<PAGE>   1

                                    FORM 10-Q

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark one)

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

For the quarterly period ended June 30, 1999

       OR

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

For the transition period from ____________ to ______________

Commission file number   0-27462

                                  RISCORP, INC.
                                  -------------
             (Exact name of registrant as specified in its charter)

           FLORIDA                                       65-0335150
-------------------------------------        ----------------------------------
 (State or other jurisdiction of                      (I.R.S. Employer
  incorporation or organization)                     Identification No.)

  One Sarasota Tower, Suite 608
  2 North Tamiami Trail
  Sarasota, Florida                                       34236
----------------------------------------           ---------------------
 (Address of principal executive offices)               (Zip Code)

                                 (941) 366-5015
                         ------------------------------
                         (Registrant's telephone number,
                              including area code)

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 [ ].

Number of shares outstanding of the issuer's Common Stock:

           Class                             Outstanding at July 31, 1999
           -----                             -----------------------------
Class A Common Stock, $.01 par value                 14,258,671
Class B Common Stock, $.01 par value                 24,334,443



                                       1
<PAGE>   2


                                      INDEX

<TABLE>
<CAPTION>

                                                                                                      PAGE NO.
                                                                                                      -------
<S>        <C>                                                                                        <C>
PART I     FINANCIAL INFORMATION

           Item 1.         Financial Statements

                           Consolidated Balance Sheets -
                               June 30, 1999 and December 31, 1998                                     3 - 4

                           Consolidated Statements of Operations -
                               For the three months ended June 30, 1999 and 1998                           5

                           Consolidated Statements of Operations -
                               For the six months ended June 30, 1999 and 1998                             6

                           Consolidated Statements of Cash Flows -
                               For the six months ended June 30, 1999 and 1998                             7

                           Consolidated Statements of Comprehensive Loss
                               For the six months ended June 30, 1999 and 1998                             8

                           Notes to Consolidated Condensed Financial Statements                       9 - 12

           Item 2.         Management's Discussion and Analysis of Financial
                           Condition and Results of Operations                                       13 - 19


PART II    OTHER INFORMATION

           Item 1.         Legal Proceedings                                                         20 - 21

           Item 2.         Changes in Securities and Use of Proceeds                                      21

           Item 3.         Defaults Upon Senior Securities                                                21

           Item 4.         Submission of Matters to a Vote of Security Holders                       21 - 22

           Item 5.         Other Information                                                              22

           Item 6.         Exhibits and Reports on Form 8-K                                               22


                           Signatures                                                                     23
</TABLE>


                                       2

<PAGE>   3


Part I   Financial Information
Item 1.  Financial Statements

                         RISCORP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                        JUNE 30                  DECEMBER 31
                                                                                         1999                       1998
                                                                                      -----------                -------------
ASSETS                                                                                (Unaudited)
<S>                                                                                   <C>                        <C>
Investments:
   Fixed maturities available for sale, at fair value
      (amortized cost $58,301 in 1999 and $6,666 in 1998)                              $ 58,262                    $  6,716

   Fixed maturities available for sale, at fair value
      (amortized cost $8,639 in 1999 and $9,047 in 1998)-restricted                       8,723                       9,264
                                                                                       --------                    --------
      Total investments                                                                  66,985                      15,980

Cash and cash equivalents                                                                 8,831                       6,864
Cash and cash equivalents-restricted                                                     14,995                      14,842
Prepaid expenses                                                                          4,810                       5,171
Deferred income taxes                                                                     3,358                       3,141
Accounts receivable--other                                                                2,300                       7,674
Income taxes recoverable                                                                     --                      17,277
Property and equipment, net                                                                 261                         337
Receivable from Zenith                                                                       81                      49,933
Other assets                                                                                582                       2,174
                                                                                       --------                    --------

      Total assets                                                                     $102,203                    $123,393
                                                                                       ========                    ========
</TABLE>








See accompanying notes to consolidated financial statements.



