SECURITIES AND EXCHANGE COMMISSION

                  Washington, D.C.  20549

                         FORM 10-K


[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
     SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
     For the fiscal year ended December 31, 1997

OR

[  ] 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 1-7411

                   ALLCITY INSURANCE COMPANY
         (Exact name of registrant as specified in its
                           charter)

        New York                                           13-2530665
 (State of incorporation)               (I.R.S. Employer Identification Number)

122 Fifth Avenue, New York, N.Y.                             10011
(Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code      212-387-3000

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on                               Title of each class
    which registered


                                       None

Securities registered pursuant to Section 12(g) of the Act:

                                       None

    (Title of Class)
     Indicate  by check mark if disclosure of delinquent filers pursuant  to
Item 405 of Regulation 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.  [x]

     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 the voting stock held by nonaffiliates of
the registrant as of  March 17, 1998 was $5,282,330.

     The number of shares outstanding of each of the registrant's classes of
common shares, as of   March 17, 1998, was 7,078,625.

DOCUMENTS INCORPORATED BY REFERENCE - 2

Exhibit Index on Page  26.

Total number of pages  55.
<PAGE>

                       TABLE OF CONTENTS


                                Part I

                                                                       Page

Item  1-  Business..................................................    1


Item  2-  Properties................................................    9

Item  3-  Legal Proceedings.........................................    9

Item  4-  Submission of Matters to a Vote of Security Holders.......    9

                                Part II
Item  5-  Market for the Registrant's Common Equity and Related
            Stockholder Matters.....................................    10
Item  6-  Selected Financial Data...................................    10

Item  7-  Management's Discussion and Analysis of Financial
            Condition and Results of Operations.....................    12

Item  8-  Financial Statements and Supplementary Data...............    16

Item  9-  Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure.....................    16

                               Part III
Item  10- Directors and Executive Officers of the Registrant........    17

Item  11- Executive Compensation....................................    19

Item  12- Security Ownership of Certain Beneficial Owners and
            Management..............................................    22

Item  13- Certain Relationships and Related Transactions............    23

                               Part IV
Item  14- Exhibits, Financial Statement Schedules,  and Reports on
            Form 8-K................................................    24

Signatures .........................................................    25




                                    -i-
<PAGE>
                                  PART I
Item 1. Business

General

Allcity  Insurance Company (the "Registrant", "Allcity" or the  "Company")
is  a property and casualty insurer.  Empire Insurance Company ("Empire"),
a   property  and  casualty  insurer,  owns  approximately  84.6%  of  the
outstanding  common  shares of the Company and  100%  of  the  outstanding
common  shares  of  Centurion  Insurance Company  ("Centurion").  Empire's
common  shares  are  100% owned and controlled, through  subsidiaries,  by
Leucadia   National  Corporation  ("Leucadia").   Additionally,   Leucadia
indirectly owns an additional 5.2% of the outstanding common shares of the
Company.    The  Company,  Empire and Centurion are sometimes  hereinafter
collectively referred to as the Group.

The  Company operates in the State of New York, primarily in the New  York
City   metropolitan   area,  conducting  property and casualty insurance
underwriting activities. The Company's voluntary  business  is
produced through general agents, local agents, and insurance brokers,  who
are  compensated  for  their services by payment  of  commissions  on  the
premiums  they generate.  There are five general agents, one of which   is
owned  by Empire, and approximately 400 local agents and insurance brokers
presently  acting  under  agreements with the  Group.   These  agents  and
brokers  also  represent  other competing insurance  companies.   Empire's
wholly  owned  general  agent  is  its  largest  producer   and  generated
approximately 11% of the Group's total premium volume for the  year  ended
December 31, 1997.   Substantially all of the Group's policies are written
for  a  one-year period.  The Group is licensed in New York to write  most
lines of insurance that may be written by a property and casualty insurer.
The  Group  specializes in  personal and commercial property and  casualty
insurance   business.   The  Group  provides  personal    automobile   and
homeowners   insurance  and  commercial insurance  coverage  for  vehicles
(including  medallion  and  radio-controlled livery  vehicles),   workers'
compensation,  multi-family residential real  estate,  and  various  other
business  classes.  The  Group  is also licensed  to  write  insurance  in
Connecticut,  Massachusetts,  Missouri,  New  Hampshire  and  New  Jersey.
Approximately 4% of the Group's written premiums are produced from sources
outside New York State.

According  to  A.M.  Best & Co. ("Best"), an insurance  industry  research
organization,  the Group ranked 109th in total net premium writings  among
property and casualty insurance companies and groups in 1996.  In  January
1998,  the  Group  was rated (A-) (Good) by Standard  &  Poor's  Insurance
Rating Services, based on the Group's claims-paying ability.  In 1997, the
Group  was  rated  (B++)  (Very Good) by Best  and  was  assigned  an  (A)
(Exceptional) financial stability rating by Demotech, Inc.,  an  insurance
rating  agency service.    Approximately 59% of the Company's net premiums
written in 1997 were for automobile insurance coverage, while 41% of  such
premiums  were  for commercial (other than automobile) and   miscellaneous
and personal  coverage.  The Group's general agents produced approximately
28%  of  the  Company's premium revenues for the year ended  December  31,
1997.

The  Group  has  acquired  blocks of assigned  risk  business  from  other
insurance companies (the "service business") relating to private passenger
and  commercial  automobile  insurance.  These  contractual  arrangements,
which are negotiated for one or two year periods, provide for fees paid to
the  Group  within parameters established by the New York State  Insurance
Department.   In  addition,  the  Group  receives  a  fee  for   providing
administrative  services, including claims processing,  underwriting   and
collection activities,  for the New York Public Automobile Pool  ("NYPAP")
and  the Massachusetts Taxi and Limousine Pool.  These latter arrangements
do  not  involve the assumption of any material underwriting risk  by  the
Group.

On  a  quarterly basis, the Group reviews and adjusts its estimated loss
reserves  for any changes in trends and actual loss experience.   Included
in  the  Company's  results for 1997 was approximately  $8.3  million  for
reserve   strengthening related to losses from prior accident  years.  The
Group  will  continue to evaluate the adequacy of its loss reserves  and
record  future  adjustments  to  its loss reserves  as  appropriate.   The
Group  has  taken  certain  steps to improve its  operations,  including
systems   enhancements  and  actions  relating  to  pricing  and  improved
underwriting and claims handling, and may initiate additional  changes  in
the  future.   The Group believes that the results of efforts  taken  to
date

					-1-
<PAGE>
may not be known for some time, given the nature of the property  and
casualty  business  and the inherently  long period of  time  involved  in
settling claims.

Pooling Agreement

All  insurance  business written by the Company is subject  to  a  pooling
agreement  with  Empire  under which the Company  and  Empire  effectively
operate  as  one  company.  The Company operates under  the  same  general
management  as Empire and has full use of Empire's personnel,  information
technology  systems and facilities.  As of December 31, 1997,  Empire  and
its subsidiaries had 748 full and part-time employees.  Currently, and for
all  periods presented, all premiums, losses, loss adjustment expenses and
other underwriting expenses are shared in the proportion 70% to Empire and
30%  to the Company.  The pooling agreement and subsequent amendments were
approved by the New York State Insurance Department.

Financial Information Relating to Business Segments

The Company operates in the following business segments:
(1)    Automobile lines - includes private passenger and commercial
  automobile bodily injury, property damage, comprehensive and collision
  insurance coverages.
(2)     Commercial  lines - includes commercial multiple  peril,  workers'
  compensation,  other  liability,  glass,  burglary,  and  inland  marine
  insurance coverages.
(3)     Miscellaneous and personal lines - includes fire and allied  lines
  and homeowners insurance coverages.

<TABLE>
The  following  table presents business segment data, net of  reinsurance,
for  each of the three years ended December 31, 1997 (in thousands, except
loss ratio information):
<CAPTION>

                    Premiums     Premiums     Losses       Loss
                    Written      Earned       Incurred     Ratio (a)
<S>                 <C>          <C>          <C>          <C>

1997
Automobile lines     $44,484     $50,677      $45,175      89.1%
Commercial lines      22,107      23,289       19,844      85.2%
Miscellaneous and
  personal lines       8,438       6,925        3,882      56.1%
Total                $75,029     $80,891      $68,901      85.2%


1996
Automobile lines     $60,162     $63,558      $56,562      89.0%
Commercial lines      25,243      27,714       17,128      61.8%
Miscellaneous and
  personal lines       5,606       4,801        2,697      56.2%
Total                $91,011     $96,073      $76,387      79.5%


1995
Automobile lines     $62,485     $61,261      $55,652      90.8%
Commercial lines      28,821      29,535       20,799      70.4%
Miscellaneous and
  personal lines       4,029       3,455        1,224      35.4%
Total                $95,335     $94,251      $77,675      82.4%


<FN>
(a)  Computed  on  a  Statutory Accounting Principles  ("SAP")  basis  and
excluding loss adjustment expenses.
</TABLE>

For  further information concerning Business Segments, see Notes 8 and  12
of  the  Notes  to  Consolidated Financial Statements, included  elsewhere
herein.

					-2-
<PAGE>
Combined Ratios

Set  forth  below  is  certain  statistical information  for  the  Company
prepared  in  accordance  with  generally accepted  accounting  principles
("GAAP")  and SAP, for the three years ended December 31, 1997.  The  Loss
Ratio is the ratio of incurred losses and loss adjustment expenses to  net
premiums  earned.  The Expense Ratio is the ratio of underwriting expenses
(policy  acquisition costs, commissions, and a portion of  administrative,
general and other expenses attributable to underwriting operations, net of
service  fee income) to net premiums written, if determined in  accordance
with  SAP,  or  to  net premiums earned, if determined in accordance  with
GAAP.  A Combined Ratio below 100% indicates an underwriting profit and  a
Combined  Ratio above 100% indicates an underwriting loss.   The  Combined
Ratio does not include the effect of investment income.

<TABLE>
                           Years Ended December
<CAPTION>
                            1997       1996      1995
      <S>                   <C>        <C>       <C>
	Loss Ratio: (a)
       GAAP                 101.4%     92.0%     95.8%
       SAP                  101.4%     89.3%     91.2%
        Industry (SAP) (b)    N/A      78.4%     78.9%

     Expense Ratio:
       GAAP                 17.9%      22.1%     19.6%
       SAP                  17.2%      18.2%     16.3%
        Industry (SAP)(b)    N/A       27.4%     27.5%

     Combined Ratio: (c)
       GAAP                119.3%     114.1%    115.4%
       SAP                 118.6%     107.5%    107.5%
        Industry (SAP) (b)   N/A      105.8%    106.4%


<FN>
(a)  Includes Loss and Loss Adjustment Expenses.

(b)  Source:  Best's Aggregates & Averages, Property/Casualty, 1997
     Edition.  A comparison of industry combined ratios may not be meaningful
     as a result of, among other things, differences in geographical
     concentration and in the mix of property and casualty insurance products.

(c)  For 1996 and 1995, a change in the statutory accounting treatment for
     retrospectively rated reinsurance agreements was the principal reason
     for the difference between the GAAP Combined Ratio and the SAP Combined
     Ratio.  Additionally,  the difference relates to the accounting for
     certain costs which are treated differently under SAP and GAAP.
     For further information about the Company's combined ratios see Item 7,
     "Management's Discussion and Analysis of Financial Condition and Results
     of Operations" of this Report.
</TABLE>

Marketing and Distribution

The  Group's  marketing and distribution strategy emphasizes profitability
rather than volume and focuses on the production of its voluntary business
through  five  general agents, one of which is an Empire  subsidiary,  and
approximately  400 local agents and insurance brokers who are  compensated
for their services by payment of commissions on the premiums they produce.

These  agents  and  brokers also represent competing insurance  companies.
Subject to regulatory approval, the Group utilizes premium rates developed
and  independently filed for all coverages with the exception of  workers'
compensation,  for  which  rates are filed by the  New  York  Compensation
Insurance  Rating Board, and assigned risk automobile business, for  which
rates are filed by the New York Automobile Insurance Plan.

					-3-
<PAGE>
Reinsurance

The  Company's  retention on property and casualty lines of insurance  was
$0.3  million  in  1997 and 1996 and $0.2 million in 1995.   For  workers'
compensation business the retention was $0.5 million for all three  years.
Additionally,  the Company carries reinsurance to protect  itself  against
certain  catastrophic losses.  Its retention of lower level  losses  under
such  treaties is $7.5 million for 1998 and was $5.0 million for 1997  and
$3.0 million for 1996 and 1995.

Effective  January 1, 1997, Empire entered into a quota share  reinsurance
agreement  with  its subsidiary, Centurion.  Under this agreement,  Empire
will  assume  50% up to July 1, 1997 and 75% thereafter of  the  effective
period  premiums  and  losses of Centurion and grant  Centurion  a  ceding
commission.   Under  the pooling agreement, 70% of such  business  assumed
will be retained by Empire and 30% will be shared with the Company.

Although  reinsurance  does  not legally discharge  an  insurer  from  its
primary  liability  for the full amount of the policy liability,  it  does
make  the  assuming reinsurer liable to the insurer to the extent  of  the
reinsurance  ceded.  The majority of the Company's  reinsurance  has  been
placed with certain of the largest reinsurance companies, including  (with
their  Best  ratings)  General Reinsurance Corporation  (A++)  (superior),
American  Re-Insurance  Company  (A+) (superior),  Partner  Re  Co.,  Ltd.
(A+)(superior),  IPC Re Ltd. (A) (excellent), CAT Ltd. (A)(excellent)  and
Zurich  Reinsurance  (North America), Inc. (A)  (excellent).  The  Company
believes  its  reinsurers  to  be financially  capable  of  meeting  their
respective  obligations.   However, to  the  extent  that  any  reinsuring
company is unable to meet its obligations, the Company would be liable for
the  reinsured  risks.  The Company has established  reserves,  which  the
Company believes are adequate, for any non-recoverable reinsurance.

Investments

Investment activities represent a significant part of the Company's  total
income.  Investments are managed by the Investment Committee of the  Board
of Directors, which consults with outside investment advisors with respect
to a substantial portion of the Company's investment portfolio.

The   Company   has  a  diversified  investment  portfolio   substantially
consisting  of  securities rated "investment grade"  by  established  bond
rating  agencies  or issued or guaranteed by the U.S.  Government  or  its
agencies.   At  December  31, 1997 and 1996,  the  average  yield  of  the
Company's  bond  portfolio was approximately 5.9% and 6.1%,  respectively,
and the average maturity of the Company's bond portfolio was approximately
3.3 years for each year.

Tax Sharing Agreement

The  Company  has  been included in the consolidated  federal  income  tax
returns  of  Leucadia  since 1993.  Under the terms  of  the  tax  sharing
agreement between Leucadia and the Company, the Company computes  its  tax
provision  on a separate return basis and is either charged its  share  of
federal income tax resulting from its taxable income or is reimbursed  for
tax benefits resulting from its losses.

Government Regulation

The  Group,  like  all  insurance  companies,  is  subject  to  regulation
involving  the establishment of premium rates, standards of  solvency  and
minimum  requirements of capital and surplus which must be  maintained  in
the  states  in which they transact business.  There can be  no  assurance
that  such regulatory requirements will not become more stringent  in  the
future  and  have an adverse effect on the Group's operations.   Insurance
companies  are required to file detailed annual reports with the insurance
regulatory  agencies in each of the states in which they do  business  and
are  subject to periodic examination by such agencies.  The New York State
Insurance  Department  is currently finalizing their  examination  of  the
Company's  statutory  financial statements for the years  1994,  1995  and
1996.

					-4-
<PAGE>
In  the  opinion of management, the results of this exam  are  not
expected to have a material impact on the financial position or results of
operations of the Company.

The  National Association of Insurance Commissioners ("NAIC") has  adopted
model  laws  incorporating the concept of a "risk based  capital"  ("RBC")
standard  for insurance companies.  Generally, the RBC formula is designed
to  assess  the adequacy of an insurer's statutory capital in relation  to
the risks inherent in its business.  The RBC formula is used by the states
as  a  tool  to identify weakly capitalized companies for the  purpose  of
initiating regulatory action when capital under the standard is judged  to
be  inadequate.   As  of  December  31,  1997,  the  Company's  RBC  ratio
substantially exceeded minimum requirements.

The NAIC also has adopted various ratios for insurance companies which, in
addition to the RBC ratio, are designed to serve as a tool to assist state
regulators  in  discovering  potential  weakly  capitalized  companies  or
companies  with unusual trends.  The Company had one "other  than  normal"
NAIC  ratio  for  the year ended December 31, 1997.  The Company  believes
that  there  are  no  material underlying problems or  weaknesses  in  its
insurance  operations  and  that  it is  unlikely  that  material  adverse
regulatory action will be taken.

