                        $ (970)           $ 274             $ 694
                                                         ======            =====             =====
</TABLE>

NOTE Q - SUBSEQUENT EVENTS

On January 14, 2000, the Company acquired 100% of the stock of Allegiance
Insurance Managers, LTD. (AIM). Gerald H. Pastor, FCAS, President, CEO and
principal shareholder of AIM was elected President & CEO of ACCEL's subsidiary,
ANIC in October, 1999 and of ACCEL in November, 1999. In consideration for the
acquisition, ACCEL has issued 529,040 shares of its common stock to shareholders
of AIM, other than Pastor, and will issue an additional 997,036 shares to Pastor
upon and subject to receipt of clearance by the Ohio Department of Insurance.
Should the forgoing clearance not be received, ACCEL will issue to Pastor such
other consideration as may be mutually agreed upon by ACCEL and Pastor, which
may include a lesser number of shares of ACCEL common stock (subject to the
foregoing clearance) and/or other securities. Under the terms of the
transaction, ACCEL will also issue up to an additional 2,180,110 shares of its
common stock to the shareholders of AIM if the combined business meets certain
performance criteria over the six years after the acquisition. If the business
does not achieve certain cumulative earnings by December 21, 2002, the former
AIM shareholders will return 763,038 shares to ACCEL.

AIM operates as an underwriting manager, managing general agency, and claims
administrator for various programs, companies and clients. It will continue to
expand its operations in these areas. ANIC has placed all of its underperforming
products in run-off. Going forward, the primary focus of ACCEL and ANIC will be
the non-standard automobile line of business, a business in which AIM and Pastor
are proficient. ANIC has consolidated its administrative offices with AIM in
Simsbury, Connecticut.

Also on January 14, 2000, ACCEL completed arrangements for a credit facility of
$5,000,000. Terms of the facility are 10% interest payable quarterly, plus
280,000 warrants per $1,000,000 borrowed, at a price of $2.00 per share. All
monies owed under the facility will be due in full by December 31, 2003.
Applicable warrants will expire on December 31, 2004.

On January 19, 2000 ACCEL acquired the assets of Payless Insurance Agencies
("Payless"). Payless is comprised of two locations in the Fort
Lauderdale/Broward County area, specializing in non-standard automobile
insurance. On January 20, 2000 ACCEL acquired substantially all of the assets of
Unistar Florida Holdings, Inc. ("Unistar"),representing 49 agency locations
throughout the state of Florida, also specializing in non-standard automobile
insurance. ACCEL paid approximately $4,500,000 for all agencies acquired.


                                       44
<PAGE>   45
                                    PART III


ITEM 9.       DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

              Not Applicable.


ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

              The executive officers, their respective ages and business
              experience are as follows: Raymond H. Deck (77), Chairman of the
              Board; Gerald H. Pastor (48), President and Chief Executive
              Officer; Thomas J. Renwick (51), Senior Vice President; Richard A.
              Lawrence (50), Vice President, Treasurer and Chief Financial
              Officer; Kathleen J. Wilson (48), Vice President and Secretary.

              Mr. Deck was named Chairman of the Board effective October 1,
              1998. He has been an outside Director of the Company since 1990.
              He also serves as President of Chase Insurance Enterprises, Inc.,
              Hartford, Connecticut.

              Mr. Pastor joined the Company on October 5, 1999, when he was
              appointed a member of the Board of Directors, and President and
              Chief Executive Officer of the Company's subsidiary, Acceleration
              National Insurance Company. On November 16, 1999, he was elected
              President and Chief Executive Officer of the Company. He also
              serves as President and Chief Executive Officer for Allegiance
              Insurance Managers, Ltd.

              Mr. Renwick joined the Company on October 5, 1999, when he was
              appointed a member of the Board of Directors of Acceleration
              National Insurance Company. On October 6, 1999, Mr. Renwick was
              appointed Senior Vice President of ANIC. On November 16, 1999, Mr.
              Renwick was elected Senior Vice President of ACCEL. Prior to his
              election, Mr. Renwick was Senior Vice President, COO and Head of
              Claims for Allegiance Insurance Managers, Ltd.

              Mr. Lawrence joined Allegiance as a financial and accounting
              consultant to guide Acceleration National Insurance Company's
              wind-down of operations in Texas and subsequent move to
              Connecticut. Mr. Lawrence joined the Company on October 5, 1999,
              when he was appointed a member of the Board of Directors of
              Acceleration National Insurance Company. On November 16, 1999, he
              was elected Vice President, Treasurer and Chief Financial Officer
              of ACCEL.

              Ms. Wilson joined the Company on October 5, 1999, when she was
              appointed a member of the Board of Directors and Corporate
              Secretary of Acceleration National Insurance Company. On October
              6, 1999, Ms. Wilson was appointed Vice President of ANIC. On
              November 16, 1999 she was elected Vice President and Corporate
              Secretary of ACCEL. Prior to her election, Ms. Wilson was Vice
              President, Systems, Administration and Controller for Allegiance
              Insurance Managers, Ltd.