                                       3








<PAGE>   4


                         RISCORP, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                       JUNE 30                     DECEMBER 31
                                                                                        1999                          1998
                                                                                     -----------                   ------------
LIABILITIES AND SHAREHOLDERS' EQUITY                                                 (Unaudited)
<S>                                                                                   <C>                           <C>
Liabilities - accrued expenses and other liabilities                                  $  10,989                     $  27,827
                                                                                      ---------                     ---------

Shareholders' equity:
   Class A Common Stock, $.01 par value, 100,000,000
       shares authorized; 14,371,253 shares issued                                          143                           143
   Class B Common Stock, $.01 par value, 100,000,000
       shares authorized; 24,334,443 shares issued and outstanding                          243                           243
   Preferred Stock, $.01 par value, 10,000,000 shares
       authorized; none issued and outstanding                                               --                            --
   Additional paid-in capital                                                           140,688                       140,688
   Retained deficit                                                                     (49,889)                      (45,680)
   Treasury Class A Common Stock - at cost, 112,582 shares                                   (1)                           (1)
   Accumulated Other Comprehensive Income:
      Net unrealized gains on investments                                                    30                           173
                                                                                      ---------                     ---------
          Total shareholders' equity                                                     91,214                        95,566
                                                                                      ---------                     ---------

          Total liabilities and shareholders' equity                                  $ 102,203                     $ 123,393
                                                                                      =========                     =========
</TABLE>






















See accompanying notes to consolidated financial statements.



                                       4

<PAGE>   5


                         RISCORP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except share and per share data)



<TABLE>
                                                                                               THREE MONTHS
                                                                                               ENDED JUNE 30
                                                                                --------------------------------------------
                                                                                    1999                             1998
                                                                                ------------                     -----------
                                                                                  (Unaudited)                    (Unaudited)
  <S>                                                                           <C>                              <C>
  Revenue:
     Net investment income                                                      $      1,235                     $      2,252
     Net realized gains                                                                  150                            2,805
     Other income                                                                        124                               93
                                                                                ------------                     ------------

         Total revenue                                                                 1,509                            5,150
                                                                                ------------                     ------------

  Expenses:
      Commissions, underwriting, and administrative expenses                           3,197                           11,352
      Interest expense (income)                                                         (219)                               8
      Depreciation and amortization                                                       36                               31
                                                                                ------------                     ------------
         Total expenses                                                                3,014                           11,391
                                                                                ------------                     ------------

  Loss from operations                                                                (1,505)                          (6,241)
  Loss on sale of net assets to Zenith                                                (4,760)                              --
                                                                                ------------                     ------------

  Loss before income taxes                                                            (6,265)                          (6,241)
  Income tax benefit                                                                  (2,896)                              --
                                                                                ------------                     ------------


  Net loss                                                                      $     (3,369)                    $     (6,241)
                                                                                ============                     ============

  Per share data:
     Net loss per common share - basic                                          $      (0.09)                    $      (0.17)
                                                                                ============                     ============

    Net loss per common share - diluted                                         $      (0.09)                    $      (0.17)
                                                                                ============                     ============

  Weighted average common shares outstanding                                      37,491,031                       36,916,725
                                                                                ============                     ============

  Weighted average common and common share
           equivalents outstanding                                                37,491,031                       36,916,725
                                                                                ============                     ============
</TABLE>









See accompanying notes to consolidated financial statements.



                                       5
<PAGE>   6


                         RISCORP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (in thousands, except share and per share data)


<TABLE>
<CAPTION>
                                                                                                SIX MONTHS
                                                                                               ENDED JUNE 30
                                                                              --------------------------------------------
                                                                                   1999                           1998
                                                                              -------------                    -----------
                                                                               (Unaudited)                     (Unaudited)
<S>                                                                           <C>                              <C>
Revenue:
   Net investment income                                                      $      3,034                     $      5,558
   Net realized gains                                                                  150                            4,266
   Other income                                                                        124                               93
   Premiums earned                                                                      --                           25,819
   Fee income                                                                           --                            5,723
                                                                              ------------                     ------------
       Total revenue                                                                 3,308                           41,459
                                                                              ------------                     ------------