The  Group  is  a  member of state insurance funds, which provide  certain
protection to policyholders of insolvent insurers doing business in  those
states.   Due  to  insolvencies of certain insurers in recent  years,  the
Group  has been assessed certain amounts which have not been material  and
are likely to be assessed additional amounts by state insurance funds. The
Company believes that it has provided for all anticipated assessments  and
that any additional assessments will not have a material adverse effect on
the Company's financial condition or results of operations.

Competition

The insurance industry is a highly competitive industry, in which many  of
the  Company's competitors have substantially greater financial resources,
larger sales forces, more widespread agency and broker relationships,  and
more  diversified  lines  of  insurance coverage.   Additionally,  certain
competitors market their products with endorsements from affinity  groups,
while  the  Company's products are unendorsed, which may give  such  other
companies  a  competitive advantage.  Federal, administrative, legislative
and  judicial activity may result in changes to federal banking laws  that
will  enable  national banks to act as agents in order  to  offer  certain
insurance products in direct competition with the Company.  The Company is
unable  to  determine  what effect, if any, such changes  may  have  on  the
Company's operations.

The Company believes that property and casualty insurers generally compete
on  the  basis  of  price,  customer  service,  consumer  recognition  and
financial  stability.   The  industry has historically  been  cyclical  in
nature,   with  periods  of  less  intense  price  competition  generating
significant  profits, followed by periods of increased  price  competition
resulting in reduced profitability or loss.  The current cycle of  intense
price  competition  has continued for a longer period than  in  the  past,
suggesting  that the significant infusion of capital into the industry  in
recent  years, coupled with larger investment returns, has been,  and  may
continue  to be, a depressing influence on policy rates. In addition,  the
Company  is  experiencing increased competition from  low  cost  insurance
providers  that  write personal lines business on a direct response  basis
through  direct mail and telemarketing. The profitability of the  property
and  casualty  insurance industry is affected by many  factors,  including
rate  competition, severity and frequency of claims (including catastrophe
losses),  interest rates, state regulation, court decisions  and  judicial
climate, all of which are outside of the Company's control.

Loss and Loss Adjustment Expenses

Liabilities  for  unpaid  losses, which are  not  discounted  (except  for
certain  workers' compensation liabilities), and loss adjustment  expenses
("LAE")  are determined using case-basis evaluations, statistical analyses
and  estimates  for  salvage  and subrogation  recoverable  and  represent
estimates  of  the  ultimate claim costs of all  unpaid  losses  and  LAE.
Liabilities include a provision for losses that have occurred but have not
yet been reported.  These estimates are subject to the effect of trends in
future  claim  severity  and

					-5-
<PAGE>
frequency experience.   Adjustments  to  such
estimates are made from time to time due to changes in such trends as well
as  changes in actual loss experience.  These adjustments are reflected in
current earnings.

The  Company  relies  upon  standard actuarial  ultimate  loss  projection
techniques  to obtain estimates of liabilities for losses and  LAE.  These
projections include the extrapolation of both losses paid and incurred  by
business  line  and accident year and implicitly consider  the  impact  of
inflation  and claims settlement patterns upon ultimate claim costs  based
upon  historical patterns.  In addition, methods based upon  average  loss
costs,  reported claim counts and pure premiums are reviewed in  order  to
obtain  a range of estimates for setting the reserve levels.  For  further
input,  changes  in  operations in pertinent areas including  underwriting
standards,   product  mix,  claims  management  and  legal   climate   are
periodically reviewed.

In  the  following table, the liability for losses and LAE of the Company,
are  reconciled  for  each  of the three years ended  December  31,  1997.
Included therein are current year data and prior year development.

<TABLE>
                 RECONCILIATION OF LIABILITY FOR LOSSES AND LAE

<CAPTION>
                                                   1997      1996      1995
                             (In thousands)
<S>                                                <C>       <C>       <C>

Liability for losses and LAE,
net of reinsurance, at beginning of the year       $143,494  $142,718  $121,923


Provision for losses and LAE for
  claims occurring in the current year               73,741    80,216    80,061

Increase in estimated losses and LAE
  for claims occurring in prior years                 8,304     8,134    10,266
                                                     82,045    88,350    90,327

Loss and LAE payments for claims
  occurring during:
    Current year                                     23,804    27,192    23,743
    Prior years                                      56,475    60,382    45,789
                                                     80,279    87,574    69,532

Liability for losses and LAE, net                   145,260   143,494   142,718

Reinsurance balances receivable                     272,266   262,593   257,161

Liability for losses and LAE at the end
  of year as reported in the financial
  statements                                       $417,526  $406,087  $399,879

</TABLE>

The  Company's liability for losses and LAE as of December  31,  1997  was
$145.3  million  determined  in accordance with  SAP  and  $417.5  million
determined in accordance with GAAP.  The difference relates to liabilities
assumed by reinsurers, which are not deducted from GAAP liabilities.

					-6-
<PAGE>
The  table on the following page presents the development of balance sheet
liabilities for 1987 through 1997.  The liability line at the top  of  the
table  indicates the estimated liability, net of reinsurance,  for  unpaid
losses  and  LAE  recorded  at the balance sheet  date  for  each  of  the
indicated years. This liability represents the estimated amount of  losses
and  LAE  for  claims that were unpaid at each annual balance sheet  date,
including  provision for losses estimated to have been  incurred  but  not
reported  to the Company.  The middle portion of the table shows  the  re-
estimated  amount of the previously reported liability based on experience
as  of  the  end  of  each succeeding year.  As more  information  becomes
available  and claims are settled, the estimated liabilities are  adjusted
upward  or downward with the effect of decreasing or increasing net income
at the time of adjustment.

The  "cumulative redundancy (deficiency)" represents the aggregate  change
in  the  estimates  over all prior years.  For example, the  initial  1987
liability estimate has developed a $5.1 million redundancy over ten years.
The  effect  on  pretax income during the past three years of  changes  in
estimates  of  the  liabilities  for  losses  and  LAE  is  shown  in  the
reconciliation table above.

The  lower  section  of the table shows the cumulative  amount  paid  with
respect  to  the  previously recorded liability as  of  the  end  of  each
succeeding  year. For example, as of December 31, 1997,  the  Company  had
paid $54.6 million of the currently estimated $56.9  million of losses and
LAE that had been incurred, but not paid, through the end of 1997; thus an
estimated $2.3 million of losses incurred through 1987 remain unpaid as of
the current balance sheet date.

In  evaluating this information it should be noted that each amount  shown
for "cumulative  redundancy (deficiency)" results includes the effects  of
all  changes in amounts for prior periods.  For example, the amount of the
deficiency  related to losses settled in 1990, but incurred in 1987,  will
be  included in the cumulative redundancy amount for years, 1987, 1988 and
1989.   This  table  does not present accident or policy year  development
data.   Conditions  and  trends  that have  affected  development  of  the
liability   in  the  past  may  not  necessarily  occur  in  the   future.
Accordingly,   it   would  not  be  appropriate  to   extrapolate   future
redundancies or deficiencies based on this table.

For  further discussion of the Company's loss development experience,  see
Item  7, "Management's Discussion and Analysis of Financial Condition  and
Results of Operations" of this Report.

					-7-
<PAGE>
<TABLE>
Analysis of Loss and Loss Adjustment Expenses Development
(In Thousands)
<CAPTION>

	                                                      Years ended December 31,
                       1987      1988      1989      1990       1991      1992      1993      1994      1995      1996      1997
<S>                    <C>       <C>       <C>       <C>        <C>       <C>       <C>       <C>       <C>       <C>       <C>

Liability for Unpaid
  Losses and Loss
  Adjustment Expenses  $ 62,013  $ 67,154  $ 70,567  $ 75,420   $ 84,178  $ 96,712  $106,115  $121,923  $142,718  $143,494  $145,260

Liability Re-estimated
  as of:
    One year later       59,515    64,411    68,347    74,844     83,987    96,516   103,181   132,189   150,852   151,798        -
    Two years later      58,357    62,135    65,227    73,538     83,341    97,208   112,176   140,620   160,686
    Three years later    56,650    59,859    63,792    73,151     85,197   103,592   118,127   150,434
    Four years later     55,367    58,606    63,556    74,190     88,928   108,430   124,375
    Five years later     54,595    59,131    63,584    76,509     92,035   112,988
    Six years later      54,904    59,304    64,962    78,392     95,273
    Seven years later    54,924    60,504    65,467    80,040
    Eight years later    55,682    61,363    66,298
    Nine years later     56,382    61,780
    Ten years later      56,895

Cumulative Redundancy
  /(Deficiency)        $  5,118  $  5,374  $  4,269  $ (4,620)  $(11,095) $(16,276) $(18,260) $(28,511) $(17,968) $ (8,304)  $    -

Cumulative Amount of
  Liability Paid
  Through:
    One year later     $ 18,133  $ 19,242  $ 19,744  $ 23,681  $ 26,852   $ 33,903  $ 35,048  $ 45,789  $ 60,382  $ 56,475
    Two years later      29,287    30,362    32,840    38,067    44,989     54,615    59,701    80,911    95,190
    Three years later    36,927    39,511    42,271    50,194    59,336     71,653    81,680   105,977
    Four years later     42,872    45,698    49,803    58,830    69,955     85,689    97,917
    Five years later     46,734    50,434    54,602    65,025    77,965     95,938
    Six years later      49,262    53,433    58,185    69,568    83,886
    Seven years later    51,067    55,598    60,953    72,683
    Eight years later    52,538    57,393    62,737
    Nine years later     53,813    58,495
    Ten years later      54,634

GROSS LIABILITY -
  END of YEAR                                                                       $290,833  $341,599  $399,879  $406,087  $417,526
REINSURANCE                                                                          184,718   219,676   257,161   262,593   272,266
NET LIABILITY -
  END of YEAR
  AS SHOWN ABOVE                                                                    $106,115  $121,923  $142,718  $143,494  $145,260

GROSS RE-ESTIMATED
  LIABILITY - LATEST                                                                $360,625  $430,635  $455,578  $440,385
RE-ESTIMATED REIN-
  SURANCE - LATEST                                                                   236,250   280,201   294,892   288,587
NET RE-ESTIMATED
  LIABILITY - LATEST                                                                $124,375  $150,434  $160,686  $151,798
GROSS CUMULATIVE
  (DEFICIENCY)                                                                      $(69,792) $(89,036) $(55,699) $(34,298)

</TABLE>
										-8-

<PAGE>
Item 2. Properties

The Group's executive and administrative offices are located on six floors
of  a  ten-story office building at 122 Fifth Avenue, New York,  New  York
10011 and some additional space in the surrounding area under leases, each
of which expire on September 30, 1998.

The  Group  has entered into a twenty-year lease agreement  in  an  office
building  in Brooklyn, New York, in which Leucadia has an equity interest,
and  will  relocate its executive and administrative offices in  September
1998.   The Group received certain incentives from both the City and State
of  New York in connection with this lease, which will be recognized  over
the term of the lease.

The Group also conducts limited operations from branch offices located  in
Manhattan, and Rochester, New York, Boston, Massachusetts and Bedford, New
Hampshire.   The  rental charged to the Company for  these  facilities  is
prorated  in  accordance with the pooling agreement described in  "Pooling
Agreement" under Item 1, herein.


Item 3. Legal Proceedings

The Company is party to legal proceedings that are considered to be either
ordinary,  routine  litigation or incidental to  its  business.  Based  on
discussion with counsel, the Company does not believe that such litigation
will  have  a  material  effect  on  its financial  position,  results  of
operations or cash flows.


Item 4. Submission of Matters to a Vote of Security Holders

The  information to be included under the captioned "Submission of Matters
to  a Vote of Security Holders" is included in the Company's Form 10-Q for
the quarterly period ended September 30, 1997.


					-9-
<PAGE>
                                    PART II

Item   5.     Market  for  the  Registrant's  Common  Equity  and  Related
Stockholder Matters

(a) Market Information
The  Company's  common  stock trades on The Nasdaq National  Stock  Market
under the symbol "ALCI".  The following table sets forth, for the calendar
quarters indicated, the high and low closing trade price per common  share
as  reported  by  the  Wall  Street Journal and  National  Association  of
Securities Dealers, Inc.

<TABLE>
<CAPTION>
                                         High          Low
     <S>                                 <C>           <C>

     1st Quarter 1998                    $ 7 3/8       $ 7
     (Through March 17, 1998)

     1st Quarter 1997                      8 1/2         7
     2nd    "     "                       11             7
     3rd    "     "                       11 1/4         9 1/4
     4th    "     "                        9 3/4         6 1/2

     1st Quarter 1996                      9 3/8         8
     2nd    "     "                        9 1/4         7 1/2
     3rd    "     "                        8 1/4         6 1/4
     4th    "     "                        8 1/2         7

</TABLE>
(b) Holders
The number of shareholders of record of common shares at December 31, 1997
was 551.

(c) Dividends
The Company has paid no dividends on its common shares since 1975. The New
York Insurance Law prohibits New York domiciled property and casualty
companies from paying dividends except out of earned surplus.  Without the
approval of the New York State Insurance Department,  dividends  are
limited to the lowest of 1) 10% of surplus as computed on a SAP basis, or  2)
adjusted net  investment income  during the 12 month period prior to
declaration. At  December  31, 1997, $7,009,000 was available for
distribution of dividends.  The Company does not presently anticipate
paying dividends in the near future.


Item 6. Selected Financial Data
<TABLE>
                           Years ended December 31,
                    (In thousands, except per share amounts)
<CAPTION>
                                  1997       1996       1995       1994       1993(b)
<S>                               <C>        <C>        <C>        <C>        <C>

Total Revenues                    $102,624   $120,790   $117,892   $107,286   $ 94,632

(Loss)/Income before
  cumulative effects of
  changes in accounting
  principles (a)                  $    (83)  $  2,634   $    563   $  6,901   $  7,222

Cumulative effects of changes
  in accounting principles               -          -          -          -      6,171

Net (Loss)/Income (a)             $    (83)  $  2,634   $    563   $  6,901   $ 13,393
Basic (Loss)/Earnings Per
  Share:
(Loss)/Income before cumu-
  lative effects of changes
  in accounting principles (a)    $  (0.01)  $   0.37    $  0.08   $   0.97   $   1.02

Cumulative effects of changes
  in accounting principles               -          -          -          -        .88

Basic (Loss)/Earnings per
 Share (a)                        $  (0.01)  $   0.37    $  0.08   $   0.97   $   1.90

</TABLE>
					-10-
<PAGE>
Item 6. Selected Financial Data, continued



a)  Net  income includes net securities (losses) gains, net of  applicable
    tax, as follows:
<TABLE>
<CAPTION>
                         (Losses)       Per
                         Gains          Share
            <S>          <C>            <C>

            1997         $(125,000)     $ (0.02)
            1996           735,000         0.10
            1995          (133,000)       (0.02)
            1994          (437,000)       (0.06)
            1993           918,000         0.13
</TABLE>
b)  The  cumulative effects of changes in accounting principle related  to
    changes  in  accounting  for  income taxes, post-retirement  benefits  and
    retrospectively rated reinsurance contracts.

<TABLE>
<CAPTION>
                                         At December 31,
                        1997       1996       1995       1994      1993
                             (In  thousands, except  ratio information)
<S>                     <C>        <C>        <C>        <C>       <C>
Total assets            $640,249   $653,730   $660,820   $582,508  $513,558
Invested  assets         271,736    272,992    273,548    237,878   219,608

Surplus note:
  Face value               7,000      7,000      7,000      7,000     7,000
  Interest                 7,710      7,115      6,524      5,911     5,395

Common Shareholders'
  Equity(a)               78,164     75,658     75,936     63,264    69,813
GAAP Combined Ratio(c)     119.3%     114.1%     115.4%     102.5%    103.5%
SAP  Combined  Ratio (c)   118.6%     107.5%     107.5%     101.3%    101.6%

Industry SAP Combined
  Ratio                      N/A      105.8%     106.4%     108.4%    106.9%
Premium to Surplus
  Ratio (b)                  1.1X       1.4X       1.6X       1.7X      1.5X

<FN>
(a)  Includes  unrealized depreciation of approximately $1.7  million  in
     1996  and   $10.9  million  in  1994,  and  unrealized  appreciation   of
     approximately  $0.9  million  in 1997, $1.2  million  in  1995  and  $2.6
     million  in 1993, all net of tax, on investments classified as  available
     for sale.