                                       45
<PAGE>   46
The following table sets forth certain information relating to the directors of
the Company:

<TABLE>
<CAPTION>
                                                                              Number of shares of Common
                                                                              Stock owned beneficially,
                                                                              directly or indirectly, on
Names, Position with the                                                      January 31, 2000, (except
Company and Age                Principal Occupation for past       Director   as otherwise noted) (1)        Percent
(as of January 31, 2000)       five years/other Directorships        Since                                  of Class
------------------------------ ----------------------------------- ---------- ----------------------------- ----------
<S>                            <C>                                 <C>        <C>                           <C>
       David T. Chase          President and Director of             1985     4,348,648  (5)                  46.2
        Director, 61           D. T. Chase Enterprises, Inc.,
             (2)               Hartford, CT.

      Douglas J. Coats         Former President and Chief            1995     173,660                         1.8%
        Director, 67           Executive Officer of the Company
                               until November 15, 1999. Prior
                               thereto he was Executive Vice
                               President of the Company since May
                               23, 1995. Prior thereto he was
                               Executive Vice President of Ranger
                               Insurance Company, Houston, TX
                               since August, 1987.

       Raymond H. Deck         Chairman of the Board of the          1990     348,787                         3.7%
        Director, 77           Company since October, 1998.
         (2) (3) (4)           President of Chase Insurance
                               Enterprises, Inc., Hartford, CT.

       Richard Desich          President of Mid-Ohio Securities      1997     41,350                            *
        Director, 64           Corp., Elyria, OH
         (2) (3) (4)

       Gregory Grusse          Vice President of JPR Resources,      1999     0                                 *
        Director, 38           Inc.
             (3)

      Gerald H. Pastor         President and Chief Executive         1999     0                                (6)
      President, Chief         Officer of the Company since
      Executive Officer        November 16, 1999. Prior thereto
      and Director, 48         he was President and Chief
                               Executive Officer of Allegiance
                               Insurance Managers, Ltd.,
                               Simsbury, CT

       John P. Redding         Senior Vice President,                1997     7,000                             *
        Director, 41           David  T. Chase Enterprises,
           (2) (4)             Inc., Hartford, CT

      Thomas J. Renwick        Senior Vice President of the          1999     218,738                         2.3%
  Senior Vice President and    Company since November 16, 1999.
        Director, 51           Prior thereto he was Senior Vice
                               President, Chief Operations
                               Officer and Head of Claims for
                               Allegiance Insurance Managers,
                               Ltd., Simsbury, CT
</TABLE>


                                46
<PAGE>   47
<TABLE>
<CAPTION>
                                                                              Number of shares of Common
                                                                              Stock owned beneficially,
                                                                              directly or indirectly, on
Names, Position with the                                                      January 31, 2000, (except
Company and Age                Principal Occupation for past       Director   as otherwise noted) (1)        Percent
(as of January 31, 2000)       five years/other Directorships        Since                                  of Class
------------------------------ ----------------------------------- ---------- ----------------------------- ----------
<S>                            <C>                                 <C>        <C>                           <C>
     Robert N. Worgaftik       President of  MW  Financial           2000     106,825                         1.1%
        Director, 49           Group, Ltd.

All Directors and Officers as a group (11 persons)                            5,291,116                       56.2%
</TABLE>

(1)  On January 31, 2000, there were 9,084,006 shares of the Company's Common
     Stock issued and outstanding. Except as noted, includes shares owned by
     spouse, minor children or certain other family members, or held as
     custodian or trustee for the benefit of spouse or children, or owned by
     corporations of which such person is an officer or principal stockholder,
     over which shares such directors have sole or shared voting or investment
     power. With respect to the Directors, includes an aggregate of 305,000
     shares which are subject to immediately exercisable options. Of the 305,000
     shares subject to options, the following Directors have options to purchase
     the number of shares indicated after their names: Mr. Chase, 13,000; Mr.
     Coats, 165,000; Mr. Deck, 113,000; Mr. Desich, 7,000; and Mr. Redding,
     7,000.

(2)  Member of Executive Committee (Mr. Deck, Chairman).

(3)  Member of Audit Committee (Mr. Grusse, Chairman).

(4)  Member of Compensation Committee (Mr. Desich, Chairman).

(5)  See footnotes (2) and (5) at pages 50 and 51 herein.

(6)  In consideration for the acquisition by the Company of Allegiance Insurance
     Managers, Ltd., on January 14, 2000, ACCEL will issue an additional 997,036
     shares to Pastor upon, and subject to receipt of, clearance by the Ohio
     Department of Insurance. Should the foregoing clearance not be received,
     ACCEL will issue to Pastor such other consideration as may be mutually
     agreed upon by ACCEL and Pastor, which may include a lesser number of
     shares of ACCEL common stock (subject to the foregoing clearance) and/or
     other securities.

     *  Less than 1% of outstanding Common Stock.