Expenses:
   Commissions, underwriting, and administrative expenses                            4,354                           26,868
   Interest expense                                                                  1,222                              477
   Depreciation and amortization                                                        76                            3,100
   Losses and loss adjustment expenses                                                  --                           24,016
   Unallocated loss adjustment expenses                                                 --                            2,561
                                                                              ------------                     ------------
       Total expenses                                                                5,652                           57,022
                                                                              ------------                     ------------

Loss from operations                                                                (2,344)                         (15,563)
Loss on sale of net assets to Zenith                                                (4,760)                              --
                                                                              ------------                     ------------

Loss before income taxes                                                            (7,104)                         (15,563)
Income tax benefit                                                                  (2,896)                              --
                                                                              ------------                     ------------
Net loss                                                                      $     (4,208)                    $    (15,563)
                                                                              ============                     ============
Per share data:
   Net loss per common share - basic                                                 (0.11)                           (0.42)
                                                                              ============                     ============
   Net loss per common share - diluted                                               (0.11)                           (0.42)
                                                                              ============                     ============

Weighted average common shares outstanding                                      37,419,156                       36,892,420
                                                                              ============                     ============

Weighted average common and common share
         equivalents outstanding                                                37,419,156                       36,892,420
                                                                              ============                     ============
</TABLE>





See accompanying notes to consolidated financial statements.



                                       6
<PAGE>   7



                         RISCORP, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                                       SIX MONTHS
                                                                                                      ENDED JUNE 30
                                                                                       -----------------------------------------
                                                                                          1999                          1998
                                                                                       -----------                   -----------
                                                                                       (Unaudited)                   (Unaudited)

<S>                                                                                    <C>                           <C>
Net cash provided by (used in) operating activities                                     $   2,231                     $(15,838)
                                                                                        ---------                     --------

Cash flows from investing activities:
     Purchase of fixed maturities available for sale                                     (327,752)                     (24,210)
     Purchase of fixed maturities held to maturity                                             --                       (5,569)
     Proceeds from sale of fixed maturities available for sale                            276,489                       28,049
     Proceeds from maturities of fixed maturities available for sale                           --                        6,029
     Proceeds from maturities of fixed maturities held to maturity                             --                        5,700
     Cash received from Zenith for sale of net assets                                      51,153                       35,000
     Purchase of property and equipment                                                        --                         (777)
     Cash assets transferred to Zenith                                                         --                      (29,308)
     Investments to be transferred to Zenith                                                   --                      (13,200)
                                                                                        ---------                     --------
       Net cash (used in) provided by investing activities                                   (110)                       1,714
                                                                                        ---------                     --------

Cash flows from financing activities:
     Principal repayments of notes payable                                                     --                         (245)
     Decrease in deposit balances payable                                                      --                       (1,599)
     Transfer of cash and cash equivalents to restricted                                     (154)                        (413)
                                                                                        ---------                     --------
       Net cash used in financing activities                                                 (154)                      (2,257)
                                                                                        ---------                     --------

Net increase (decrease) in cash and cash equivalents                                        1,967                      (16,381)

Cash and cash equivalents, beginning of period                                              6,864                       16,858
                                                                                        ---------                     --------
Cash and cash equivalents, end of period                                                $   8,831                     $    477
                                                                                        =========                     ========

Supplemental disclosures of cash flow information:

     Cash paid during the period for:
           Interest                                                                     $   1,124                     $    479
                                                                                        =========                     ========
           Income taxes                                                                 $      82                     $  3,435
                                                                                        =========                     ========
</TABLE>







See accompanying notes to consolidated financial statements.




                                       7
<PAGE>   8


                         RISCORP, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                  SIX MONTHS ENDED JUNE 30
                                                                          --------------------------------------
                                                                             1999                         1998
                                                                          ----------                   ----------
                                                                          (Unaudited)                  (Unaudited)
<S>                                                                       <C>                          <C>
Net loss                                                                   $(4,208)                    $(15,563)
                                                                           -------                     --------
Other comprehensive loss, before income taxes:
  Unrealized losses on securities available for sale:
    Unrealized holding losses arising during the period                       (220)                      (4,063)
Income tax benefit related to items of other
    comprehensive loss                                                         (77)                      (1,422)
                                                                           -------                     --------
Other comprehensive loss, net of income taxes                                 (143)                      (2,641)
                                                                           -------                     --------

Total comprehensive loss                                                   $(4,351)                    $(18,204)
                                                                           =======                     ========
</TABLE>





























See accompanying notes to consolidated financial statements.