(b)  Premium to Surplus Ratio was calculated by dividing annual  statutory
     net premiums written by year-end statutory surplus.

(c)  For 1996 and 1995, a change in the statutory accounting treatment for
     retrospectively  rated reinsurance agreements was  the  principal  reason
     for  the  difference between the GAAP Combined Ratio and the SAP Combined
     Ratio.  Additionally,    the differences relate  to  the  accounting  for
     certain costs which are treated differently under SAP and GAAP.
</TABLE>


					-11-
<PAGE>
Item 7. Management's Discussion and Analysis of
        Financial Condition and Results of Operations

The  purpose  of  this  section is to discuss and  analyze  the  Company's
financial  condition,  liquidity  and capital  resources  and  results  of
operations.    This  analysis  should be  read  in  conjunction  with  the
financial  statements  and related notes which  appear elsewhere  in  this
Report.


Liquidity and Capital Resources

In  1997,  the  Company  posted a small loss and net  cash  was  used  for
operations  as a result of a decrease in premiums written and a program to
reduce  pending claims and settle claims more quickly than  in  the  past.
During  the two year period ended December 31, 1996, the Company  operated
profitably and net cash was provided from operations.

At  December 31, 1997 and 1996 the yield of the Company's fixed maturities
portfolio was 5.9% and 6.1%, respectively, with an average maturity of 3.3
years  for  each year.  Additionally, at December 31, 1997,  approximately
92%  of  the  fixed maturities portfolio was invested in issues of the U.S.
Government and its agencies with the remainder invested in investment
grade corporate and  industrial issues.  The Company presently
anticipates reinvesting the majority of proceeds from  maturities
and investment income in substantially similar investments.

The Company believes its immediate cash needs will not require the sale of
long  term  fixed  maturities,  although it  may  sell  certain  of  these
securities from time to time.

The  Company maintains cash, short-term and readily marketable  securities
and  anticipates that the cash flow from investment income and  maturities
of   long  term  fixed  maturities  will  be  sufficient  to  satisfy  its
anticipated cash needs.  The Company does not presently anticipate  paying
dividends  in  the near future and believes it has sufficient  capital  to
meet its currently anticipated level of operations.


Results of Operations

Net  earned  premium  revenues of the Company decreased  by  approximately
$15.2   million,  or  15.8%, in 1997 and increased by  approximately  $1.8
million and $5.2 million in 1996 and 1995 respectively (1.9% and 5.8% in 1996
and 1995, respectively). In 1997, the decline in earned premium revenues
was  primarily  due to the depopulation of the assigned risk  pools  ($9.5
million)   and  a  reduction  in  certain  commercial  lines,  principally
voluntary  commercial automobile ($3.1 million) and workers'  compensation
($2.6  million)  due  to competition, reunderwriting  and  repricing.   In
addition, earned premium revenues were reduced in 1997 by $1.7 million  to
record  premiums  due  under retrospectively rated  reinsurance  contracts
written  for  1995 and prior accident years. The Company re-estimated  the
premium  due based upon its current estimate of loss ratios for  1995  and
prior  accident  years.   Partially offsetting  these  reductions  was  an
increase   in  certain  voluntary  personal  lines,  principally   private
passenger automobile and homeowners.

In  1996, although  higher premium rates were charged on certain lines  of
business   than  in  1995  including amounts related to increased  minimum
automobile  liability  coverage required by  New  York  State,  such  rate
increases  were largely offset by a decrease in the number of policies  in
force.   This  decrease primarily resulted from the  depopulation  of  the
assigned  risk  pools and reduced volume in other lines of  business  that
were not profitable, primarily certain specialty programs within voluntary
commercial   automobile  lines.   In  addition,  in  1996    the   Company
experienced increased competition, primarily in workers'  compensation and
commercial package policies, which reduced volume.


					-12-
<PAGE>
During  the  three  years ended December 31, 1997,  the  Company  received
servicing  fees for providing administrative and claims services  for  the
NYPAP.  During 1997, the premium volume that the Group managed under  this
program  significantly declined primarily due to the ongoing  depopulation
of  the  NYPAP, which is expected to continue, and increased  competition.
During  1997,  the Group's agreement with NYPAP contributed  approximately
$900,000  to  the  Company in pre-tax income, net of  servicing  expenses.
Effective  February  28,  1998, the Group ceased serving  as  a  servicing
carrier  for  the  NYPAP, thereby enabling the Group  to  concentrate  its
resources  on  its  core  non-service  businesses  and  redeploy   certain
resources previously dedicated to the NYPAP.  Accordingly, the Group  will
not provide such services in 1998, except for the run-off of the remaining
NYPAP claims, which will occur over approximately a two-year period.   The
Group  believes  it  has provided sufficient reserves  for  future  claims
servicing costs related to such  run-off business.

The  Company's combined ratios as determined under GAAP and  SAP  were  as
follows:

<TABLE>
<CAPTION>
                             Years Ended December 31,
                         1997           1996           1995
     <S>                 <C>            <C>            <C>
     GAAP                119.3%         114.1%         115.4%
     SAP                 118.6%         107.5%         107.5%

</TABLE>
The combined ratios of the Company increased in 1997, primarily reflecting
an  increase  in the 1997 accident year loss ratios, principally  for  the
private  passenger  automobile  and  commercial  assigned  risk  lines  of
business,  based upon increased claim frequency and continued  unfavorable
development  of prior accident year losses.  This increase  was  partially
offset  by  a decrease in  expenses  primarily due to a reduction  in  the
reserve  for prior years' servicing carrier expenses and reduced  expenses
reflecting  reduced  premium volume in 1997.  Included  in  the  Company's
results  for 1997, 1996 and 1995 were approximately $8.3 million in  1997,
$8.1  million  in 1996 and $10.3 million in 1995 for reserve strengthening
related  to  losses  from prior accident years.  In  1997  and  1996,  the
reserve strengthening primarily related to voluntary commercial automobile
and  commercial  package lines of business, while  in  1995,  the  reserve
strengthening  primarily related to automobile and  workers'  compensation
lines of business.

The  1997  reserve strengthening included approximately $3.3  million  for
commercial  package lines of business and approximately $2.1  million  for
voluntary  commercial  automobile lines of  business.   During  1997,  the
Company  reviewed   the  adequacy of the reserves  carried  for  its  open
claims'  files,  as part of its normal ongoing practice, focusing  on  the
commercial package, general liability and commercial automobile  lines  of
business.   As  a  result  of  this review and the  continued  unfavorable
development of prior accident years losses, particularly the 1992  through
1994  accident  years,  the Company has revised its assumptions  regarding
future   increases   in  average  claims  severity   and   reserves   were
strengthened.

The  1996  reserve strengthening included approximately $6.0  million  for
voluntary  commercial automobile lines of business and approximately  $2.4
million for commercial package lines of business.  Beginning in 1992,  the
Company  entered  into  new  market segments of the  voluntary  commercial
business,   including  specialty  programs  for  sanitation  trucks,   gas
stations,  fuel  oil  deliveries and limousines.  Initially,  the  Company
based  its loss ratio estimate upon its experience with similar  lines  of
business,  industry  statistics  and  standard  actuarial  ultimate   loss
projection techniques, which consider expected loss ratios.  During  1996,
claims  began  to  develop  unfavorably and the Company  used  such  claim
development  to revise the assumptions that formed the basis of  actuarial
studies  and reserves were increased.  With respect to commercial  package
lines, general liability claims for business written in 1992 through  1994
also developed unfavorably.  These claims showed an increased frequency of
losses  as  well  as  an increase in the time between the  date  the  loss
occurred  and  when  the loss was reported compared to  prior  experience.
General  liability claims are susceptible to the emergence of losses  over
an extended period of time.


					-13-
<PAGE>
The  1995  reserve strengthening included approximately $6.9  million  for
private  passenger  automobile  lines of business  and  $3.0  million  for
workers'  compensation  lines of business.  In  early  1994,  the  private
passenger automobile business increased significantly as a result  of  the
acquisition  of a large block of assigned risk business.  The  acquisition
of this block of business nearly doubled the volume  previously written by
the  Company.   Early in 1995, losses began to develop  in  this  line  of
business that indicated a higher ultimate loss ratio than the Company  had
experienced  on  similar  blocks of assigned risk  business  from  earlier
periods, which experience formed the basis of the Company's original  loss
estimate.  The Company believes the increased losses in this line resulted
primarily  from its inability to effectively process a much larger  volume
of  claims  from its significantly increased customer base.  Consequently,
claims  investigation  and file documentation were  not  conducted  timely
which  led  to  higher claim costs. With respect to workers'  compensation
lines,  the Company's policies provide insurance coverage to the  employer
if  employees  are  able  to successfully assert  liability  for  employer
negligence  in  providing  a  safe working environment.   During  1995,  a
relatively  small number of such claims with large dollar  values  emerged
that  had not been previously anticipated.  The emergence of these claims,
and  the  fact  that  the  workers'  compensation  line  of  business   is
susceptible  to the emergence of losses over an extended period,  resulted
in  a  revision of the Company's estimate of ultimate losses and  reserves
were increased.

For the lines of business discussed above, as well as all other  property
and casualty lines of business, the Company employs a variety  of  standard
actuarial  loss projection techniques, statistical analyses and case  base
evaluations  to estimate its liability for unpaid losses.   The  actuarial
projections  include an extrapolation of both losses paid and incurred  by
business  line  and accident year and implicitly consider  the  impact  of
inflation  and claims settlement patterns upon ultimate claim costs  based
upon  historical  patterns.  These estimates are performed  quarterly  and
consider  any changes in trends and actual loss experience.  Any resulting
change in the estimate of the liability for unpaid losses, including those
discussed above, is reflected in current year earnings during the  quarter
the change in estimate is identified.

The  reserving process relies on the basic assumption that past experience
is  an  appropriate  basis  for predicting future  events.   The  probable
effects  of  current developments, trends and other relevant  matters  are
also considered.  Since the establishment of loss reserves is affected  by
many  factors, some of which are outside the Company's control or affected
by  future  conditions, reserving for property and casualty  claims  is  a
complex and uncertain process, requiring the use of informed estimates and
judgements.  As additional experience and other data become available  and
are  reviewed,  the  Company's estimates and judgements  may  be  revised.
While  the  effect of any such changes in estimates could be  material  to
future results of operations, the Company does not expect such changes  to
have a material effect on its liquidity or financial condition.

In  management's  judgement,  information  currently  available  has  been
appropriately  considered in estimating the Company's loss reserves.   The
Company will continue to evaluate the adequacy of its loss reserves  on  a
quarterly  basis,  incorporating any future changes in trends  and  actual
loss   experience,  and  record  adjustments  to  its  loss  reserves   as
appropriate.

Investment income has decreased by approximately $0.7 million, or 4.1%  in
1997,  as  compared  to  an  increase of $1.0 million  or  6.5%  in  1996
and $2.2 million or 16.5% in 1995, primarily  as a result of a decrease
in premiums written and a program  to reduce  pending  claims and settle
claims more quickly  during  1997,  and higher invested assets resulting
from positive cash flows in 1996 and 1995.  During 1997, the Company also
recorded $0.2 million in realized capital losses in
the  normal  course  of managing its investment strategy.   In  1996,  the
Company  realized  gains of $1.1 million on the sale of fixed  maturities,
primarily  U.S. Treasury Notes.  During 1995, the Company realized  losses
of $0.2 million on the sale of certain investments in order to shorten the
average duration of its investment portfolio.

					-14-
<PAGE>
The   combination  of  other  underwriting  expenses  incurred   and   the
amortization of deferred policy acquisition costs reflected a decrease  of
approximately  $7.8  million,  or 27.8% in 1997,  and  increases  of  $1.7
million,  or 6.6% in 1996.  The decrease in 1997 was primarily the  result
of  lower  operating  costs, primarily relating to pension  and  severance
benefits  for  certain  employees, and a decrease  in  the  provision  for
servicing carriers expenses in connection with the NYPAP, offset by higher
systems  costs.   The increase in 1996 was the result of higher  operating
costs  primarily  relating to pension and severance benefits  for  certain
employees coupled with higher systems costs.

Impact of Inflation

The  Company, as well as the property and casualty insurance  industry  in
general,  is affected by inflation.  With respect to losses, the Company's
claim  severity  is affected by the impact of inflation  on  the  cost  of
automobile  repair  parts, medical costs and lost  wages.   The  costs  of
adjusting  claims and other underwriting expenses have also been adversely
affected by inflationary pressures on salaries and employee benefits.  The
Company receives rate increases based in part upon its experience as  well
as  the  industry's experience.  Accordingly, premium increases  generally
follow the rate of inflation.

Year 2000 and Information Technology Systems

The  Company has evaluated its information technology systems to determine
the  potential impact of the year 2000.  The year 2000 issue is the result
of  computer programs being written using two digits (rather than four) to
define  the  applicable  year.   Any  programs  that  have  time-sensitive
software may recognize a date using "00" as the year 1900 rather than  the
year  2000, which could result in miscalculations or system failures.   In
1996,  the Group began to evaluate its information technology systems  and
their ability to support future business needs.  This led to a decision to
acquire  new  policy  management and accounting  systems.   These  systems
provide  enhanced functionality and improved processing for  underwriting,
claims, billing, collection, reinsurance, reporting and accounting and are
designed to be year 2000 compliant.  The Group anticipates that these  new
systems  will be fully implemented in 1999.  The Company does  not  expect
that  the  year 2000 issue will have a material effect on its consolidated
financial  position or consolidated results of operations.   However,  the
year 2000 issue may affect other entities with which the Company transacts
business, and the Company cannot predict the effect of the year 2000 issue
on such entities.

Cautionary Statement for Forward-Looking Information

Statements included in this Report may contain forward-looking statements.
Such  forward-looking  statements are made  pursuant  to  the  safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995.   Such
statements  may relate, but are not limited, to projections  of  revenues,
income or loss, capital expenditures, fluctutations in insurance reserves,
plans for growth and future operations, competition and regulation as well
as  assumptions relating to the foregoing.  Forward-looking statements are
inherently  subject to risks and uncertainties, many of  which  cannot  be
predicted or quantified.  When used in this Report, the words "estimates",
"expects", "anticipates", "believes", "plans", "intends" and variations of
such  words  and  similar expressions are intended  to  identify  forward-
looking  statements that involve risks and uncertainties.   Future  events
and  actual  results  could differ materially from  those  set  forth  in,
contemplated by or underlying the forward-looking statements.  The factors
that  could cause actual results to differ materially from those suggested
by any such statements include, but are not limited to, those discussed or
identified  from  time to time in the Company's public filings,  including
general  economic  and  market  conditions,  changes  in  domestic   laws,
regulations  and  taxes, changes in competition and pricing  environments,
regional  or  general  changes  in  asset  valuation,  the  occurence   of
significant  natural  disasters, the inability to reinsure  certain  risks
economically,  the  adequacy of loss reserves,  prevailing  interest  rate
levels  and  changes  in  the  composition of  the  Company's  assets  and
liabilities  through acquisitions or divestitures.  Undue reliance  should
not  be  placed on these forward-looking statements, which are  applicable
only  as  of  the  date hereof.  The Company undertakes no  obligation  to
revise  or  update these forward-looking statements to reflect  events  or
circumstances that arise after the date of this Report or to  reflect  the
occurrence of unanticipated events.

					-15-
<PAGE>
Securities Exchange Commission Financial Reporting Release No. 48

Financial  Reporting  Release No. 48 ("Accounting Policies  for  Derivative
Financial  Instruments  and Derivative Commodity Instruments")  issued  on
February  4,  1997 by the Securities Exchange Commission requires  certain
domestic  and  foreign  issuers to disclose the  accounting  policies  for
derivative instruments and derivative commodity instruments and disclosure
of  quantitative and qualitative information about market risk inherent in
these  instruments.  The  Company's market  capitalization  is  under  the
reporting  threshold  for 1997 and accordingly no disclosure  is  included
herein.  The  Company  will  be  required  to  disclose  such  information
beginning with 1998 financial activity.

Item 8.  Financial Statements and Supplementary Data

See page F1.

Item 9. Changes in and Disagreements with Accountants on Accounting
   and Financial Disclosure

NONE

					-16-
<PAGE>

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

Pursuant  to the Company's Charter and By-Laws, the Board of Directors  of
the  Company consists of 14 members divided into three classes:  Class  I,
Class II and Class III.  Classes I and III consist of five directors  each
and  Class  II  consists  of four directors.  Currently, Class III consists
of four directors due to the resignation of Oliver Patrell on January 1, 1998.
One class  of  directors  is elected in each year for a three-year term.
All of the directors  of  the Company are also directors of Empire and
Centurion.