ITEM 11.      EXECUTIVE COMPENSATION

SUMMARY

The following table is a summary of certain information concerning the
compensation awarded or paid to, or earned by, the Company's current Chief
Executive Officer and each of the Company's other most highly compensated
executive officers whose total annual salary and bonus for the fiscal year ended
December 31, 1999, exceeded $100,000 (the "named executives") during each of the
last three fiscal years:

<TABLE>
<CAPTION>
                                             SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------------------------------------------------
                                                        Annual Compensation            Long Term Compensation
                                                     -------------------------- --------------------------------------
                                                                                    Securities          All Other
   Year      Name, Age, and Principal Position         Salary        Bonus          Underlying         Compensation
                                                         ($)          ($)        Options/SAR's (#)       ($) (1)
------------ --------------------------------------- ------------ ------------- -------------------- -----------------
<S>          <C>                                     <C>          <C>           <C>                  <C>
       1999  Gerald H. Pastor, 48 (2)                     57,692            --                   --                --
       1998  President and Chief Executive Officer            --            --                   --                --
       1997                                                   --            --                   --                --
       1999  Douglas J. Coats, 66  (3)                   216,947            --                   --             9,516
       1998  President and Chief Executive Officer       162,728            --               30,000             6,318
       1997                                              137,500            --               30,000            12,980
       1999  Walter J. Kozuch, 46 (4)                     95,892        20,000                   --             5,280
       1998  Vice President and Chief  Program            80,801            --               10,000             1,996
       1997  Manager                                          --            --                   --                --


</TABLE>

(1)  Represents approximate amounts contributed on behalf of each such executive
     to the Acceleration Retirement Savings and Stock Ownership Plan.


                                       47
<PAGE>   48
(2)  Mr. Pastor was appointed President and Chief Executive Officer of
     Acceleration National Insurance Company on October 5, 1999, and was elected
     President and Chief Executive Officer of ACCEL International Corporation on
     November 16, 1999.

(3)  Mr. Coats served as President and Chief Executive Officer of the Company
     for the period October 1, 1998 through November 15, 1999. He continues to
     serve as Director for the Company and as Chairman of the Board of
     Acceleration National Insurance Company.

(4)  Mr. Kozuch joined Acceleration National Insurance Company in February, 1998
     as Assistant Vice President, Actuarial Services. He was promoted to Vice
     President, Actuarial Services in December, 1998. He currently serves both
     on the Board of Directors of ANIC and as Vice President and Chief Program
     Manager.

The following table sets forth information concerning individual grants of
options to purchase the Company's Common
Stock made to the named executives in 1999:

<TABLE>
<CAPTION>
                                          OPTION GRANTS IN LAST FISCAL YEAR
----------------------------------------------------------------------------------------------------------------------
                                                                                          Potential Realizable Value
                               INDIVIDUAL GRANTS IN 1999                                   at Assumed Annual Rates
                                                                                         of Stock Price Appreciation
                                                                                               for Option Term
----------------------------------------------------------------------------------------------------------------------
                              Number of      Percent of
                              Securities        Total
                              Underlying       Options       Exercise or
                               Options/      Granted to      Base Price     Expiration
                                 SARs       Employees in     ($ Sh) (1)        Date          5% ($)        10% ($)
           Name              Granted (#)     Fiscal Year
---------------------------- ------------- ---------------- -------------- ------------- --------------- -------------
<S>                          <C>           <C>              <C>            <C>           <C>             <C>
No option grants were
made to any employees
of the Company during
1999.
</TABLE>

(1)  Market price of the Company's Common Stock on date of grant.

The following table sets forth certain information regarding individual
exercises of stock options during 1999 by each of the named executives:

<TABLE>
<CAPTION>
                      AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
----------------------------------------------------------------------------------------------------------------------
                              Shares       Value
                             Acquired     Realized         Number of Securities             Value of Unexercised
           Name                 on      (Mkt. Price       Underlying Unexercised          In-The-Money Options at
                             Exercise   at Exercise             Options at                  Fiscal year End (1)
                               (#)          Less            Fiscal Year End(#)
                                          Exercise
                                           Price)        Exercisable      Unexercisable       Exercisable    Unexercisable
--------------------------- ----------- ------------- ------------------  --------------  -----------------  -------------
<S>                         <C>         <C>           <C>                 <C>             <C>                <C>
Gerald H. Pastor                     0           N/A              N/A             N/A             N/A             N/A
Douglas J. Coats                     0           N/A          165,000             N/A             N/A             N/A
Walter J. Kozuch                     0           N/A            5,000           5,000             N/A             N/A
</TABLE>

(1)  Intended to represent the amount by which the market price of the Company's
     Common Stock on December 31, 1999 ($1.00) exceeded the exercise prices of
     unexercised options on that date. On December 31, 1999, none of the options
     outstanding for any of the named executives exceeded the market price of
     the Company's Common Stock.


                                       48
<PAGE>   49
ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
              MANAGEMENT

The following table sets forth certain information regarding the named
executive's beneficial ownership of the Common Stock of the company as of
January 31, 2000:

<TABLE>
<CAPTION>
                                                                             Shares of Common Stock of
                                                                            Company Beneficially Owned
                                                                     ------------------------------------------
         Title of Class              Name of Officer                       Number (1) (2)     Percent of Class
         --------------------------- ------------------------------- --------------------- --------------------
<S>                                  <C>                             <C>                   <C>
         Common Stock                Gerald H. Pastor                                 N/A                9.57%
         Common Stock                Walter J. Kozuch                               5,000                    *
</TABLE>


(1)        In consideration for the acquisition by the Company of Allegiance
           Insurance Managers, Ltd., on January 14, 2000, ACCEL will issue an
           additional 997,036 shares to Pastor upon, and subject to receipt of,
           clearance by the Ohio Department of Insurance. Should the foregoing
           clearance not be received, ACCEL will issue to Pastor such other
           consideration as may be mutually agreed upon by ACCEL and Pastor,
           which may include a lesser number of shares of ACCEL common stock
           (subject to the foregoing clearance) and/or other securities. The
           percentage shown for Mr. Pastor is as if the 997,036 common shares
           were issued.