                                       8
<PAGE>   9



                         RISCORP, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                                   (Unaudited)


(1)    BASIS OF PRESENTATION

       The accompanying consolidated unaudited interim financial statements of
       RISCORP, Inc. ("RISCORP") and subsidiaries (collectively, the "Company")
       have been prepared on the basis of generally accepted accounting
       principles ("GAAP") and, in the opinion of management, include all
       adjustments, consisting only of normal recurring adjustments, necessary
       for a fair presentation of the Company's financial condition, results of
       operations, and cash flows for the periods presented. The preparation of
       financial statements in conformity with GAAP requires management to make
       estimates and assumptions that affect the reported amounts of assets and
       liabilities and disclosures of contingent liabilities at the date of the
       financial statements and the reported revenues and expenses during the
       reporting period. Actual results could differ from those estimates.

       The consolidated financial statements include the accounts and operations
       of RISCORP and its subsidiaries. All significant intercompany balances
       have been eliminated.


(2)    SALE TO ZENITH INSURANCE COMPANY

       As previously disclosed, on April 1, 1998, RISCORP and certain of its
       subsidiaries sold substantially all of their assets and transferred
       certain liabilities to Zenith Insurance Company ("Zenith") pursuant to
       the terms of the Asset Purchase Agreement among the parties dated June
       17, 1997, as amended (the "Asset Purchase Agreement"). In connection with
       the sale to Zenith, the Company ceased substantially all of its former
       business operations, including its insurance operations, effective April
       1, 1998. Accordingly, after such date, the Company's operations consisted
       principally of the administration of the day-to-day activities of the
       surviving corporate entities, compliance with the provisions of the Asset
       Purchase Agreement, and the investment, protection, and maximization of
       the remaining assets of the Company. At the present time, RISCORP has no
       plans to resume any operating activities.

       On July 7, 1999, the Company and Zenith settled, with certain limited
       exceptions, the claims arising out of the sale. The Asset Purchase
       Agreement contemplated a post-closing purchase price adjustment based on
       the difference between the book value of the assets purchased and the
       book value of the liabilities assumed as of the closing date. In
       connection with the determination of the final purchase price, a dispute
       arose between the parties regarding, among other things, the book value
       of the assets and liabilities of the business, Zenith's assumption of
       certain operating liabilities of the business, and each party's
       indemnification obligations under the Asset Purchase Agreement. The terms
       of the settlement included, among other things, (i) the disbursement of
       the $12.8 million in cash that has been held in escrow pursuant to the
       terms of the Asset Purchase Agreement, with $6 million to be disbursed to
       Zenith and the balance to be disbursed to RISCORP; (ii) RISCORP's right
       to seek correction of alleged errors made by the neutral auditor in
       connection with its determination of certain reinsurance recoverable
       adjustments contained in the Final Business Balance Sheet; (iii)
       RISCORP's right to retain any proceeds received from the Florida
       Department of Labor (the "Florida DOL") in connection with RISCORP's
       request for a refund of $5.3 million related to deductions for
       commissions with respect to gross premiums; (iv) RISCORP's right to
       retain a portion of any additional refunds received from the Florida



                                       9
<PAGE>   10

       DOL related to deductions for premiums ceded to others; and (v) the
       mutual release of all other claims and causes of action that each party
       may have against the other through the date of the Settlement
       Agreement, except as expressly set forth therein. The parties have also
       agreed that, with certain limited exceptions, any future claim or
       controversy between the parties is to be submitted to binding
       arbitration pursuant to the procedures set forth in the Settlement
       Agreement. As part of the settlement, the lawsuit filed by Zenith
       against the Company in the United States District of New York, and the
       lawsuit filed by the Company against Zenith in the United States
       District Court for the Middle District of Florida, Tampa Division, have
       been dismissed with prejudice.