Name, Age and Position              Principal Occupation, Office
 with Company                         and Term of Office

Richard  G. Petitt, 49,             Principal Occupation - Chairman
Director, Chairman of                 of the Board, and Chief Executive
the Board, President and              Officer of the Company and Empire
Chief Executive Officer               since March 1996 and Executive
                                      Officer and President since May
                                      1996. Previously, Chairman of the
                                      Board and Chief Executive Officer
                                      of Colonial Penn Life Insurance
                                      Co. ("CPL") from March 1992 to
                                      September 1997.  President and
                                      Chief Operating Officer of CPL
                                      from August 1991 to
                                      April 1996. Since September 1983,
                                      has served in various executive
                                      capacities at Leucadia and its
                                      subsidiaries including Vice
                                      President of Leucadia and
                                      President of Sperry &
                                      Hutchinson Co., Inc. ("S&H").
                                     Director since March 1996;
                                      current term expires 1999.

Martin B. Bernstein, 64,             Principal Occupation - President
Director                               and Director of Ponderosa Fibres
                                       of America, Inc.  (A pulp
                                       manufacturer for paper producers).
                                      Director since February 1988;
                                       current term expires 1998.

Ian  M. Cumming, 57,                Principal Occupation - Presently
Director                              and since June 1978, Chairman
                                      of the Board and a Director of
                                      Leucadia.  Director of Skywest,
                                      Inc. (a Utah-based regional air
                                      carrier) since June 1986.
                                      Director of MK Gold Company
                                      (an international gold mining
                                      company) since June 1995.
                                     Director since February 1988;
                                      current term expires 2000.

James E. Jordan, 54                 Principal Occupation - Financial
Director                              Consultant, The Jordan Company.
                                      Previously, President of  the
                                      William Penn Co. from 1986 until
                                      1997.
                                     Director since 1997; current term
                                      expires 2000.

Thomas E. Mara, 52,                 Principal Occupation - Presently
Director                              and since May 1980, Executive Vice
                                      President of Leucadia and Treasurer
                                      of Leucadia since January 1993.
                                     Director since October 1994;
                                      current term expires 2000.

Louis V. Siracusano, 51,            Principal Occupation - Attorney with
Director                              McKenna, Fehringer, Siracusano
                                      & Chianese (a law firm) for over six
                                      years.
                                     Director  since 1985; current term
                                      expires 1998.

					-17-
<PAGE>

Name, Age and Position              Principal Occupation, Office
 with Company                         and Term of Office

Joseph  S.  Steinberg, 54,          Principal Occupation -  President of
Director                              Leucadia since January 1979 and
                                      Director of Leucadia since December
                                      1978.  Director of MK Gold Company
                                      since June 1995.  Director since June
                                      1988 of Jordan Industries, Inc., a
                                      holding company principally
                                      engaged in manufacturing.
                                     Director since February 1988; current
                                      term expires 2000.

Daniel G. Stewart, 79,              Principal Occupation - Independent
Director                              consulting actuary.  Previously,
                                      Senior Vice President of Mutual
                                      Benefit Life Insurance Company
                                      from 1985 to November 1991.
                                     Director since 1980; current term
                                      expires 2000.

Lucius  Theus, 75,                  Principal Occupation - President,
Director                              The U.S. Associates (consultants
                                      in civic affairs, human resources
                                      and business management) since 1989.
                                      Principal and Director of the Wellness
                                      Group, Inc. (a  provider of
                                      health promotion programs) since 1989.
                                      Corporate Director, Civic Affairs of
                                      Allied Corporation (a diversified
                                      industrial company) since 1979.
                                     Director since 1980; current term
                                      expires 1998.

Helen  W.  Vogel, 80,                Principal Occupation - Teacher
Director                               of political science at the White
                                       Plains, New York, Senior Center
                                       for over six years.
                                      Director since 1980; current term
                                        expires 1998.

Harry H. Wise, 59,                   Principal Occupation - President and
Director                               Director, H.W. Associates, Inc. (an
                                       investment advisory firm). President
                                       and Director, Madison Equity Capital
                                       Corp. (a sponsor of private
                                       investment partnerships).
                                      Director since 1988; current term
                                       expires 1999.

Joel M. Berlin, 54,                   Principal Occupation - Senior Vice
Director, Senior Vice                   President of marketing of the Company
President Marketing                     and Empire since May 1996. Previously,
                                        Chairman of the Board and Chief
                                        Executive Officer of S&H (an incentive
                                        marketing firm) from April 1993 to May
                                        1996.  President and Chief Operating
                                        Officer of S&H from March 1992 to May
                                        1996.
                                       Director since 1996; current term
                                        expires 2000.

					-18-
<PAGE>
Name, Age and Position              Principal Occupation, Office
 with Company                         and Term of Office
Francis M. Colalucci, 53,           Principal Occupation - Senior Vice
Director, Senior Vice President,      President, Chief Financial Officer and
Chief  Financial  Officer &           Treasurer of the Company and Empire since
Treasurer                             January 1996.  Previously, Vice President
                                      & Corporate Treasurer of  Continental
                                      Corporation (an insurance holding Company)
                                      from 1991 to January 1996.
	                               Director since October 1996; Current term
                                      expires in 1999.

Linda A. Philipps, 53,              Principal Occupation - Senior Vice
Senior Vice President,                President and Chief Information Officer
Chief Information Officer             of the Company and Empire since June 1996.
                                      Previously, Chief Information Officer of
                                      Banta Printing Corp (a commercial
                                      printing firm), from March 1996 to June
                                      1996 and Director of Business Development
                                      of Menasha Paper Corp.  (a manufacturer of
                                      paper and plastic products) from March
                                      1994 to March 1996.  From August 1988
                                      to February 1994 acted in various
                                      operational capacities for Leucadia.

R.  Scott Conant, 47,              Principal Occupation - Senior Vice President,
Senior Vice President,               of Claims for the Company and Empire since
Claims                               September 1997.  Previously,  Senior Vice
                                     President of Home State Holdings, Inc (an
                                     insurance holding company) from August
                                     1996 to September 1997.  Previously,
                                     Manager &  Consultant for KPMG Peat
                                     Marwick, from February 1995 to August 1996.

Item 11.  Executive Compensation

Summary Compensation Table
The following table sets forth certain compensation information for
Richard G. Petitt, the Chief Executive Officer of the Company, and Andrew
W. Attivissimo, who was Chief Executive Officer of the Company in 1995,
the only executive officers whose compensation paid, or accrued for, under
the pooling arrangement exceeded $100,000 for the years ended December 31,
1997, 1996 and 1995.

<TABLE>
                                 Summary Compensation Table
<CAPTION>
                                                    Long Term
                              Annual Compensation   Compensation
Name and Principal                                  LTIP         All Other
  Position             Year   Salary    Bonus       Payouts      Compensation
<S>                    <C>    <C>       <C>         <C>          <C>

Richard G. Petitt      1997   $105,969   $ 90,000   $      -     $  6,767 (a)
Chairman, President
& C.E.O.               1996     86,674    150,000          -        7,494 (b)

Andrew W. Attivissimo  1997          -          -          -            -
President & C.O.O.     1996     87,791     30,000     69,631 (c)   89,397 (d)
                       1995     78,906     42,300     30,497 (c)   72,876 (e)

<FN>
(a) Includes Salary Cap Restoration Plan ($2,303), Pension Plan ($3,264), and
    Company match of 401(k) Plan ($1,200).
(b) Includes Salary Cap Restoration Plan ($2,100), Pension Plan ($4,455) and
    Company match of 401(k) plan ($939).
(c) Contributions made to a trust pursuant to the Empire Long Term Incentive
    Plan.
(d) Includes Supplemental Retirement Plan ($86,698), Pension Plan  ($1,856),
    income from Empire Long Term Incentive Plan units ($599) and Company
    match of 401(K) plan ($244).
(e) Includes Supplemental Retirement Plan ($58,090), Pension Plan ($5,325),
    income from Empire Long Term Incentive
    Plan units ($9,217) and Company match of 401(k) plan ($244).
</TABLE>

					-19-
<PAGE>
The  Company does not directly remunerate directors.  The directors of the
Company  and  Empire who are not employees of Empire and the Company  were
paid  an  annual  fee of $5,000.  In addition, eligible directors  receive
$1,500 for each joint board meeting attended.  For attendance at a meeting
of  a  committee  of  the joint board, such directors receive  $1,500  per
meeting.  In addition, each Chairperson of a Committee is entitled to $500
per  annum.  All fees paid to such directors are shared in accordance with
the pooling agreement.

In  February  1996,  Mr.  Patrell retired as  Chairman  of  the  Board  of
Directors and Chief Executive Officer of the Company and Empire; he was  a
Director  of Empire and the Company before resigning on January  1,  1998.
Upon  his retirement, Leucadia agreed to pay to Mr. Patrell the amount  of
$1,000,000 of which $333,333 was paid by Empire.  Pursuant to the  pooling
agreement, the Company contributed 30% of the compensation paid by  Empire
to  Mr. Patrell. Mr. Patrell agreed not to compete against Leucadia or its
affiliated entities for a two year period.

Mr.  Attivissimo  was employed pursuant to an Employment  Agreement  which
terminated on December 31, 1996.  The Employment Agreement was to continue
from  year  to  year  thereafter  unless  the  period  of  employment  was
terminated  at  the  end of a calendar year by either Mr.  Attivissimo  or
Empire  on  at  least  six  months  written  notice.   In  May  1996,  Mr.
Attivissimo retired from his positions as an officer and director  of  the
Company  and  Empire.  Pursuant to the terms of his Employment  Agreement,
Mr.  Attivissimo continued to be paid his normal salary  at  the  rate  of
$240,000   per  annum  through  December  31,  1997.   In  addition,   Mr.
Attivissimo  received  $1,901,000 in a lump  sum  supplemental  retirement
benefit, $482,375 under Empire's Long Term Incentive Plan and title to  an
automobile having a book value of approximately $13,000. Pursuant  to  the
pooling agreement, the Company is obligated to pay 30% of the compensation
and cost of benefits paid to Mr. Attivissimo.


Pension Plan

Pensions  for officers and employees of the Company are provided  under  a
trusteed  non-contributory pension plan.  Any  employee  is  eligible  for
membership  in the Plan on January 1st or July 1st of any plan year  after
which  he has completed one full year of service, consisting of a  minimum
of  1,000 credited hours with Empire, provided they have attained the  age
of 21 years by or before such date.

Members  of  the  Plan receive a basic pension if they  work  until  their
normal  retirement date which is the last day of the month in  which  they
attain  65  years of age with 5 years of credited service.  Any member  in
the  active employ of Empire may elect early retirement between 55 and 65.
A member electing early retirement must have at least 10 years of service.
A monthly  average of  total   compensation   received over  the highest 5
consecutive plan or calendar years before retirement is taken  to  compute
benefits as follows:

          1.30% of the first $833 per month of average pay, plus
          1.75% of average pay over $833 per month.

The  sum  of  these  two credits is multiplied by the  years  of  credited
service.  The  basic  benefit amounts listed in the table  below  are  not
subject  to  any  deduction for Social Security benefits or  other  offset
amounts.  The  maximum benefit payable under the pension plan  is  $96,400
per year.

The  amounts  set  forth  in  the following table  show  estimated  annual
benefits upon retirement to which the Company contributes 30% of such cost
through the pooling agreement.


					-20-
<PAGE>
<TABLE>
<CAPTION>

Highest
Five Year Average
Compensation at                     Years of Service
Retirement         10        15        20        25        30        35
<S>                <C>       <C>       <C>       <C>       <C>       <C>
$ 10,000           $  1,300  $  1,950  $  2,600  $  3,250  $  3,900  $  4,550
  25,000              3,925     5,888     7,850     9,813    11,775    13,738
  50,000              8,300    12,450    16,600    20,750    24,900    29,050
  75,000             12,675    19,013    25,350    31,688    38,025    44,363
 100,000             17,050    25,575    34,100    42,625    51,150    59,675
 160,000             27,500    41,300    55,100    69,000    82,600    96,400

</TABLE>

Salary Cap Restoration Plan

In  1994,  Empire established a Salary Cap Restoration Plan  ("SCRP")  for
certain  corporate  officers.  Under the SCRP, Empire will  provide  these
officers  with  an  additional benefit, to be  paid  in  a  lump-sum  upon
retirement,  equal  to  the difference between the actuarially  determined
lump-sum  benefits, as computed under the Pension Plan, of  the  officer's
highest  five year average compensation (not to exceed $320,000,  adjusted
for   the   cost-of-living)  at  retirement  and  the   current    maximum
compensation limit of $160,000. The SCRP is an unfunded plan.   Under  the
pooling agreement, the Company is obligated to pay 30% of the cost of  the
SCRP.

Employees' Savings Plan

Empire  sponsors  an Employees' Savings Plan (the "Savings  Plan"),  under
which  each  eligible  employee  may  defer  a  portion  of  their  annual
compensation,  subject  to  limitations.  Empire  contributes  a  matching
amount,  subject to certain limits.  In 1995, Empire matched 65%  of  each
participant's deferral contribution up to a maximum matching  contribution
of  $813.   A participant may also contribute, from his after-tax dollars,
an  amount, not to exceed 10% of his annual compensation.  Effective  July
1996,  the Savings Plan was amended to allow Empire matching contributions
equal to 50% of an employee's contributions up to a maximum of 2.5% of the
employee's  salary.   Empire's contributions  to  the  Savings  Plan  were
$438,000,  $524,000  and  $435,000 in 1997, 1996 and  1995,  respectively.
Under  the pooling agreement, the Company is obligated to provide  30%  of
Empire's contributions under the Savings Plan.

Supplemental Retirement Plan

Under Empire's Supplemental  Retirement Plan, eligible employees  who work
until   their   normal retirement  date, which,  is the last  day  of  the
month  in  which such employees attains 65 years of age, are  entitled  to
receive  monthly  benefits  equal to (a) the difference  between  (i)  one
twelfth  of a stipulated percentage (the "stipulated percentage") of  such
participant's final average compensation (the "base amount") and (ii)  the
aggregate  amount  of  the  monthly pension and benefit  entitlement  such
participant  would receive under Empire's Pension Plan, Savings  Plan  and
other  employee pension benefit plans if such benefits were  paid  in  the
form  of  an annuity for the life of the participant and fifty percent  of
the  participant's  monthly  Social Security benefit,  multiplied,  unless
otherwise specified in the plan, by (b) a fraction, not exceeding one (the
"reduction  factor"),  the  numerator  of  which  is  the  number  of  the
participant's  years  of service and the denominator  of  which  is  five.
Final  average compensation is the average annual compensation paid during
any  five  consecutive  calendar  years  during  which  the  participant's
compensation  was  highest.  The plan provides that  the  minimum  benefit
payable  is  equal to the base amount multiplied by the reduction  factor.
Participants  remaining  in the employ of the  Company  after  the  normal
retirement  date  continue  to  accrue benefits  under  the  plan.   Early
retirement,  between age 55 and 65 under this plan, is permitted  provided
the  participant  electing early retirement has  at  least  ten  years  of
service.  Amounts payable under the plan are payable out of the assets  of
the  Trust  to  Fund Benefits under Certain Unfunded Deferred Compensation
Plans  of the Company, established effective November 1, 1987 (the  "Trust
Fund").   The Trust Fund is subject to the claims of certain creditors  of
the  Company if the Company becomes insolvent.  The Board of Directors had
designated  one  key employee, Andrew W. Attivissimo, to receive  benefits
under the  plan based on a maximum stipulated percentage  of  60%

					-21-
<PAGE>
and  a minimum   stipulated  percentage  of  30%.   In 1996,
Mr. Attivissimo received a lump sum payment under the plan of $1,901,000.

Long Term Incentive Plan

Prior  to  1996, Empire sponsored a Long Term Incentive Plan which,  based
upon  the  attainment of certain performance goals, awarded officers  with
units of participation in a compensation pool.  The plan was terminated in
1996.


Item 12. Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners

The   table  on the following page sets forth information as of March  17,
1998  as  to   the  Common   Shares of the Company  owned  of  record  and
beneficially    by  each person who owns of record, or  is  known  by  the
Company to own beneficially, more than 5% of such Common Shares.