(2)        The amounts shown represent the total shares owned outright by such
           individuals together with shares which are issuable upon the exercise
           of all stock options which are currently exercisable. Specifically,
           the following individuals have the right to acquire the shares
           indicated after their names, upon the exercise of such stock option:
           Mr. Pastor: N/A; Mr. Kozuch 5,000.

*          Less than 1% of outstanding Common Stock.


The following table sets forth certain information as of January 31, 2000
(except as otherwise noted) with respect to stockholders known to the Company to
be the beneficial owners of more than five percent (5%) of any class of the
Company's voting securities:

<TABLE>
<CAPTION>
                                Name and Address                        Amount of                        Percent
Title of Class                  of Beneficial Owner                     Beneficial Ownership (1)         of Class
--------------                  -------------------                     -------------------------        --------
<S>                             <C>                                     <C>                              <C>
Common Stock                    David T. Chase                          4,348,648  Shares (2)            47.9%
                                D. T. Chase Enterprises, Inc.
                                One Commercial Plaza
                                Hartford  CT   06103

                                Arnold L. Chase                         1,167,824 Shares (3)             12.9%
                                D. T. Chase Enterprises, Inc.
                                One Commercial Plaza
                                Hartford  CT   06103

                                The Darland Trust                       1,167,824 Shares (4)             12.9%
                                P. O. Box 472
                                St. Peter's House, Le Bordage
                                St. Peter Port
                                Guernsey GYI6AX
                                Channel Islands

                                Rhoda L. Chase                          2,000,000 Shares (5)             22.0%
                                c/o Chase Enterprises, Inc.
                                One Commercial Plaza
                                Hartford  CT   06103

                                Spitzer Profit Sharing and              750,250 Shares (6)               8.3%
                                Savings Plan
                                150 E. Bridge Street
                                Elyria  OH   44035
</TABLE>

(1)   Except as otherwise noted, the Company has no reason to believe that any
      beneficial owner listed above does not have sole voting and investment
      power with respect to these shares.


                                       49
<PAGE>   50
(2)   Includes 13,000 shares of Common Stock subject to immediately exercisable
      options. According to a Schedule 13D filed with the Commission, Mr. David
      T. Chase has, to the extent temporarily transferred to him, sole power to
      vote and dispose of 880,000 shares of Common Stock loaned to him by his
      wife, Rhoda L. Chase (the "Rhoda Chase Borrowed Shares") and shares the
      power to dispose or to direct the disposition of (i) 1,120,000 shares
      beneficially owned by Rhoda L. Chase (ii) 1,167,824 shares beneficially
      owned by his son, Arnold L. Chase, and (iii) 1,167,824 shares beneficially
      owned by The Darland Trust (the "Trust"), a trust whose beneficiaries are
      his daughter, Cheryl A. Chase, and her children.

(3)   According to a Schedule 13D filed with the Commission, Mr. Arnold L. Chase
      shares the power to dispose or to direct the disposition of the 1,167,824
      shares owned by him with Mr. David T. Chase and has the sole power to vote
      or direct the vote of such shares. Such shares are also included in the
      above table in Mr. David T. Chase's shares.

(4)   According to a Schedule 13D filed with the Commission, the Trust shares
      the power to dispose or to direct the disposition of the 1,167,824 shares
      owned by it with Mr. David T. Chase and has the sole power to vote or
      direct the vote of such shares. Such shares are also included in the above
      table in Mr. David T. Chase's shares.

(5)   According to a Schedule 13D filed with the Commission, Rhoda L. Chase has
      the sole power to vote or to direct the vote of all such shares, except to
      the extent that she may be deemed to have temporarily transferred the sole
      power to vote or to direct the vote of the 880,000 Rhoda Chase Borrowed
      Shares to David T. Chase. Rhoda L. Chase shares the power to dispose or to
      direct the disposition of 1,120,000 of the shares of Common Stock owned by
      her with David T. Chase. Rhoda L. Chase has the sole power to dispose or
      to direct the disposition of the Rhoda Chase Borrowed Shares, except to
      the extent that she may be deemed to have temporarily transferred such
      power to David T. Chase. The shares of Common Stock owned by Rhoda L.
      Chase are also included in the above table in David T. Chase's shares.

(6)   Spitzer Profit Sharing and Savings Plan under agreement dated December 31,
      1973, is an employee Benefit Plan, Pension Fund subject to the provisions
      of the Employee Retirement Income Security Act of 1974.



ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

              Not Applicable.