       At June 30, 1999, the Company recorded an additional net loss of $4.8
       million on the sale to Zenith due to the final terms of the Settlement
       Agreement.

       In connection with the sale of RISCORP's insurance operations to Zenith
       on April 1, 1998, RISCORP voluntarily consented to the Florida Insurance
       Department's request that RISCORP discontinue writing any new or renewal
       insurance business for an indefinite period of time.


(3)    ISSUANCE OF ADDITIONAL SHARES OF STOCK

       In September 1996, RISCORP purchased all of the outstanding stock of
       Independent Association Administrators, Inc. ("IAA") and Risk Inspection
       Services and Consulting, Inc. ("RISC") in exchange for $11.5 million,
       consisting principally of 790,336 shares of RISCORP's Class A Common
       Stock valued at $10.9 million on the date of acquisition. IAA and RISC
       are workers' compensation management services companies offering services
       in Alabama. On the acquisition date, the excess of the purchase price
       over the fair value of the net assets acquired was $11.4 million and was
       recorded as goodwill. The remaining unamortized goodwill relating to
       those acquisitions was $7.8 million at March 31, 1998 (just prior to the
       transfer of the goodwill to Zenith on April 1, 1998).

       Due to a decrease in the market value of RISCORP's Class A Common Stock,
       790,336 additional shares of RISCORP's Class A Common Stock valued at
       $0.6 million were issued in January 1998 to the former shareholders of
       IAA.


(4)    COMMITMENTS AND CONTINGENCIES

       On or about January 11, 1999, Zenith filed a lawsuit against RISCORP and
       certain of its subsidiaries in federal court in New York setting forth 14
       separate causes of action arising out of the Asset Purchase Agreement and
       certain ancillary agreements. The complaint sought an unspecified total
       amount of damages, but the amount of compensatory damages sought was in
       excess of $30 million, together with an unspecified amount of punitive
       damages and attorneys' fees. As more fully disclosed in Note 2, on July
       7, 1999, the Company and Zenith settled those claims and, in connection
       therewith, this lawsuit has been dismissed with prejudice by Zenith.

       On August 20, 1997, the Occupational Safety Association of Alabama
       Workers' Compensation Fund (the "Fund"), an Alabama self-insured workers'
       compensation fund, filed a breach of contract and fraud action against
       the Company and others. The Fund entered into a Loss Portfolio Transfer
       and Assumption Reinsurance Agreement dated August 26, 1996 and effective
       September 1, 1996 with RISCORP National Insurance Company ("RNIC"). Under
       the terms of the agreement, RNIC assumed 100 percent of the outstanding
       loss reserves (including incurred but not reported losses) as of
       September 1, 1996. Co-defendant Peter D. Norman ("Norman") was a
       principal and officer of IAA prior to its


                                       10
<PAGE>   11
       acquisition by RISCORP in September 1996. The complaint alleges that
       Norman and IAA breached certain fiduciary duties owed to the Fund in
       connection with the subject agreement and transfer. The complaint
       alleges that RISCORP has breached certain provisions of the agreement
       and owes the Fund monies under the terms of the agreement. The Fund
       claims, per a Loss Portfolio Evaluation dated February 26, 1998, that
       the Fund overpaid RNIC by $6 million in the subject transaction. The
       court has granted RNIC's Motion to Compel Arbitration per the terms and
       provisions of the agreement. On December 1, 1998, the trial court issued
       an order prohibiting the American Arbitration Association from
       administering the arbitration between RNIC and the Fund, and RNIC has
       appealed the trial court's ruling. The Alabama Supreme Court has stayed
       the current arbitration. Despite the Alabama Supreme Court's stay, the
       dispute between the Fund and RNIC is expected to be resolved through
       arbitration. The other defendants, including IAA, have appealed to the
       Supreme Court of Alabama the trial court's denial of their motions to
       compel arbitration. RNIC intends to vigorously defend the Fund's claim.