Name and                     Amount and
Address of                   Nature of
Beneficial                   Beneficial                 Percent of
Owner                        Ownership                  Class

Empire Insurance Company     5,987,401 Common           84.6%
122 Fifth Avenue             Shares owned of
New York, N.Y.  10011        record


Baldwin Enterprises, Inc.    368,607 Common              5.2%
529 East South Temple        Shares owned of
Salt Lake City, Utah 84102   record

As  discussed in Item 1, "Business", Leucadia (and certain of its  wholly-
owned subsidiaries) may be
deemed a parent of Empire and therefore of the Company as a result of  its
indirect ownership of 100% of the outstanding common stock of Empire.


Security Ownership of Management

The following table sets forth information concerning beneficial ownership
of the Company's common stock and the equity securities of Leucadia by all
directors  and by directors and officers of the Company as a group  as  of
December  31, 1997 with respect to the Company's Common Shares and  as  of
March 17, 1998 with respect to Leucadia's and Empire's securities.

					-22-
<PAGE>
Each  holder shown exercises sole voting and sole investment power of  the
shares shown opposite his or her name.

Name of Beneficial            Amount and Nature of         Percent of
Owner                         Beneficial Ownership         Class

Joel M. Berlin                  -                            -
Martin B. Bernstein             -                            -
Francis M. Colalucci            -                            -
R. Scott Conant                 -                            -
Ian M. Cumming (1)              -                            -
James E. Jordan                 -                            -
Thomas E. Mara                  -                            -
Oliver L. Patrell               -                            -
Richard G. Petitt               -                            *
Linda Philipps                  -                            *
Louis V. Siracusano             -                            -
Joseph S. Steinberg (1)         -                            -
Daniel G. Stewart               -                            -
Lucius Theus                    -                            -
Helen W. Vogel                  -                            *
Harry H. Wise                   -                            *
Directors and executive
Officers as a group
  (16 persons) (2)              -                            *

*Less than 1% of Common Stock

(1) Although neither Ian M. Cumming nor Joseph S. Steinberg directly  owns
any  shares of Common Stock of the Company, by virtue of their  respective
interest  of  approximately 15.5% and 14.3%   in Leucadia,  each  may   be
deemed to be the beneficial owner of a proportionate number of  the shares
of  Common Stock of the Company beneficially owned by Leucadia through its
100% ownership of Empire.

(2) Aside from the beneficial ownership described in note 1 to this table,
seven  directors  and  one  officer  beneficially  own  common  shares  of
Leucadia,  which  in the aggregate, represent less than 1%  of  Leucadia's
common stock.


Item 13. Certain Relationships and Related Transactions

See  Item  1  of this report and Notes 1, 3, 8, 9, 10 and 11 of  Notes  to
Consolidated Financial Statements for information relating to transactions
and  relationships between the Company and its affiliates.

					-23-
<PAGE>
                            PART IV

Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K

(a) Financial Statements and Schedule

1.   The  following Financial Statements of Allcity Insurance  Company  are
included in item 8:

 Report of Independent Accountants
 Consolidated Balance Sheets as of December 31, 1997 and 1996.
  Consolidated  Statements of Operations for the years ended  December  31,
1997, 1996 and 1995.
 Consolidated  Statements of Changes in Shareholders' Equity Accounts   for
 the years ended
  December 31, 1997, 1996 and 1995.
  Consolidated  Statements  of  Cash Flows for  the  years  ended  December
31,1997, 1996 and 1995.
 Notes to Consolidated Financial Statements.
    Schedule   VI   -   Supplemental   Insurance   Information   Concerning
Property/Casualty Insurance Operations
   for the years ended  December 31, 1997, 1996 and 1995.

2.   The information for Schedules I, IV and V required to be filed pursuant
     to Regulation S-X, Article 7 is
 contained   in  the  Notes  to  Consolidated  Financial  Statements   and,
 therefore,  these  schedules have been omitted.  The information  required
 by  Schedules  III  and  IV  of Article 7 is combined  in  Schedule  VI  -
 Supplemental    Insurance    Information   Concerning    Property/Casualty
 Insurance Operations.  All other required schedules are not applicable.

3.    The  exhibits required by Item 601 of Regulation S-K have been  filed
  herewith, see attached Exhibit
    Index.

(b) Reports on Form 8-K.

    During the quarter ended December 31, 1997, there were no reports on
    Form 8-K filed for the Company.

(c) Exhibits Required by Item 601 of Regulation S-K.

    See attached Exhibit Index.

(d) Financial Statements Required by Regulation S-X.

    See Item 14(a).

					-24-
<PAGE>
Signatures

Pursuant  to  the requirements of Section 13 or 15 (d) of  the  Securities
Exchange  Act  of 1934, the registrant has duly caused this report  to  be
signed on its behalf by the undersigned, thereunto duly authorized.

                                ALLCITY INSURANCE COMPANY

March 30, 1998                  By:  FRANCIS M. COLALUCCI
                                     Francis M. Colalucci
                                     Director, Senior Vice President
                                     C.F.O. & Treasurer

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 indicated and on the  date  set  forth
above.

RICHARD G. PETITT                       FRANCIS M. COLALUCCI         _
Richard G. Petitt                       Francis M. Colalucci
Director, Chairman, President & C.E.O.  Director, Senior Vice President
                                        C.F.O. & Treasurer


JOSEPH S. STEINBERG                     MARTIN B. BERNSTEIN
Joseph S. Steinberg                     Martin B. Bernstein
Director                                Director


LOUIS V. SIRACUSANO                     HARRY H. WISE
Louis V. Siracusano                     Harry H. Wise
Director                                Director


DANIEL G. STEWART                       JOEL M. BERLIN
Daniel G. Stewart                       Joel M. Berlin
Director                                Director, Senior Vice President


IAN M. CUMMING                          JAMES E. JORDAN
Ian M. Cumming                          James E. Jordan
Director                                Director


LUCIUS THEUS                            HELEN  H. VOGEL
Lucius Theus                            Helen H. Vogel
Director                                Director


THOMAS E. MARA
Thomas E. Mara
Director


					-25-
<PAGE>
EXHIBIT INDEX


The  following designated exhibits, as indicated below,  are  either
filed herewith (if indicated by an asterisk) or have heretofore been filed
with  the Securities and Exchange Commission under the Securities  Act  of
1933 or the Securities Exchange Act of 1934 and are incorporated herein by
reference to such filings.  Reference is made to Item 8 of this Form  10-K
for a listing of certain financial information and statements incorporated
by reference herein.

Exhibit Number       Description of Document

  3                  Corporate charter, as amended,  and  by-laws, as
                     amended, of the Company (Incorporated  by reference
                     to  Exhibit  3  of the Company's  Annual Report on Form
                     10-K  for  the  year ended  December  31, 1994).

  10(a)              Pooling Agreement, as amended through March 31,
                     1992 between Empire and the Company (Incorporated by
                     reference  to  Exhibit 10(a)-20 of the  Company's
                     Form 8  Amendment No. 1 of its annual Report  for  the
                     year ended December 31, 1981).

  10(b)              Lease Agreement, dated November 15, 1982, between
                     Empire and 122 Fifth Associates (Incorporated by
                     reference to exhibit 10(d) of the Company's Annual
                     Report on Form 10-K or the year ended December 31,
                     1982).

  10(c)              Centurion Agreement, made effective as of
                     August 21, 1987 by and between Empire and the
                     Company,   and   Centurion.   (Incorporated by reference
                     to Exhibit 10(e) of the Company's Annual Report on
                     Form 10-K for the year ended December 31, 1987).

  10(d)              Empire Mutual Executive Deferred Compensation Plan
                     dated  November  17,  1987.   (Incorporated by reference
                     to Exhibit 10(f) of the Company's Annual Report on
                     Form 10-K for the year ended December 31, 1987).

  10(e)              Empire Mutual Insurance Company Supplemental
                     Retirement Plan dated November 17, 1987.
                     (Incorporated by reference to Exhibit 10(g) of the
                     Company's Annual Report on Form 10-K for  the year
                     ended December 31, 1987).

  10(f)              Tax Allocation Agreement dated February 28, 1989 among
                     the Company, PHLCORP, Empire, Centurion, Empire Livery
                     Services, Inc., Executroll Services Corporation and
                     Empall  Agency Incorporated (Incorporated  by  reference
                     to Exhibit 10(m) of  the Company's  Annual  Report on
                     Form 10-K for the year ended December 31, 1988).


					-26-
<PAGE>
Exhibit Number       Description of Document

  10(g)              Employment Agreement made as of January  1,  1993
                     Empire  and  Andrew W. Attivissimo.   (Incorporated  by
                     reference  to  Exhibit 10(g) of the 10-K for  the  year
                     ended December 31, 1992).

  10(h)              Empire   Insurance   Company   Salary   Cap
                     Restoration  Plan dated May 26, 1994. (Incorporated  by
                     reference  to  Exhibit  10(i) of the  Company's  Annual
                     Report on Form 10-K for the December 31, 1994).

  10(i)              Quota  Share Reinsurance Agreement between Empire
                     Insurance  Company  and  Centurion  Insurance   Company
                     (Incorporated  by  reference to Exhibit  10(i)  of  the
                     company's Annual Report on Form 10-K for the year ended
                     December 31, 1997).

  10(j)              Lease agreement dated June 27, 1996 between Empire
                     Insurance   Company  and  Brooklyn  Renaissance   Plaza
                     L.L.C.,   as  Landlord,  BRPII  L.L.C  as  sub-landlord
                     (Incorporated  by  reference to Exhibit  10(a)  of  the
                     company's quarterly report on Form 10-Q for the quarter
                     ended March 31, 1997).

  EX-10*             Quota Share Agreement (Refer to 10(i) above)

  EX-27*             Financial Data Schedule
					-27-
<PAGE>

ITEM 8.  Financial Statements and Financial Statement Schedule

                                                                Page
The following financial information is submitted herein:


Report of Independent Accountants                                F2
Consolidated Balance Sheets - December 31, 1997 and 1996         F3
Consolidated Statements of Operations for the years
     ended  December 31, 1997, 1996 and 1995                     F4
Consolidated Statements of Changes in Shareholders' Equity
     for the years ended December 31, 1997, 1996 and 1995        F5
Consolidated Statements of Cash Flows for the years ended
     December 31, 1997, 1996 and 1995                            F6
Notes to Consolidated Financial Statements                       F7 - F25


Financial Statement Schedule:
Schedule VI- Supplemental Insurance Information
Concerning Property/Casualty Insurance Operations for the
     Years ended December 31, 1997, 1996 and 1995                F26



					-F1-
<PAGE>
		REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders' of Allcity Insurance Company:

We have audited the consolidated financial statements and the financial
statement schedule of Allcity Insurance Company and Subsidiary listed
in Item 8 of this Form 10-K.  These financial statements and financial
statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
and financial statement schedule 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Allcity Insurance Company and Subsidiary as of December 31, 1997 and
1996, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.  In
addition, in our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the
information required to be included therein.



	COOPERS & LYBRAND L.L.P.
New York, New York
February 9, 1998


					-F2-
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY
(In thousands, except share and per share amounts)
<CAPTION>

	                                                   December 31,
                                                         1997         1996

<S>                                                      <C>          <C>

ASSETS
Investments:
    Fixed maturities
      Available for sale (amortized cost of
      $268,091 in 1997 and $254,645 in 1996)             $269,055     $252,073
      Held to maturity (fair value
      of $497 in 1997 and $485 in 1996)                       485          477
    Equity securities available for sale                      447            -
    Short-term                                              1,749       20,442
        TOTAL INVESTMENTS                                 271,736      272,992

    Cash                                                    2,863        2,232
    Agents' balances, less allowance for
      doubtful accounts ($1,561 in 1997 and
      $1,363 in 1996)                                      13,109       17,814
    Accrued investment income                               2,942        2,822
    Reinsurance balances receivable                       273,280      264,159
    Prepaid reinsurance premiums                           55,074       70,061
    Deferred policy acquisition costs                       7,079        7,707
    Deferred tax                                           11,462       13,019
    Other assets                                            2,704        2,924
        TOTAL ASSETS                                     $640,249     $653,730

LIABILITIES
    Unpaid losses                                        $361,341     $353,536
    Unpaid loss adjustment expenses                        56,185       52,551
    Unearned premiums                                      90,807      111,657
    Drafts payable                                          4,983        5,712
    Due to affiliates                                      14,427       14,232
    Unearned service fee income                             4,539        5,461
    Reserve for servicing carrier claim
      expenses                                              3,701        8,043
    Reinsurance balances payable                            4,825        4,887
    Other liabilities                                       6,567        7,878
    Surplus note                                           14,710       14,115
        TOTAL LIABILITIES                                 562,085      578,072
SHAREHOLDERS' EQUITY
    Common stock, $1 par value: 7,368,420
      shares authorized; 7,078,625 shares issued
      and outstanding in 1997 and 1996                      7,079        7,079
    Additional paid-in capital                              9,331        9,331
    Net unrealized appreciation(depreciation)
      on investments (net of deferred taxes
      of  $494 and ($900) in 1997 and
      1996, respectively)                                     917       (1,672)
    Retained earnings                                      60,837       60,920
       TOTAL SHAREHOLDERS' EQUITY                          78,164       75,658
       TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY        $640,249     $653,730

<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
					-F3-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
ALLCITY INSURANCE COMPANY AND SUBSIDIARY
(In thousands, except share
 and per share amounts)
<CAPTION>
                                                        Year Ended December 31,

                                                          1997         1996         1995
<S>                                                       <C>          <C>          <C>
REVENUES
    Premiums earned                                       $ 80,891     $ 96,073     $ 94,251
    Net investment income                                   15,694       16,358       15,358
    Service Fee Income                                       5,696        6,608        7,683
    Net securities (losses) and gains                         (192)       1,130         (205)
    Other income                                               535          621          805
                                                           102,624      120,790      117,892
LOSSES AND EXPENSES
    Losses                                                  68,901       76,387       77,675
    Loss adjustment expenses                                13,144       11,963       12,652
    Other underwriting expenses, less
      deferrals of $14,616 in
      1997, $15,333 in 1996 and
      $18,359 in 1995                                        4,886       11,681        7,810
    Amortization of deferred policy
      acquisition costs                                     15,245       16,204       18,349
    Interest on surplus note                                   595          591          613
                                                           102,771      116,826      117,099
(LOSS)/INCOME BEFORE FEDERAL INCOME TAX                       (147)       3,964          793
FEDERAL INCOME TAXES
    Current (benefit)/expense                                 (227)       2,501        3,050
    Deferred expense/(benefit)                                 163       (1,171)      (2,820)
                                                               (64)       1,330          230
    NET (LOSS)/INCOME                                     $    (83)    $  2,634     $    563

Per share data, based on 7,078,625
    average shares outstanding in 1997,
    1996 and 1995
        BASIC (LOSS)/EARNINGS PER SHARE                   $  (0.01)    $   0.37     $   0.08

<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
					-F4-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
ALLCITY INSURANCE COMPANY AND SUBSIDIARY
(In thousands)
<CAPTION>
                                                                     SHAREHOLDERS' EQUITY
                                                                        Net Unrealized
                                                                                 (Depreciation)              Total
                                                                   Additional    Appreciation                Share-
                                          Common Stock             Paid-In       On            Retained      holders
                                       Shares        Amount        Capital       Investments   Earnings      Equity
<S>                                    <C>           <C>           <C>           <C>           <C>           <C>

Balance at January 1, 1995             7,079         $  7,079      $  9,331      $(10,869)     $ 57,723      $ 63,264

Net income for the year                                                                             563           563

Change in unrealized appreciation
  on investments (net of deferred
  taxes of $1,073)                                                                 12,109                      12,109

Balance at December 31, 1995           7,079            7,079         9,331         1,240        58,286        75,936

Net income for the year                                                                           2,634         2,634

Change in unrealized depreciation
  on investments (net of deferred
  benefit of $1,567)                                                               (2,912)                     (2,912)

Balance as of December 31, 1996        7,079            7,079         9,331        (1,672)       60,920        75,658

Net Loss for the year                                                                               (83)          (83)

Change in unrealized appreciation
  on investments (net of deferred
  taxes of $1,394)                                                                  2,589                       2,589

Balance as of December 31, 1997        7,079         $  7,079      $  9,331      $    917     $  60,837      $ 78,164

</TABLE>

					-F5-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
ALLCITY INSURANCE COMPANY AND SUBSIDIARY
(In thousands)
<CAPTION>
                                                               Year  Ended December 31,
                                                            1997         1996         1995
<S>                                                         <C>          <C>          <C>