                                       50
<PAGE>   51
                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

ITEM 14 (a) (l) AND (2)--INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES COVERED BY INDEPENDENT AUDITORS' REPORT

The following consolidated financial statements of ACCEL International
Corporation and subsidiaries are included in Item 8:


         Independent Auditors' Report
         Consolidated balance sheets--December 31, 1999 and 1998
         Consolidated statements of operations--Years ended December 31, 1999,
         1998 and 1997
         Consolidated statements of common stockholders' equity--Years ended
         December 31, 1999, 1998 and 1997
         Consolidated statements of cash flows--Years ended December 31, 1999,
         1998 and 1997
         Notes to consolidated financial statements

The following financial statement schedules of ACCEL International Corporation
and subsidiaries are included in Item 14 (d):

         Schedule I -- Summary of Investments - Other than Investments in
         Related Parties
         Schedule II -- Condensed Financial Information of Registrant
         Schedule III -- Supplementary Insurance Information
         Schedule IV -- Reinsurance
         Schedule V -- Supplemental Information Concerning Property-Casualty
         Insurance Operations

All other schedules to the consolidated financial statements required by Article
7 of Regulation S-X are not required under the related instructions or are
inapplicable or the required information is provided in the consolidated
financial statements, and the schedules therefore have been omitted.


                                       51
<PAGE>   52
ITEM 14 (c)--EXHIBITS

              (3)             Articles of Incorporation and By-Laws.

                              3.1 Restated Certificate of Incorporation of the
                              Registrant. (Incorporated by reference to Exhibit
                              (3)1(g) of Registrant's Report on Form 10-K for
                              the year ended December 31, 1989.)

                              3.2 By-laws of Registrant. (Incorporated by
                              reference to Exhibit B of the Registrant's
                              definitive Proxy Statement as filed with the
                              Commission on June 9, 1978.)

                              3.3 Amendment to Article III, Section 3.02 of the
                              Registrant's By-Laws as passed by the Board of
                              Directors of the Registrant on December 1, 1978.
                              (Incorporated by reference to Exhibit (9)(b) of
                              the Registrant's Report on Form 10-Q for the
                              quarter ended March 31, 1979.)

                              3.4 Amendment to Article II, Section 2.04 of the
                              Registrant's By-Laws as passed by the Board of
                              Directors of the Registrant on October 23, 1981.
                              (Filed with the Registrant's Amendment #1 to the
                              Registration Statement on Form S-7 as Exhibit
                              (4)3(c) and incorporated herein by reference.)

                              3.5 Amendment to Article II, Section 2.02 of the
                              Registrant's By-Laws as approved by the Board of
                              Directors of the Registrant on June 18, 1985.
                              (Incorporated by reference to Exhibit (3) 2(d) to
                              Registrant's Report on Form 10-K for the year
                              ended December 31, 1985.)

                              3.6 Amendment to Article II, Section 2.02 of the
                              Registrant's By-Laws as approved by the Board of
                              Directors of the Registrant on March 29, 1988.
                              (Incorporated by reference to Exhibit (3)2(e) of
                              Registrants Report on Form 10-K for the year ended
                              December 31, 1989.)

                              3.7 Amendment to Article VIII and the
                              redesignation and alteration of the former Article
                              VIII as Article IX. (Incorporated by reference to
                              Exhibit (3)2(f) of Registrant's Report on Form
                              10-K for the year ended December 31, 1989.)

              (10)            Material Contracts.

                              Previously filed Material Contracts which are
                              either terminated or deemed to be in the ordinary
                              course of business to the Registrant are no longer
                              identified.

                              10.1 Verification of coverage of current Directors
                              and Officers Liability Policy for ACCEL
                              International Corporation as issued by Reliance
                              Insurance Company, indicating coverage for the
                              period from November 27, 1998 to November 27,
                              1999.

                              10.2 The Company's 1982 Incentive Stock Option
                              Plan. (Incorporated by reference to Exhibit A to
                              the Company's definitive Proxy Statement for the
                              1982 annual meeting of stockholders of the
                              Company.)

                              10.3 The Company's 1987 Incentive Stock Option
                              Plan. (Incorporated by reference to Exhibit (10)
                              7. to the Registrant's Report on Form 10-K for the
                              year ended December 31, 1987.)


                                       52
<PAGE>   53
              (10)            10.4 The Company's first restatement of the 1987
              Cont.           Stock Incentive Plan. (Incorporated by reference
                              to Exhibit A to the Company's definitive Proxy
                              Statement for the 1990 annual meeting of
                              stockholders of the Company.)

                              10.5 The Company's 1996 Stock Incentive Plan.
                              (Incorporated by reference to Exhibit A to the
                              Company's definitive Proxy Statement for the 1996
                              annual meeting of stockholders of the Company.)

                              10.6 Termination Agreement with Consumers Life
                              Insurance effective July 31, 1996. (Incorporated
                              by reference to Form 10-K for year ended December
                              31, 1996.)

                              10.7 Amendment to Termination Agreement with
                              Consumers Life Insurance Company effective October
                              9, 1996. (Incorporated by reference to Form 10-K
                              for year ended December 31, 1996.)

                              10.8. Stock Acquisition Agreement dated October
                              20, 1997 by and among ACCEL International
                              Corporation, Lyndon Life Insurance Company and
                              Lyndon Insurance Group, Inc. (Incorporated by
                              reference to the Proxy Statement filed in
                              connection with the Special Shareholders' meeting
                              held December 30, 1997.)