       On March 13, 1998, RISCORP Insurance Company ("RIC") and RISCORP Property
       & Casualty Insurance Company ("RPC") were added as defendants in a
       purported class action lawsuit filed in the United States District Court
       for the Southern District of Florida, styled Bristol Hotel Management
       Corporation, et. al., v. Aetna Casualty & Surety Company, a/k/a Aetna
       Group, et. al. Case No. 97-2240-CIV-MORENO. The plaintiffs purport to
       bring this action on behalf of themselves and a class consisting of all
       employers in the State of Florida who purchased or renewed
       retrospectively rated or adjusted workers' compensation policies in the
       voluntary market since 1985. The suit was originally filed on July 17,
       1997 against approximately 174 workers' compensation insurers as
       defendants. The complaint was subsequently amended to add the RISCORP
       defendants. The amended complaint named a total of approximately 161
       insurer defendants. The suit claims that the defendant insurance
       companies violated the Sherman Antitrust Act, the Racketeer Influenced
       and Corrupt Organizations Act ("RICO"), and the Florida Antitrust Act,
       committed breach of contract and civil conspiracy, and were unjustly
       enriched by unlawfully adding improper and illegal charges and fees onto
       retrospectively rated premiums and otherwise charging more for those
       policies than allowed by law. The suit seeks compensatory and punitive
       damages, treble damages under the Antitrust and RICO claims, and
       equitable relief. RIC and RPC moved to dismiss the amended complaint and
       have also filed certain motions to dismiss the amended complaint filed by
       various other defendants.

       On August 26, 1998, the district court issued an order dismissing the
       entire suit against all defendants on one of the grounds identified in
       the various motions to dismiss filed by the defendants. The district
       court indicated that all other grounds and motions to dismiss that were
       pending at that time were mooted by the dismissal. On September 13, 1998,
       the plaintiffs filed a Notice of Appeal. On February 9, 1999, the
       district court issued, sua sponte, an Order of Reconsideration in which
       the court indicated its desire to vacate the dismissal of the RICO claims
       and pendant state claims based on a recent decision of the United States
       Supreme Court. On March 17, 1999, plaintiffs-appellants filed an
       unopposed motion to remand the action to the district court, citing the
       Order of Reconsideration. On June 9, 1999, the Eleventh Circuit remanded
       the case to the district court. Management will resume its vigorous
       defense of the case once district court proceedings recommence.

       On July 9, 1999, a shareholder class action lawsuit was filed against the
       Company, two of its executive officers, and two former executive officers
       in the United States District Court for the Middle District of Florida.
       The plaintiff in this action purports to represent the class of
       shareholders who purchased shares of RISCORP's Class A Common Stock
       between November 19, 1997 and July 20, 1998. The complaint alleges, among
       other things, that the financial statements included in the periodic
       reports filed by RISCORP with the Securities and Exchange Commission
       during the class period contain false and misleading statements of
       material fact and omissions, in violation of Sections 10(b) and 20(a) of
       the Securities Exchange Act of 1934, as amended, and Rule 10b-5
       promulgated thereunder. These




                                       11
<PAGE>   12

       allegations principally relate to the difference between the net book
       value of the Company as reflected on its published financial statements
       during the class period and the net book value of the assets transferred
       to Zenith as determined by the neutral auditors and neutral actuaries
       pursuant to the terms of the Asset Purchase Agreement between the
       parties. The complaint seeks unspecified compensatory damages. RISCORP
       believes that these claims are without merit and intends to vigorously
       defend this suit.

       The Company, in the ordinary course of business, is party to various
       lawsuits. Based on information presently available, and in the light of
       legal and other defenses available to the Company, contingent liabilities
       arising from such threatened and pending litigation in the ordinary
       course of business are not presently considered by management to be
       material.

       Other than as noted herein, no provision had been made in the
       accompanying consolidated financial statements for the foregoing matters.
       Certain of the related legal expenses may be covered under directors and
       officers' insurance coverage maintained by the Company.


(5)    RECLASSIFICATIONS

       For comparative purposes, certain amounts in the accompanying financial
       statements have been reclassified from amounts previously reported. These
       reclassifications had no effect on previously reported shareholders'
       equity or net loss.