NET CASH FLOWS FROM OPERATING ACTIVITIES
 Net (loss)/income                                          $    (83)    $  2,634     $    563
   Adjustments to reconcile net (loss)/income
     to net cash used for/provided by operating
     activities:
       Provision for deferred tax benefits                       163       (1,171)      (2,820)
       Amortization of deferred policy
         acquisition costs                                    15,245       16,204       18,349
       Provision for doubtful accounts                           198          270          141
       Net securities losses and (gains)                         192       (1,130)         205
	Policy acquisition costs incurred
         and deferred                                        (14,616)     (15,333)     (18,359)

       Net change in:
         Agents' balances                                      4,507        3,071       (1,977)
         Reinsurance balances receivable                      (9,121)      (6,544)     (37,761)
         Prepaid reinsurance premiums                         14,987        9,224       (1,671)
         Unpaid losses and loss adjustment expense            11,439        6,208       58,280
         Unearned premiums                                   (20,850)     (14,285)       2,756
         Drafts payable                                         (729)         868        1,408
         Due to affiliates                                       195       (3,633)      (2,557)
         Unearned service fees                                  (922)         352          853
         Reserve for service carrier claims expenses          (4,342)       1,133        1,660
         Reinsurance balances payable                            (62)       1,411        3,255
         Other                                                  (413)       2,907         (169)

NET CASH (USED FOR)/PROVIDED BY OPERATING
  ACTIVITIES                                                  (4,212)       2,186       22,156

NET CASH FLOWS FROM INVESTING ACTIVITIES
  Available for Sale:
         Acquisition of fixed maturities                    (147,423)    (172,010)    (107,352)
         Proceeds from sale of fixed maturities              120,272      140,862       48,405
         Proceeds from maturities of fixed maturities         13,301       36,767       21,731
         Net change in short-term investments                 18,693       (8,845)      14,389

NET CASH PROVIDED BY/(USED FOR) INVESTING
  ACTIVITIES                                                   4,843       (3,226)     (22,827)

NET INCREASE/(DECREASE)IN CASH                                   631       (1,040)        (671)
  Cash at beginning of year                                    2,232        3,272        3,943
  Cash at the end of year                                   $  2,863     $  2,232     $  3,272
  Cash paid for federal income taxes                        $  1,428     $  3,686     $  3,714

<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
					-F6-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 1-ORGANIZATION

Allcity Insurance Company ("Allcity" or the "Company") is
a property and casualty insurer and includes the results of its subsidiary,
Empall Agency, Inc. ("Empall").   Empire Insurance Company ("Empire"), a
property and casualty insurer owns approximately 84.6% of the outstanding
common shares of the Company and 100% of the outstanding common shares of
Centurion Insurance Company ("Centurion").  Empire's common shares are 100%
owned and controlled, through subsidiaries, by Leucadia National Corporation
("Leucadia").  Additionally, Leucadia indirectly owns an additional 5.2% of
the outstanding common shares of the Company. The Company, Empire and
Centurion are sometimes hereinafter collectively referred to as the Group.

The property and casualty insurance business written by Empire and Allcity is
subject to a pooling agreement under which premiums, losses, loss adjustment
expenses and other underwriting expenses are shared on the basis of 70% to
Empire and 30% to Allcity.  The pooling percentages have been changed from
time to time and may be changed in the future subject to New York State
Insurance Department approval.  Allcity has no employees of its own.
Administrative services are provided by Empire and 30% of the related expenses
are allocated to Allcity.

The Company's three business segments and principal lines of business are
(1) automobile (private passenger and commercial), (2) commercial (commercial
multi-peril, workers' compensation and other liability) and (3) miscellaneous
and personal(fire, allied and homeowners) insurance coverages.  Based on the
Company's 1997 net premiums written, approximately 59%, 30% and 11% of such
premiums were for the automobile, commercial and miscellaneous and personal
lines of business, respectively. The Company markets its products primarily to
individuals, retail establishments, restaurants, livery and taxicab owners,
and several types of service contractors. A substantial portion of the
Company's and Empire's automobile business, both private passenger
and commercial, is assigned risk business acquired through contractual
arrangements with other  insurance companies, some of which are competitors.
These contractual arrangements, which are negotiated for one or two
year periods, provide for fees paid to the Group within parameters established
by the New York State Insurance Department.  In addition, the Group receives
a fee for providing administrative services, including claims processing,
underwriting and collection activities,  for the New York Public Automobile
Pool ("NYPAP"), the Massachusetts Taxi and Limousine Pool, and  the New
Hampshire Commercial Automobile Insurance Procedure. These latter arrangements
do not involve the assumption of any material underwriting risk by the Group.
Effective February 28, 1998, the Group ceased serving as a servicing carrier
for the NYPAP, thereby enabling the Group to concentrate its resources on
its core non-service businesses and redeploy certain resources previously
dedicated to the NYPAP.  Under the pooling arrangement, the Company assumes
30% of the fees and costs of these arrangements.

The Company and Empire are licensed to transact insurance in the State of New
York with Empire being additionally licensed in Connecticut, Massachusetts,
Missouri, New Hampshire and New Jersey. Based on 1997 direct premiums written,
approximately 96% of the property and casualty business written by the Company
and Empire was in the State of New York.


					-F7-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 1--ORGANIZATIONCONTINUED

The Company and Empire distribute their products through five general agents,
one of which is an Empire subsidiary, and independent agents and brokers.
The Empire Group's wholly owned general agent is the largest producer and
generated approximately 11% of its total premium volume for the year ended
December 31, 1997.

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Empall.  The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.  Actual results could differ from
those estimates.

NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Investments: Fixed maturities are designated as either (i) "held to maturity"
and carried at amortized cost, (ii) "trading" and carried at estimated market
value, which is based on quoted market prices, with differences
between cost and estimated fair value reflected in results of operations
or (iii) "available for sale" and carried at estimated fair value with
differences between cost and estimated fair value being reflected as a
separate component of Shareholders' Equity, net of deferred income tax
effects.  Equity securities are designated as available for sale and
carried at estimated fair values with differences between cost and estimated
fair value reflected as a separate component of Shareholders' Equity, net
of deferred taxes.  Short-term investments are carried at cost.

At December 31, 1997 and 1996, investments in fixed maturities on deposit
with the New York State Insurance Department, which the Company has the intent
and ability to hold to maturity, are classified as "Investments held to
maturity".  All other investments in fixed maturities and equity securities
at those dates are classified as "Investments available for sale" and stated
at estimated fair market value. Net unrealized appreciation (depreciation)
on investments available for sale (net of deferred tax/(benefit)) is
included as a separate component of Shareholders' Equity.

Net securities gains or losses on the sale of investments are
determined on a specific identification basis and are included in
revenues. Investments with an impairment in value considered to be
other than temporary are written down to estimated net realizable
value.

Unearned Premiums:  Unearned premiums have been calculated primarily
using the monthly pro rata method.

Unpaid Losses and Loss Adjustment Expenses: Liabilities for unpaid losses,
which are not discounted (except for certain workers' compensation
liabilities), and loss adjustment expenses ("LAE") are determined using


					-F8-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 2--ACCOUNTING POLICIES-CONTINUED

case-basis evaluations, statistical analyses and estimates for salvage and
subrogation recoverable and represent estimates of the ultimate claim costs
of all unpaid losses and LAE. Liabilities include a provision for losses that
have occurred but have not yet been reported. These estimates are subject to
the effect of trends in future claim severity and frequency experience.
Adjustments to such estimates are made from time to time due to changes in
such trends as well as changes in actual loss experience. These adjustments
are reflected in current earnings.

Reinsurance:  Unpaid  losses, unpaid loss adjustment expenses and unearned
premiums are stated gross of reinsurance ceded. Premiums written and earned,
losses and LAE incurred, and other underwriting expenses are stated net of
reinsurance ceded.

Pension Cost:  Empire funds actuarially determined pension costs as currently
accrued; 30% of such pension costs are allocated to Allcity.

Policy Acquisition Costs:  Policy acquisition costs such as commissions,
premium taxes and certain other underwriting expenses are deferred and
amortized ratably over the terms of the related policies. Deferred policy
acquisition costs are limited to their net realizable value after
consideration of investment income on the related premium.

Participating Policies:  Participating business on workers' compensation
lines constitutes approximately 4.7% of the Company's policies in force
and net premiums written.  Amounts transferred to the participating
policyholders' funds are determined by means of specific identification
based upon premium volume and loss experience.  The amount of dividends to
be paid to participating policyholders is approved quarterly by the Board
of Directors. The amount of policyholders' dividends declared on
participating policies was $315,000, $946,000, and $523,000 in 1997, 1996
and 1995, respectively.  Unpaid dividends to participating policyholders
are included as a liability in the consolidated balance sheets.

Servicing Arrangements:  Service fee income from assigned risk business
acquired through contractual arrangements with other insurance companies is
recognized as revenue and earned over the life of the covered policies on a
monthly pro-rata method.

Service fee income for the administrative services, including underwriting,
policy issuance, premium collection and claims services, provided to the NYPAP
is recorded as a reduction to other underwriting and loss adjustment expenses
and is earned over the life of the policies issued.  The premiums and losses
processed by the Company on  behalf of the NYPAP, which are not reflected in
the consolidated financial statements for the years ended December 31, are as
follows (in thousands):

<TABLE>
<CAPTION>

                                             1997      1996      1995
<S>                                          <C>       <C>       <C>
Premiums Earned                              $ 29,076  $ 59,158  $ 60,458
Losses Incurred                                50,745    76,939   100,595
Unpaid Losses                                  98,150   119,223   117,736
</TABLE>

					-F9-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 2--ACCOUNTING POLICIES-CONTINUED
The premiums, losses and expenses of the business for which the Company
provides administrative services are reflected on the financial statements
of those insurance companies, including the Company, in New York State which
are required to participate in the NYPAP. In its role as a servicing carrier,
the Company is liable only for the loss adjustment expenses which are
reflected as a reserve for servicing carrier claim expense and are determined
using case basis evaluations and statistical analyses.

Federal Income Taxes:  The Company uses the liability method in providing for
income taxes. Under the liability method, deferred income taxes are provided
at the enacted tax rates for differences between the financial statements
carrying amounts and tax bases of assets and liabilities and for carryforwards.
A valuation allowance is provided if deferred tax assets are not considered
more likely than not to be realized.

Earnings Per Share:  Earnings per share ("EPS") are based on the weighted
average number of common shares outstanding. There were no outstanding common
stock equivalents during 1997, 1996 and 1995 and therefore, basic and diluted
EPS are the same.

New Pronouncements: In June 1997, the Financial Accounting Standards Board
(the "FASB") issued SFAS No. 130, Reporting Comprehensive Income.  This
statement establishes standards for the reporting and display of comprehensive
income and its components in the consolidated financial statements.  The
purpose of reporting comprehensive income is to report the change in equity
of a business enterprise for the period from transactions and other events
and circumstances from nonowner sources.  It includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. These items include unrealized appreciation
(depreciation) of investments, which is currently reported as separate
components of equity in the balance sheet. The statement is effective in
1998 and will change the presentation of information in the financial
statements and is not expected to have any effect on the financial position
or results of operations of the Company.

Also in June 1997, the FASB issued SFAS No. 131, Disclosure about Segments of
an Enterprise and Related Information.  This statement requires that companies
report certain information about their operating segments in the financial
statements including information about the products and services from which
revenues are derived, the geographic areas of operations, and information
about major customers.  Operating segments are determined by the way
management decides how to allocate resources and how it assesses performance.
Descriptive information about the method used to identify the reportable
operating segments must also be disclosed.  The statement also requires a
reconciliation of revenues, net income, assets and other amounts disclosed
for the segments to the corresponding amounts in the consolidated financial
statements.  The statement is effective in 1998 and is not expected to change
the Company's current segmentation of its business.  The financial position
and operating results of the Company are not expected to  be affected by
this statement.


					-F10-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 2--ACCOUNTING POLICIES-CONTINUED

Presentation: Certain prior year amounts have been reclassified
to conform with the 1997 presentation.

NOTE 3--SURPLUS NOTE

The Company issued a surplus note to Empire in 1980.  The surplus note
provides, among other things, for interest to be accrued on the principal
of the note based on a bank's prime rate at the end of the calendar
quarter.  Neither the principal amount of the surplus note nor the accrued
interest may be paid, in whole or in part, without the consent of the
Superintendent of Insurance of the State of New York ("Superintendent")
and must be repaid, in whole or in part, when so ordered by the
Superintendent.

NOTE 4-INVESTMENTS
Investment income by source is summarized as follows:
<TABLE>
<CAPTION>

                                          Year Ended December 31,
                                          1997      1996      1995
				(In thousands) Investment income:
<S>                                       <C>       <C>       <C>
Fixed  maturities                         $ 15,627  $ 15,955  $ 13,606
Short-term investments                         385       742     2,126
                                            16,012    16,697    15,732
Less: Investment expenses                      318       339       374
     NET INVESTMENT INCOME                $ 15,694  $ 16,358  $ 15,358
</TABLE>

Investments at December 31, 1997 are summarized as follows:
<TABLE>
<CAPTION>

                                              Gross Unrealized            Esti-
                                Amortized     Apprec-      Deprec-        mated         Carrying
                                Cost          iation       iation         Fair Value    Amount
                                                       (In Thousands)
<S>                             <C>           <C>           <C>           <C>           <C>

Available for Sale:
U.S. Treasury securities
  and obligations of U.S.
  government agencies           $218,088      $  1,327      $    596       $218,819     $218,819
Mortgage-backed
  securities                      29,437           298           113         29,622       29,622
Foreign governments               15,143           121            77         15,187       15,187
All other corporate bond           5,423             7             3          5,427        5,427
     Total                       268,091         1,753           789        269,055      269,055

Equity securities                      -           447             -            447          447
     TOTAL INVESTMENTS
       AVAILABLE FOR SALE        268,091         2,200           789        269,502      269,502

Held to maturity:
U.S. Treasury securities             485            12             -            497          485
     TOTAL INVESTMENTS
       HELD TO MATURITY              485            12             -            497          485

Short-term                         1,749             -             -          1,749        1,749
     TOTAL INVESTMENTS          $270,325      $  2,212      $    789       $271,748     $271,736
</TABLE>
					-F11-
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 4--INVESTMENTS CONTINUED

Investments at December 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
                                              Gross Unrealized            Esti-
                                Amortized     Apprec-      Deprec-        mated         Carrying
                                Cost          iation       iation         Fair Value    Amount
                                                       (In Thousands)
<S>                             <C>           <C>           <C>           <C>           <C>
Available for sale:
U.S. Treasury securities
  and obligations of U.S.
  government agencies           $195,470     $    377      $  2,720      $193,127      $193,127
Mortgage-backed
  securities                      50,619          130           377        50,372        50,372
Foreign governments                   75            -             8            67            67
All other corporate bonds          8,481           41            15         8,507         8,507
     TOTAL INVESTMENTS
     AVAILABLE FOR SALE          254,645          548         3,120       252,073       252,073

Held to maturity:
U.S. Treasury securities             477            8             -           485           477
     TOTAL INVESTMENTS
     HELD TO MATURITY                477            8             -           485           477

Short-term                        20,442            -             -        20,442        20,442
     TOTAL INVESTMENTS          $275,564     $    556      $  3,120      $273,000      $272,992

</TABLE>
The amortized cost and estimated fair values of fixed maturities at
December 31, 1997 are shown as follows (in thousands):
<TABLE>
<CAPTION>
                                              Amortized     Fair
                                              Cost          Value
<S>                                           <C>           <C>
Investments available for sale:
  Due in one year or less                     $ 32,219      $ 32,192
  Due after one year through five years        186,510       187,102
  Due after five years through ten years        19,925        20,139
    Sub total                                  238,654       239,433

  Mortgage-backed securities                    29,437        29,622
    Sub total                                  268,091       269,055

Investments held to maturity:
  Due after one year through five years            485           497
    TOTAL                                     $268,576      $269,552
</TABLE>
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.

The Company sold certain fixed maturities during 1997, 1996 and 1995
realized gross gains of $216,000, $1,354,000 and, $343,000,
respectively. Realized gross losses of $298,000, $224,000 and $548,000 were
realized on these sales in 1997, 1996 and 1995, respectively, before
income taxes.  In 1997, the Company realized a gross gain of $129,000
before taxes, from the conversion of a portion of stock received from a
trade organization membership, Insurance Services Offices, into a stock
company.


				-F12-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 4--INVESTMENTS CONTINUED

The changes in unrealized appreciation/(depreciation) on investments
available for sale in fixed maturities were $3,983,000 and $(4,479,000)
for the years ended December 31, 1997 and 1996, respectively, before
income taxes.