                              10.9. Asset Purchase Agreement dated October 20,
                              1997 by and among ACCEL International Corporation,
                              Acceleration National Insurance Company, and
                              Lyndon Life Insurance Company. (Incorporated by
                              reference to the Proxy Statement filed in
                              connection with the Special Shareholders' meeting
                              held December 30, 1997.)

                              10.10. Amendment No. 1 to Stock Acquisition
                              Agreement dated January 2, 1998 by and among ACCEL
                              International Corporation, Acceleration National
                              Insurance Company, Lyndon Life Insurance Company
                              and Lyndon Insurance Group, Inc. (Incorporated by
                              reference to the Form 8-K dated December 31,
                              1997.)

              (21)            Subsidiaries of the Registrant

                              21.1 See Organizational Chart - all such Companies
                              are incorporated herein by reference and are
                              presently doing business under their respective
                              INCORPORATED NAMES.

              (23)            23.1 Consent of Independent Auditors'

              (24)            24.1 Powers of Attorney

              (27)            27.1 Financial Data Schedule incorporated herein
                              by reference to the EDGAR filing of the Registrant
                              for the year ended December 31, 1999.


                                       53
<PAGE>   54
ITEM 14 (d)--SCHEDULES

                      SCHEDULE I - SUMMARY OF INVESTMENTS -

                    OTHER THAN INVESTMENTS IN RELATED PARTIES

                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

                                DECEMBER 31, 1999

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------

           Column A                               Column B           Column C             Column D
-----------------------------------------------------------------------------------------------------
                                                                                          Amount at
                                                                                          which shown
                                                                                          in the
                                                                       Fair               Balance
         Type of Investment                         Cost*              Value              Sheet
                                                   -------            -------            -------
                                                              (Thousands of dollars)
<S>                                                <C>                <C>                <C>
Available for sale securities:
   Fixed maturities:
    United States government and
    government agencies and authorities            $ 8,521            $ 8,445            $ 8,445
  States, municipalities and
    political subdivisions                              40                 41                 41
  Mortgage and asset-backed securities              10,103              9,728              9,728
  All other corporate bonds                          2,928              2,798              2,798
                                                   -------            -------            -------
Total                                               21,592             21,012             21,012

 Short-term investments                              1,358              1,358              1,358
                                                   -------            -------            -------
  Total investments                                $22,950            $22,370            $22,370
                                                   =======            =======            =======
</TABLE>

*    Original cost of equity securities, adjusted for any permanent write down,
     and, as to fixed maturities, original cost reduced by repayments and
     adjusted for amortization of premiums or accrual of discounts.



See accompanying independent auditors' report.


                                       54
<PAGE>   55
           SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                                 BALANCE SHEETS

                ACCEL INTERNATIONAL CORPORATION (PARENT COMPANY)

<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                               1999                 1998
                                                                             --------             --------
                                                                                 (Thousands of dollars)
<S>                                                                          <C>                  <C>
ASSETS

  Investments                                                                $   --               $  4,748
  Cash
                                                                                  199                  883
  Notes and receivables from consolidated subsidiaries*                           382                 --
  Investments in subsidiaries*                                                  4,845               18,579
  Receivable from sale of discontinued and disposed of operations                --                    703
  Other                                                                           192                  337
                                                                             --------             --------
                                                                             $  5,618             $ 25,250
                                                                             ========             ========

LIABILITIES AND COMMON STOCKHOLDERS' EQUITY

  Accounts payable and other liabilities                                     $     78             $     98
  Notes and accounts payable to subsidiaries*                                      86                1,477
  Payable related to discontinued operations                                       34                   53
  Current federal income tax                                                      534                  521
                                                                             --------             --------
                                                                                  732                2,149
                                                                             ========             ========

  Common stockholders' equity:
    Common stock                                                                  947                  947
    Additional paid-in capital                                                 32,659               32,659
    Accumulated deficit (including
      undistributed loss of subsidiaries and affiliates:
      1999--$12,800,000; 1998--$9,700,000)                                    (21,178)              (3,933)
    Treasury shares at cost                                                    (6,962)              (6,962)
    Accumulated other comprehensive income (loss)                                (580)                 390
                                                                             --------             --------


                                                                                4,886               23,101
                                                                             --------             --------
                                                                             $  5,618             $ 25,250
                                                                             ========             ========
</TABLE>

*    Eliminated in consolidation

     The condensed financial statements should be read in conjunction with the
     consolidated financial statements and notes thereto of ACCEL International
     Corporation and subsidiaries.



See accompanying independent auditors' report.