As of December 31, 1997 and 1996, a security with an amortized cost of
approximately $485,000 was on deposit with the New York State Insurance
Department.

During 1997 and 1996, the Company sold call options on certain U.S.
Treasury Notes and recognized an investment loss of $239,000
in 1997 and  income of $230,000 in 1996.  Options on U.S. Treasury Notes
with notional values of $0 and $20,000,000 were in force at December 31,
1997 and 1996, respectively.

NOTE 5--STATUTORY INFORMATION

The following is a reconciliation of net income/(loss)  and surplus as
reported on a statutory basis to net income and shareholders' equity as
determined in conformity with generally accepted accounting principles
("GAAP Basis") (in thousands):

<TABLE>
<CAPTION>
                                               Years Ended December 31,
                                               1997      1996      1995
<S>                                            <C>       <C>       <C>
Statutory basis - Net Income                   $    505  $  7,233  $  3,311
Add (deduct):
     Change in deferred policy acquisition
       costs                                       (628)     (871)        9
     Change in allowances for doubtful
       accounts                                    (198)     (270)     (141)
     Change in policyholders' dividend reserve       60      (450)        -
     Retrospectively rated reinsurance
       contracts                                      -    (3,365)   (4,742)
     System development cost capitalized            600         -         -
     Other postretirement benefits                  276      (176)      (49)
     Deferred tax provision (benefit)              (163)    1,171     2,820
     Interest on surplus note                      (595)     (591)     (613)
     Other                                           60       (47)      (32)
          GAAP Basis                            $   (83) $  2,634  $    563

</TABLE>


					-F13-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 5--STATUTORY INFORMATION -CONTINUED
<TABLE>
<CAPTION>

                                                     DECEMBER 31,
                                                     1997      1996
                                                     (In Thousands)
<S>                                                  <C>       <C>
Statutory Shareholders' Equity and Surplus           $ 70,088  $ 69,566
 Add (deduct):
      Deferred policy acquisition costs                 7,079     7,707
      Nonadmitted assets, less allowance
        for doubtful accounts                           1,984     2,352
      System development cost capitalized                 600         -
      Provision for unauthorized reinsurance              108       114
      Policyholders' dividend reserve                    (390)     (450)
      Excess of statutory reserves over
        statement reserves                              1,143       291
      Deferred tax benefit                             11,462    13,019
      Other postretirement benefits                      (467)     (744)
      Net unrealized appreciation
        (depreciation)on investments                      964    (2,572)
      Surplus note                                    (14,710)  (14,115)
      Other                                               303       490
           GAAP Basis                                $ 78,164  $ 75,658
</TABLE>

The Company has paid no dividends on its common shares since 1975.  The New
York Insurance Law prohibits New York domiciled property and casualty
companies from paying dividends except out of earned surplus.  Without the
approval of the New York State Insurance Department,  dividends  are
limited to the lowest of 1) 10% of surplus as computed on a SAP basis, or
2) adjusted net investment income  during the 12 month period prior to
declaration.  At December 31, 1997, $7,009,000 was available for
distribution of dividends.  The Company does not presently anticipate
paying dividends in the near future.

The New York State Insurance Department is currently finalizing their
examination of the Company's statutory financial statements for the years
1994, 1995 and 1996.  In the opinion of management, the results of this exam
are not expected to have a material impact on the financial position or
results of operations of the Company.

NOTE 6--AGENTS' BALANCES

Activity affecting the allowance for uncollectible agents' balances for
the years ended December 31, 1995, 1996 and 1997 is summarized as follows
(in thousands):

<TABLE>
<CAPTION>

      <S>                                       <C>
      Balance at January 1, 1995                $    952
      Provision                                    1,577
      Charge-offs, net of recoveries              (1,436)

      Balance at December 31, 1995                 1,093
      Provision                                    2,089
      Charge-offs, net of recoveries              (1,819)

      Balance at December 31, 1996                 1,363
      Provision                                    1,470
      Charge-offs, net of recoveries              (1,272)

      Balance at December 31, 1997              $  1,561
</TABLE>


					-F14-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 7-UNPAID LOSSES AND LAE

The Company has relied upon standard actuarial ultimate loss projection
techniques to obtain estimates of liabilities for losses and LAE. These
projections include the extrapolation of both losses paid and incurred by
business line and accident year and implicitly consider the impact of
inflation and claims settlement patterns upon ultimate claim costs based
upon historical patterns.  In addition, methods based upon average loss
costs, reported claim counts and pure premiums are reviewed in
order to obtain a range of estimates for setting the reserve levels.
For further input, changes in operations in pertinent areas including
underwriting standards, product mix, claims management and legal climate
are periodically reviewed.

In the following table, the liability for losses and LAE are reconciled
for each of the three years ended December 31, 1997. Included therein
are current year data and prior year development.

<TABLE>
				RECONCILIATION OF LIABILITY FOR LOSSES AND LAE

<CAPTION>
                                                 1997         1996         1995
                                                          (In thousands)

<S>                                              <C>          <C>          <C>
Liability for losses and LAE, net,
  at beginning of year                           $143,494     $142,718     $121,923
Provision for losses and LAE for claims
  occurring in the current year                    73,741       80,216       80,061
Increase in estimated losses and LAE
  for claims occurring in prior years               8,304        8,134       10,266
                                                   82,045       88,350       90,327

Loss and LAE payments for claims
  occurring during:
    The current year                               23,804       27,192       23,743
    Prior years                                    56,475       60,382       45,789
                                                   80,279       87,574       69,532

Liability for losses and LAE, net                 145,260      143,494      142,718

Reinsurance balances receivable                   272,266      262,593      257,161

Liability for losses and LAE
  at end of year as reported in
  financial statements                           $417,526     $406,087     $399,879
</TABLE>

Based upon actuarial studies conducted during 1997 and 1996 the Company
strengthened reserves for losses from prior accident years by approximately
$8.3 million in 1997 and by approximately $8.1 million in 1996, primarily
related to commercial package and voluntary commercial automobile lines
of business.


					-F15-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 7-UNPAID LOSSES AND LAE - CONTINUED

The Company has purchased annuities with various life insurance
companies for a number of settled claims. The claimants have been
designated as payees, however, the Company has a contingent liability
of approximately $3.1 million which represents the aggregate amount of
settlements with the claimants, in the event of the failure of the
various life insurance companies to perform.

NOTE 8--REINSURANCE

The Company has obtained reinsurance coverage to reduce its risk of and
exposure to large insurance claims and catastrophes.   The maximum single
risk retained by the Company was $0.5 million on workers' compensation, for
all three years, and for other property and casualty lines $0.3 million in
1997 and 1996 and $0.2 million in 1995, respectively. The Company also uses
reinsurance to protect itself against certain catastrophic losses. Its
retention of lower level losses under such treaties was $5.0
million for 1997 and $3.0 million for 1996 and 1995.  Due to the
geographic concentration of its business, the Company believes
hurricanes, windstorms and civil disturbances are its most significant
exposure to catastrophic losses. Computer modeling programs provided by
independent consultants are used to estimate exposure to such losses.
The Company believes it presently has sufficient catastrophe reinsurance
protection.

Although reinsurance does not legally discharge an insurer from its primary
liability for the full amount of the policy liability, it does make the
assuming reinsurer liable to the insurer to the extent of the reinsurance
ceded. The majority of the Company's reinsurance has been placed with certain
of the largest reinsurance companies, including (with their A. M. Best
ratings) General Reinsurance Corporation (A++) (superior), American
Re-Insurance Company (A+) (superior), Partner Re Co., Ltd. (A+)(superior),
IPC Re Ltd. (A) (excellent), CAT Ltd. (A)(excellent) and Zurich Reinsurance
(North America), Inc. (A)(excellent). The Company believes its reinsurers
to be financially capable of meeting their respective obligations.  However,
to the extent that any reinsuring company is unable to meet its obligations,
the Company would be liable for the reinsured risks.  The Company has
established reserves, which the Company believe are adequate, for any
non-recoverable reinsurance.

Effective January 1, 1997, Empire entered into a quota share reinsurance
agreement with its subsidiary, Centurion.  Under this agreement, Empire will
assume 50% up to July 1 and 75% thereafter of the effective period premiums
and losses of Centurion and grant Centurion a ceding commission.  Under the
pooling agreement, 70% of such business assumed will be retained by Empire
and 30% will be shared with the Company.


					-F16-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 8--REINSURANCE-CONTINUED

Assets and insurance reserves at December 31, 1997 and 1996 (including
$328.4 million and $334.2 million, respectively, which represent
reinsured amounts principally arising from the intercompany pooling
agreement with Empire are as follows (in thousands):

<TABLE>
<CAPTION>
                                                             Ceded to
					Empire       Others       Total
<S>                                             <C>          <C>          <C>
As of December 31, 1997
Prepaid reinsurance premiums                    $ 54,476     $    598     $ 55,074
Reinsurance balances receivable on:
  Paid losses                                          -        1,014        1,014
  Unpaid losses                                  204,023       32,758      236,781
  Unpaid loss adjustment expenses                 31,671        3,814       35,485

</TABLE>
<TABLE>
<CAPTION>
                                                             Ceded to
					Empire       Others       Total
<S>                                             <C>          <C>          <C>
As of December 31, 1996
Prepaid reinsurance premiums                    $ 69,266     $    795     $ 70,061
Reinsurance balances receivable on:
  Paid losses                                          -        1,567        1,567
  Unpaid losses                                  200,877       28,489      229,366
  Unpaid loss adjustment expenses                 29,991        3,235       33,226
</TABLE>
An analysis of reinsurance premiums, losses, LAE and commissions for
the years ended December 31, 1997, 1996 and 1995 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>



                         Direct        Assumed              Ceded          Net
                                   Empire    Others    Empire    Others
<S>                      <C>       <C>       <C>       <C>       <C>       <C>

1997
Premiums earned          $191,175  $ 80,891  $    142   $178,488 $ 12,829  $ 80,891
Losses incurred           170,395    68,902       195    155,122   15,469    68,901
LAE incurred               16,345    13,144        62     15,489      918    13,144
Commissions incurred       22,121    10,666         4     20,271    1,854    10,666

Premiums written          169,911    75,029        81    157,359   12,633    75,029
Losses paid               161,192    68,512       634    150,628   11,198    68,512

Unearned premiums(a)       78,336    35,733        85     77,823      598    35,733
Unpaid losses(a)          322,671   124,559     1,548    291,461   32,758   124,559
Unpaid LAE(a)              49,058    20,700         -     45,244    3,814    20,700

1996
Premiums earned          $235,467  $ 96,073  $    277   $222,909  $ 12,835 $ 96,073
Losses incurred           182,132    76,387       209    170,630    11,711   76,387
LAE incurred               13,827    11,963        72     11,679     2,220   11,963
Commissions incurred       25,556    10,987         8     23,259     2,305   10,987

Premiums written          222,467    91,011       200    210,068    12,599    91,011
Losses paid               177,454    75,938       728    170,948     7,234    75,938

Unearned premiums(a)       99,600    41,596       146     98,952       794    41,596
Unpaid losses(a)          313,469   124,170     1,987    286,967    28,489   124,170
Unpaid LAE(a)              46,080    19,324         -     42,845     3,235    19,324
</TABLE>


					-F17-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 8--REINSURANCE-CONTINUED

<TABLE>
<CAPTION>


<S>                      <C>       <C>       <C>       <C>       <C>       <C>

1995
Premiums earned          $233,695  $ 94,251  $    569  $219,649  $ 14,615  $ 94,251
Losses incurred           188,198    77,671       555   179,410     9,339    77,675
LAE incurred               17,731    12,652        76	 19,128    (1,321)   12,652
Commissions incurred       29,792    12,223        32    27,076     2,748    12,223

Premiums written          236,170    95,335       483   222,046    14,607    95,335
Losses paid               141,279    59,680       811   133,849     8,241    59,680

<FN>
(a) Amounts as reflected in the consolidated balance sheet can be derived by
adding together amounts for direct and assumed and subtracting from this sum
30% of the amount ceded to Empire.  The Company remains primarily liable for
amounts ceded to reinsurers for unpaid losses, LAE and unearned premiums to
the extent that the assuming reinsuring companies are unable to meet their
obligations.
</TABLE>
An analysis of the effect of reinsurance on premiums by business segment for
the years ended December 31, 1997, 1996 and 1995 are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
                                                                     Percentage
                                    Assumed    Ceded                 of Amount
                         Direct     from       to         Net        Assumed
                         Amount     Empire (a) Empire (b) Amount     to Net
<S>                      <C>        <C>        <C>        <C>        <C>

1997
Premiums written:
  Automobile lines        $ 85,701  $ 44,565   $ 85,782   $ 44,484   100.2%
  Commercial lines          73,455    22,107     73,455     22,107   100.0%
  Miscellaneous and
    personal lines          10,755     8,438     10,755      8,438   100.0%

    Total                 $169,911  $ 75,110   $169,992   $ 75,029


1996
Premiums written:
  Automobile lines        $131,542  $ 60,362    $131,742  $ 60,162   100.3%
  Commercial lines          80,758    25,243      80,758    25,243   100.0%
  Miscellaneous and
    personal lines          10,167     5,606      10,167     5,606   100.0%

    Total                 $222,467  $ 91,211    $222,667  $ 91,011


1995
Premiums written:
  Automobile lines        $133,427  $ 62,968    $133,910  $ 62,485   100.8%
  Commercial lines          93,659    28,821      93,659    28,821   100.0%
  Miscellaneous and
    personal lines           9,084     4,029       9,084     4,029   100.0%

    Total                 $236,170  $ 95,818    $236,653  $ 95,335
<FN>
(a)Includes $81, $200 and $483 assumed from non-affiliates in
   1997, 1996 and 1995, respectively, before the effects of the pooling
   agreement described in Note 1.
(b)Includes $12,633, $12,599 and, $14,607 ceded to non affiliates
   in 1997, 1996 and 1995, respectively, before the effects
   of the pooling agreement described in Note 1.
</TABLE>


					-F18-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 9--FEDERAL INCOME TAXES

The Company has been included in the consolidated federal income tax
returns of Leucadia since 1993.  Under the terms of the tax sharing
agreement, members compute their tax provision on a separate return
basis and are either charged their share of federal income tax resulting
from their taxable income or are reimbursed for the tax
benefits resulting from losses. As of December 31, 1997 and 1996, the
Company's liability to affiliates for income taxes was $8,125,000 and
$9,780,000, respectively.

The principal components of the deferred tax asset at December 31, 1997
and 1996 were as follows (in thousands):

<TABLE>
<CAPTION>

  					 1997      1996
<S>                                      <C>       <C>

Unpaid loss and loss adjustment
  expense reserves                       $  7,576  $  7,644
Unearned premiums                           2,501     2,912
Employee benefits and compensation          1,221     1,580
Interest accrued on surplus note            2,698     2,490
Allowance for doubtful accounts               547       477
Deferred policy acquisition costs          (2,478)   (2,697)
Unrealized (appreciation) depreciation
  on investments                             (494)      900
Other, net                                   (109)     (287)
  Total                                  $ 11,462  $ 13,019
</TABLE>

The Company believes that it is more likely than not that the deferred
tax asset at December 31, 1997 will be fully realized based on the
availability of taxable income.

For the years 1997, 1996 and 1995, the difference between the "expected"
statutory federal income tax applicable to continuing operations and the
actual income tax expense are as follows:

<TABLE>
<CAPTION>

                                         1997      1996      1995
<S>                                      <C>       <C>       <C>
Expected federal income tax	         $   (51)  $  1,388  $    278
Other                                        (13)       (58)      (48)
Actual federal income tax                $   (64)  $  1,330  $    230

</TABLE>

NOTE 10--PENSION PLAN, POSTRETIREMENT BENEFITS AND STOCK OPTIONS

Empire has a trusteed non-contributory pension plan covering substantially
all employees. Current benefits are based on years of credited service and
the employee's highest compensation during any five consecutive plan or
calendar years before retirement.  Empire's policy is to fund pension costs
on a current basis using an aggregate method.