                                       55
<PAGE>   56
           SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                            STATEMENTS OF OPERATIONS

                ACCEL INTERNATIONAL CORPORATION (PARENT COMPANY)

<TABLE>
<CAPTION>
                                                                             Year Ended December 31,
                                                                  1999                 1998                 1997
                                                                --------             --------             --------
                                                                             (Thousands of dollars)
<S>                                                             <C>                  <C>                  <C>
INCOME
   Net investment income:
     Dividends from subsidiaries                                $   --                   --               $  5,011
     Interest                                                         17                  144                 --
     Realized gains                                                  252                 --                    226
     Equity in income of affiliated company                         --                   (189)                --
   Other income                                                      228                  294                    8
                                                                --------             --------             --------
                                                                     497                  249                5,245
EXPENSES
   General, administrative, taxes, licenses and fees               4,977                1,288                  488
   Interest                                                         --                   --                  1,532
                                                                --------             --------             --------
                                                                   4,977                1,288                2,020
                                                                --------             --------             --------

INCOME (LOSS) BEFORE INCOME
     TAXES AND OTHER ITEMS                                        (4,480)              (1,039)               3,225

Federal income taxes (benefit)                                      --                   (270)                 286
Other item -- equity in undistributed net income
   (loss) of consolidated subsidiaries                           (12,765)              (9,682)               8,673
Other item -- undistributed net income (loss)
   of former subsidiaries                                           --                   --                (10,497)
                                                                --------             --------             --------

   NET INCOME (LOSS)                                            $(17,245)            $(10,451)            $  1,115
                                                                ========             ========             ========
</TABLE>

     The condensed financial statements should be read in conjunction with the
     consolidated financial statements and notes thereto of ACCEL International
     Corporation and subsidiaries.



See accompanying independent auditors' report.


                                       56
<PAGE>   57
           SCHEDULE II - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                             STATEMENT OF CASH FLOWS
                ACCEL INTERNATIONAL CORPORATION (PARENT COMPANY)

<TABLE>
<CAPTION>
                                                                                                Year Ended December 31,
                                                                                         1999             1998             1997
                                                                                       --------         --------         --------
                                                                                                   (Thousands of dollars)
<S>                                                                                    <C>              <C>              <C>
OPERATING ACTIVITIES:
     Income (loss) from continuing operations                                          $(17,245)        $(10,451)        $  7,015
     Adjustments to reconcile income (loss) from continuing operations
         to net cash (used in) provided by operating activities:
             Change in notes and receivables due from subsidiaries                         (382)               1               (2)
             Change in notes and accounts payable due to subsidiaries
                 and former subsidiaries                                                 (1,391)          (2,281)             578
             Change in other assets, other liabilities and accrued income taxes             822           (4,899)            (266)
             Interest paid in kind                                                         --               --               --
             Equity in (gains) losses of subsidiaries                                    12,765            9,682           (8,673)
             Equity in income of affiliated company                                        --                189             --
             Provision for amortization of goodwill                                        --               --                 65
                                                                                       --------         --------         --------
     Net cash (used in) provided by continuing operations                                (5,431)          (7,759)          (1,283)
     Net cash (used in) provided by discontinued operations                                --             28,816            1,221
                                                                                       --------         --------         --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                      (5,431)          21,057              (62)
                                                                                       --------         --------         --------

INVESTING ACTIVITIES:
     Equity method investment, net                                                        4,747           (4,936)            --
                                                                                       --------         --------         --------
NET CASH USED IN INVESTING ACTIVITIES                                                     4,747           (4,936)            --
                                                                                       --------         --------         --------

FINANCING ACTIVITIES:
     Repayment of notes payable                                                            --            (15,000)            --
     Repayment of notes to subsidiary                                                      --               --               --
     Issuance of Common Stock under Stock Option Plan                                      --                 52              107
     Issuance of Common Stock under Rights Offering                                        --               --               --
     Repurchase of treasury shares                                                         --               (363)            --
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES                                        --            (15,311)             107
                                                                                       --------         --------         --------
     NET INCREASE (DECREASE) IN CASH                                                       (684)             810               45
Cash at beginning of year                                                                   883               73               28
                                                                                       --------         --------         --------
CASH AT END OF YEAR                                                                    $    199         $    883         $     73
                                                                                       ========         ========         ========

Supplemental schedule of non-cash financing activities:

     Transfer of note payable to ALIC--Note E                                          $   --           $   --           $ 15,000
                                                                                       ========         ========         ========
</TABLE>

The condensed financial statements should be read in conjunction with the
consolidated financial statements and notes thereto of ACCEL International
Corporation and subsidiaries.

See accompanying independent auditors' report.


                                       57
<PAGE>   58
               SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Column A                Column B        Column C      Column D       Column E
--------------------------------------------------------------------------------
                                           December 31,
                       --------------------------------------------------------
                                                                      Other
                        Deferred       Reserve for                    policy
                         policy          future                       claim and
                       acquisition       policy        Unearned       benefits
                          costs         benefits       premiums       payable
                         -------        -------        -------        -------
                                        (Thousands of dollars)
<S>                      <C>            <C>            <C>            <C>
1999
Property/Casualty        $   280        $  --          $ 3,125        $59,421
Corporate                   --             --             --             --
                         -------        -------        -------        -------
      TOTAL              $   280        $  --          $ 3,125        $59,421
                         =======        =======        =======        =======

1998
Property/Casualty        $ 2,803        $  --          $12,449        $49,535
Corporate                   --             --             --             --
                         -------        -------        -------        -------
      TOTAL              $ 2,803        $  --          $12,449        $49,535
                         =======        =======        =======        =======


1997
Property/Casualty        $ 3,112        $  --          $29,986        $22,028
Corporate                   --             --             --             --
                         -------        -------        -------        -------
      TOTAL              $ 3,112        $  --          $29,986        $22,028
                         =======        =======        =======        =======
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                        Column F        Column G       Column H       Column I        Column J      Column K
-------------------------------------------------------------------------------------------------------------
                                                  Year ended December 31,
                       --------------------------------------------------------------------------------------
                                                      Benefits,     Amortization
                                                      claims,       of deferred
                                       Net invest-    losses and    policy          Other
                         Premium       ment           settlement    acquisition     operating        Premiums
                         revenue       income(1)      expenses      costs (2)       expenses         written
                         -------        -------        -------        -------         -------        -------
                                                       (Thousands of dollars)
<S>                      <C>            <C>            <C>            <C>             <C>            <C>
1999
Property/Casualty        $20,299        $ 1,604        $23,922        $ 2,523         $10,677        $21,759
Corporate                   --              269           --             --             2,561           --
                         -------        -------        -------        -------         -------        -------
      TOTAL              $20,299        $ 1,873        $23,922        $ 2,523         $13,238        $21,759
                         =======        =======        =======        =======         =======        =======

1998
Property/Casualty        $16,000        $ 1,967        $19,227        $   308         $ 8,381        $43,285
Corporate                   --              139           --             --             1,288           --
                         -------        -------        -------        -------         -------        -------
      TOTAL              $16,000        $ 2,106        $19,227        $   308         $ 9,669        $43,285
                         =======        =======        =======        =======         =======        =======


1997
Property/Casualty        $18,717        $ 2,764        $15,373        $(1,733)        $11,617        $40,897
Corporate                   --              226           --             --             1,913           --
                         -------        -------        -------        -------         -------        -------
      TOTAL              $18,717        $ 2,990        $15,373        $(1,733)        $13,530        $40,897
                         =======        =======        =======        =======         =======        =======
</TABLE>

(1)  For all years, net investment income includes realized capital gains and
     losses.

(2)  Represents the net (increase) decrease in deferred policy acquisition
     costs.

See  accompanying independent auditors' report.


                                       58
<PAGE>   59
                            SCHEDULE IV - REINSURANCE
                ACCEL INTERNATIONAL CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
Column A                                  Column B        Column C         Column D         Column E        Column F
--------------------------------------------------------------------------------------------------------------------------
                                                                                                            Percentage
                                                           Ceded to                                          of amount
                                            Gross           other          Assumed from                     assumed to
                                            amount         companies      other companies    Net amount         net
--------------------------------------------------------------------------------------------------------------------------
                                                                      (Thousands of dollars)
<S>                                      <C>             <C>              <C>              <C>              <C>
Year Ended December 31, 1999:

Premiums

     Property and casualty                    $ 17,140         $ (6,789)         $ 4,619         $ 14,970           30.9%
                                         ==============  ===============  ===============  ===============  ==============

Year Ended December 31, 1998:

Premiums

     Property and casualty                    $ 37,872        $ (27,300)         $ 5,413         $ 15,985           33.9%
                                         ==============  ===============  ===============  ===============  ==============

Year Ended December 31, 1997:

Premiums

     Property and casualty                    $ 38,848        $ (17,118)         $ 2,049         $ 23,779            8.6%
                                         ==============  ===============  ===============  ===============  ==============
</TABLE>

See accompanying independent auditors' report.



                                       59
<PAGE>   60
                                   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.

                                       ACCEL INTERNATIONAL CORPORATION

                                       BY:   /S/ Richard A. Lawrence
                                             -----------------------------------
                                             Richard A. Lawrence
                                             Vice President, Chief Financial
                                             Officer and Treasurer

                                       DATE: April 14, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated..

<TABLE>
<CAPTION>
         SIGNATURE                                           TITLE                                              DATE
         ---------                                           -----                                              ----
<S>                                   <C>                                                                   <C>
    /S/ David T. Chase*               Director                                                              March 2, 2000
----------------------------
      David T. Chase

   /S/ Douglas J. Coats*              Director                                                              March 2, 2000
----------------------------
     Douglas J. Coats

   /S/ Raymond H. Deck*               Director and Chairman of the Board                                    March 2, 2000
----------------------------
      Raymond H. Deck

    /S/ Richard Desich*               Director                                                              March 13, 2000
----------------------------
      Richard Desich

    /S/ Gregory Grusse*               Director                                                              March 2, 2000
----------------------------
      Gregory Grusse

 /S/ Richard A. Lawrence*             Vice President, Chief Financial Officer and Treasurer                 March 2, 2000
----------------------------          (principal financial and accounting officer)
    Richard A. Lawrence

   /S/ Gerald H. Pastor*              Director, President and Chief Executive Officer                       March 6, 2000
----------------------------          (principal executive officer)
     Gerald H. Pastor

  /S/ Thomas J. Renwick*              Director, Senior Vice President                                       March 3, 2000
----------------------------
     Thomas J. Renwick


   /S/ John P. Redding*               Director                                                              March 2, 2000
----------------------------
      John P. Redding

 /S/ Robert N. Worgaftik*             Director                                                              March 2, 2000
----------------------------
    Robert N. Worgaftik

*By:            /S/ Kathleen J. Wilson                                                                      March 13, 2000
           ----------------------------------
                  Kathleen J. Wilson
                   Attorney-in-Fact
</TABLE>


                                       60