					-F19-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 10--PENSION PLAN, POSTRETIREMENT BENEFITS AND STOCK OPTIONS--CONTINUED

The following table sets forth certain information relating to Empire's
pension plan (in thousands):

<TABLE>
<CAPTION>
                                                       December 31,
                                                       1997      1996
<S>                                                    <C>       <C>
Actuarial present value of benefit obligation:
  Accumulated benefit obligation, including vested
  benefits of $19,955 in 1997 and $19,355 in 1996      $ 20,763  $ 20,043
Projected benefit obligation for services
  rendered to date                                      (27,765)  (26,927)
Plan assets at fair value (primarily bonds and stocks)   25,152    25,700
     PROJECTED BENEFIT OBLIGATION
       IN EXCESS OF PLAN ASSETS                          (2,613)   (1,227)

Unrecognized prior service cost                              98       115

Unrecognized net (gain) from past experience
  different from that assumed and effects of
  changes in assumptions                                   (103)     (797)

Unrecognized net obligation at transition date              386       515

     ACCRUED PENSION COST                              $ (2,232) $ (1,394)
</TABLE>

Net pension cost includes the following components (in thousands):

<TABLE>
<CAPTION>
                                                        Years Ended December 31,
                                                        1997       1996       1995
<S>                                                     <C>        <C>        <C>

Service cost-benefits earned during the period          $  1,628   $  1,862   $  1,887
Interest cost on projected benefit obligation              1,985      2,098      1,792
Actual return on plan assets                              (2,838)    (2,120)    (3,745)
Deferred gain on plan assets                               1,039        556      2,535
Net amortization and deferral                                145        298        196
     NET PERIODIC PENSION COST                          $  1,959   $  2,694   $  2,665

</TABLE>

In accordance with the pooling agreement, the Company's share of accrued
pension cost and net periodic pension cost is 30% of the amounts reflected
above.  In determining the actuarial present value of the projected benefit
obligation, the Company utilized discount rates of 7.0% for 1997 and 7.5%
for 1996 and a rate of increase in future compensation of 4% in 1997 and 5%
in 1996, respectively. The expected long-term rate of return on plan assets
was 7.0% during 1997 and 1996.

Empire provides certain health care and life insurance benefits for retired
employees.  During 1996, Empire amended the eligibility requirement to only
those employees who had at least ten years of service


					-F20-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 10--PENSION PLAN, POSTRETIREMENT BENEFITS AND STOCK OPTIONS--CONTINUED

and were at least 50 years of age as of October 1, 1996. Prior to this
amendment, substantially all of Empire's employees were eligible for such
benefits if they reached normal or  early retirement  age while still
working  for Empire. As a result of this amendment, the accumulated
postretirement benefit obligation was reduced by approximately $7,602,000
which is being amortized over three years. Those benefits are provided
through an insurance company whose premiums are based on the cost of
benefits paid during the year.

The following table sets forth certain information relating to Empire's
unfunded substantive plan for postretirement benefits  (in thousands):

<TABLE>
<CAPTION>
                                                1997       1996
<S>                                             <C>        <C>
Actuarial present value of accumulated
  postretirement benefit obligation:
    Retirees                                    $ (3,538)   $ (5,325)
    Fully eligible active plan participants         (544)     (1,742)
    Other active plan participants                  (647)       (450)
                                                  (4,729)     (7,517)

Unrecognized net (gain) from  past
  experience different from that assumed
  and effects of changes in assumptions           (4,938)     (5,213)
     ACCRUED POSTRETIREMENT BENEFITS COST       $ (9,667)   $(12,730)

</TABLE>
For the years ended December 31, 1997, 1996 and 1995, net postretirement
benefits cost included the following components (in thousands):
<TABLE>
<CAPTION>
                                                  1997      1996      1995
<S>                                               <C>       <C>       <C>
Service cost--benefits earned during the period   $     23  $    309  $    234
Interest cost on projected benefit obligation          330       970       866
Amortization of curtailment gain                    (3,168)        -         -
Net amortization and deferral                          (19)        -         -

     PERIODIC POSTRETIREMENT BENEFITS (INCOME)
       COST                                       $ (2,834) $  1,279  $  1,100
</TABLE>
In accordance with the pooling agreement, the Company's share of
accrued postretirement benefit cost and net periodic postretirement
benefit (income)  cost is 30% of the amounts reflected above and is
included in other liabilities. In determining the accumulated postretirement
benefit obligation at December 31, 1997 and 1996, Empire
utilized discount rates of 7.0% and 7.5%, respectively.
The assumed health care cost trend rates used in measuring the accumulated
postretirement benefit obligation were  9% for 1997 declining to an
ultimate rate of 6% by 2000.  If the health care cost trend rates were
increased by 1%, the accumulated postretirement benefit obligation


					-F21-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 10--PENSION PLAN, POSTRETIREMENT BENEFITS AND STOCK OPTIONS--CONTINUED

as of December 31, 1997 and 1996 would have increased by approximately
$155,000 and $338,000, respectively, before the effects of the pooling
agreement. The effect of a 1% change in the estimated aggregate of
service and interest cost for 1997, 1996 and 1995 would be immaterial.

In 1987, Empire established a Supplemental Retirement Plan ("SERP") for
certain senior officers.  Under the SERP, Empire makes contributions to
a trust account for the benefit of eligible senior officers. Eligible
officers will receive benefits determined in accordance with the formulas
and other provisions of the SERP agreement based on prior salary.  Empire
expensed $1,073,000 during 1996 and had income of $697,000 in 1995 due to
a reduction in accruals. Pursuant to the pooling agreement the Company is
obligated to contribute 30% of the payments made under the SERP.

In 1994, Empire established a Salary Cap Restoration Plan ("SCRP") for
certain corporate officers.  Under the SCRP, Empire will provide these
officers with an additional benefit, to be paid in a lump-sum upon
retirement, equal to the difference between the actuarially determined
lump-sum benefits, as computed under the Pension Plan, of the officer's
highest five year average compensation (not to exceed $320,000) at
retirement and the current maximum compensation limit of $160,000. The SCRP
is an unfunded plan. During 1995, Empire had income of $274,000 due to an
accrual reduction and, during 1997 and 1996, expensed $17,000 and $90,000,
respectively. Under the pooling arrangement, the Company is obligated to
pay 30% of the cost of the SCRP.

Empire sponsors an Employees' Savings Plan (the "Savings Plan"),
under which each eligible employee may defer a portion of their annual
compensation, subject to limitations. Empire contributes a matching amount,
subject to certain limits. In 1995, Empire matched 65% of each participant's
deferral contribution up to a maximum matching contribution of $650.  A
participant may also contribute, from after-tax dollars, an amount, not to
exceed 10% of annual compensation.  Effective July 1996, the Savings Plan
was amended to allow Empire matching contributions equal to 50% of an
employee's contributions up to a maximum of 2.5% of the employee's
salary.  Empire's contributions to the Savings Plan were $438,000, $524,000
and $435,000 in 1997, 1996 and 1995, respectively. Under the pooling
arrangement, the Company is obligated to provide 30% of Empire's
contributions under the Savings Plan.


-F22-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 10--PENSION PLAN, POSTRETIREMENT BENEFITS AND STOCK OPTIONS--CONTINUED

In 1985, Allcity adopted the Allcity Insurance Company 1985 Incentive Stock
Option Plan ("SOP") for officers and key employees.  Under this plan,
368,420 shares were reserved for future options that may be granted to
acquire common shares at the market price at date of grant. On October 1,
1986 options were granted to acquire a total of 312,250 common shares at
an exercise price of $1.50 per common share. The plan expired in 1995.

Prior to 1996, Empire sponsored a Long Term Incentive Plan which, based
upon the attainment of certain performance goals, awarded officers with
units of participation in a compensation pool.  The plan was terminated
in 1996.

NOTE 11--LEASES

The Group's executive and administrative offices are located on six floors of
a ten-story office building at 122 Fifth Avenue, New York, New York 10011 and
some additional space in the surrounding area, under leases each of which
expire on September 30, 1998.

The Group has entered into a twenty year lease agreement, in an office
building in Brooklyn, New York, in which Leucadia has an equity interest,
and will relocate its executive and administrative offices in September 1998.
The Group received certain incentives from both the City and State of New
York in connection with this lease which will be recognized over the term
of the lease.

Empire has guaranteed the payment of lease rent by its wholly owned
subsidiary Gould Dente Agency ("Gould").  Gould will also relocate its
offices to the new office buildings with Empire.  In accordance with the
guarantee, in 1997 Empire has established a $2.3 million liability for
lease abandonment costs.  Under the pooling agreement, the Company is
obligated to pay  30% of this cost.

Future minimum rentals, which exclude escalation amounts, on non-cancelable
leases in the aggregate for each of the next five years and thereafter
are as follows (in thousands):

<TABLE>
<CAPTION>

     <S>          <C>
           1998   $  2,361
           1999      4,906
           2000      4,906
           2001      4,906
           2002      4,906
     Thereafter    102,064

          Total   $124,049
</TABLE>
Rental expense for the Group for the years 1997, 1996 and 1995 was $3.3
million, $3.2 million  and $2.8 million, respectively. The Company is
obligated to pay 30% of these rental charges in accordance with the
pooling agreement.


					-F23-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 12--BUSINESS SEGMENTS

Allcity operates in three business segments--automobile lines, commercial
lines and miscellaneous and personal lines. Results by business segment
for each of the three years ended December 31, 1997 are summarized as
follows (in thousands):

<TABLE>
<CAPTION>

                                               Premiums  Underwriting
                                               Earned    Gain (Loss)
<S>                                            <C>       <C>

1997
Automobile lines                               $ 50,677  $ (8,015)
Commercial lines                                 23,289    (7,842)
Miscellaneous and personal lines                  6,925       268
     TOTAL FROM UNDERWRITING                   $ 80,891   (15,589)

Net investment income, net securities losses,
  other income and interest on surplus note                15,442
     (LOSS) BEFORE FEDERAL INCOME TAXES                  $   (147)

1996
Automobile lines                               $ 63,558  $ (10,822)
Commercial lines                                 27,714     (2,998)
Miscellaneous and personal lines                  4,801        266
     TOTAL FROM UNDERWRITING                   $ 96,073    (13,554)

Net investment income, net securities gains,
  other income and interest on surplus note                 17,518
     INCOME BEFORE FEDERAL INCOME TAXES                  $   3,964

1995
Automobile lines                               $ 61,261  $  (9,965)
Commercial lines                                 29,535     (5,147)
Miscellaneous and personal lines                  3,455        560
     TOTAL FROM UNDERWRITING                   $ 94,251    (14,552)

Net investment income, net securities losses,
  other income and interest on surplus note                 15,345
     INCOME BEFORE FEDERAL INCOME TAXES                  $     793

</TABLE>

Direct investment portfolios are not maintained for each segment and,
accordingly, allocation of assets to each segment is not performed.

Five  general agents,  one of which  is an  Empire subsidiary, produced
approximately 28%, 23%, and 21%  of Allcity's premiums for the
years ended December 31, 1997, 1996 and 1995, respectively. All of
Allcity's business is conducted in the State of New York.


					-F24-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
ALLCITY INSURANCE COMPANY  AND SUBSIDIARY

NOTE 13--FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's only material financial instruments are investments for
which the fair values are disclosed in Note 4, and the surplus note
and short-term investments, for which the carrying amount approximates
fair value.

NOTE 14 -- LITIGATION

The Company is party to legal proceedings that are considered to be
either ordinary, routine litigation or incidental to its business.
Based on discussion with Counsel, the Company does not believe that
such litigation will have a material effect on its financial
position, results of operations or cash flows.

NOTE 15 -- RELATED PARTIES

See Notes 1, 3, 8, 9, 10 and 11 regarding Allcity's relationships with
the Group and Leucadia.


NOTE 16--SUMMARY OF UNAUDITED QUARTERLY RESULTS OF OPERATIONS

The following is a summary of unaudited quarterly results of operations
for 1997, 1996 and 1995 (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                           1997
                                            1st       2nd       3rd       4th
<S>                                         <C>       <C>       <C>       <C>
Total revenues                              $ 28,108  $ 26,560  $ 25,826  $ 22,130
Net income /(loss)                               856      (162)       49      (826)
Basic Earnings/(Loss) per share                 0.12     (0.02)     0.01     (0.12)

</TABLE>
<TABLE>
<CAPTION>
                                                           1996
                                            1st       2nd       3rd       4th
<S>                                         <C>       <C>       <C>       <C>
Total revenues                              $ 30,884  $ 30,714  $ 30,600  $ 28,592
Net income                                       556       497       780       801
Basic Earnings per share                        0.08      0.07      0.11      0.11
</TABLE>
<TABLE>
<CAPTION>
                                                           1995
                                            1st       2nd       3rd       4th
<S>                                         <C>       <C>       <C>       <C>
Total revenues                              $ 28,273  $ 30,091  $ 29,852  $ 29,676
Net income/(loss)                                698       590       299    (1,024)
Basic Earnings/(Loss) per share                 0.10      0.08      0.04     (0.14)
</TABLE>


					-F25-
<PAGE>
<TABLE>
ALLCITY INSURANCE COMPANY
SCHEDULE VI - SUPPLEMENTAL INSURANCE INFORMATION
CONCERNING PROPERTY - CASUALTY INSURANCE OPERATIONS
(THOUSANDS OF DOLLARS)
<CAPTION>

      COL. A         COL. B     COL. C   COL. D   COL. E   COL. F   COL. G        COL. H         COL. I   COL. J   COL. K    COL. L
                              Reserves                                                          Amortiz-
                              for Unpaid                                    Claims and Claim    tion of                    Paid
                    Deferred  Claims    Discount                   Net      Adjustment Expenses Deferred Other             Claims
                    Policy    and Claim if any                     Invest-  Incurred Related to Policy   Operat-           and Claim
                    Acquisi-  Adjust-   Deducted                   ment     (1)       (2)       Acquisi- ing Exp-          Adjust-
                    tion      ment Exp- in Col.  Unearned Earned   Income   Current   Prior     tion     enses    Premiums ment Exp-
       Segment      Costs     enses     C (a)    Premiums Premiums (b)      Year      Years     Costs    (b)      Written  enses
<S>                 <C>       <C>       <C>      <C>      <C>      <C>      <C>       <C>       <C>      <C>      <C>      <C>

Year Ended 12/31/97:
Automobile Lines    $   3,339 $ 205,353 $      0 $ 46,780 $ 50,677 $  8,881 $  53,995 $     191 $  8,371 $ (3,864)$ 44,484 $  54,649
Commercial Lines        2,577   203,383      123   35,827   23,289    6,072    15,907     7,482    5,118    2,619   22,107    22,580
Miscellaneous and
  Personal Lines        1,163     8,790        0    8,200    6,925      741     3,839       631    1,756      435    8,438     3,050
                    $   7,079 $ 417,526 $    123 $ 90,807 $ 80,891 $ 15,694 $  73,741 $   8,304 $ 15,245 $   (810)$ 75,029 $  80,279

Year Ended 12/31/96:
Automobile Lines    $   4,318 $ 206,706 $      0 $ 66,050 $ 63,558 $  9,561 $  58,256 $   6,443 $  9,854 $   (180)$ 60,162 $  62,446
Commercial Lines        2,654   194,000      104   39,090   27,714    6,370    19,251     1,434    5,293    4,742   25,243    22,483
Miscellaneous and
  Personal Lines          735     5,381        0    6,517    4,801      427     2,709       257    1,057      511    5,606     2,645
                    $   7,707 $ 406,087 $    104 $111,657 $ 96,073 $ 16,358 $  80,216 $   8,134 $ 16,204 $  5,073 $ 91,011 $  87,574


Year Ended 12/31/95:
Automobile Lines    $   5,057 $ 199,550 $      0 $ 74,194 $ 61,261 $  8,875 $  56,931 $  13,656 $ 11,016 $ (3,045)$ 62,485 $  57,891
Commercial Lines        3,042   195,098       75   46,402   29,535    6,137    21,399    (3,183)    6,530   2,589   28,821    10,174
Miscellaneous and
  Personal Lines          479     5,231        0    5,346    3,455      346     1,731      (207)     803      583    4,029     1,467
                    $   8,578 $ 399,879 $     75 $125,942 $ 94,251 $ 15,358 $  80,061 $  10,266 $ 18,349 $    127 $ 95,335 $  69,532

<FN>
  (a) Liabilities for losses for certain long-term disability payments under
      workers' compensation insurance are discounted at a maximum 6%.
      The liabilities discounted are deemed insignificant and do not have a
      material effect on reported income.

  (b) Allocations of Net Investment Income and Other Operating Expenses are
      based on a number of assumptions and estimates and results  would
      change if different methods were applied.  Other Operating Expenses
      are reflected net of service fee income.

* Information required by Schedule III - Supplementary Insurance Information
  has been incorporated within this schedule.
</TABLE>

					-F26-
<PAGE>