                                       12
<PAGE>   13


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

FORWARD-LOOKING STATEMENTS

       This Quarterly Report on Form 10-Q contains forward-looking statements,
       particularly with respect to Risk Factors, Legal Proceedings, and the
       Liquidity and Capital Resources section of Management's Discussion and
       Analysis of Financial Condition and Results of Operations. Additional
       written or oral forward-looking statements may be made by RISCORP, Inc.
       ("RISCORP") and its subsidiaries (collectively, the "Company") from time
       to time in filings with the Securities and Exchange Commission or
       otherwise. Such forward-looking statements are within the meaning of that
       term in Sections 27A of the Securities Act of 1933, as amended (the
       "Securities Act") and Section 21E of the Securities Exchange Act of 1934,
       as amended (the "Exchange Act"). Such statements may include, without
       limitation, projections of revenues, income, losses, cash flows, plans
       for future operations, financing needs, estimates concerning the effects
       of litigation or other disputes, as well as assumptions regarding any of
       the foregoing.

       Forward-looking statements are inherently subject to risks and
       uncertainties, some of which cannot be predicted. Future events and
       actual results could differ materially from those set forth in or
       underlying the forward-looking statements. Many factors could contribute
       to such differences and include, among others, the actual outcome of
       pending litigation, the Company's ability to gain approval and receive
       payment from the Florida Department of Labor for certain refund
       applications, the Company's ability to receive payment for the alleged
       errors and understatement of the Final Business Balance Sheet by the
       Independent Expert, the Company's need for additional capital to meet
       operating requirements, and other factors mentioned elsewhere in this
       report.

RECENT DEVELOPMENTS

       ASSET PURCHASE AGREEMENT WITH ZENITH

       See Part 1, Item 1, Notes to Consolidated Financial Statements, Note 2
       for further discussion of the Zenith transaction.

       LEGAL DEVELOPMENTS

       See "Part II, Item 1, Legal Proceedings."

OVERVIEW

       GENERAL

       As discussed more fully in Note 2 to the consolidated financial
       statements, RISCORP and certain of its subsidiaries sold substantially
       all of their assets and transferred certain liabilities to Zenith on
       April 1, 1998. In connection with the sale to Zenith, RISCORP ceased
       substantially all of its former business operations, including its
       insurance operations, effective April 1, 1998. Accordingly, after such
       date, the Company's operations consisted primarily of the administration
       of the day-to-day activities of the surviving corporate entities,
       compliance with the provisions of the Asset Purchase Agreement, and the
       investment, protection, and maximization of the remaining assets of the
       Company. At the present time, RISCORP has no plans to resume any
       operating activities.



                                       13
<PAGE>   14

       Since April 1, 1998, the Company has had no employees or insurance
       operations, and has provided no services to self-insurance funds or other
       insurance related entities. Because of these significant changes in the
       operating activities of the Company after April 1, 1998, a comparison of
       the results of operations for the six months ended June 30, 1999 to the
       comparable period in 1998 is meaningless. Therefore, the results of
       operations for the six months ended June 30, 1999 are explained
       separately without comparison to the comparable prior period. The results
       of operations for the three months ended June 30, 1999 are explained
       separately with comparison to the comparable prior period. The results of
       operations of the Company prior to the April 1, 1998 sale to Zenith are
       included to comply with the requirements of the Securities Exchange Act
       of 1934, as amended, and the rules and regulations of the Securities and
       Exchange Commission; however, those results of operations are not
       indicative of the operations of the Company since April 1, 1998 and are
       not indicative of the anticipated future operations of the Company.

       RESULTS OF OPERATIONS

       During the six months ended June 30, 1999, the Company's primary
       operating activities were the defense of the Proposed Business Balance
       Sheet, the investment of the $25 million initial payment received from
       Zenith on April 2, 1998, the investment of other invested assets retained
       by the Company, compliance with the provisions of the Asset Purchase
       Agreement, converting the taxes recoverable to cash, collecting the sale
       proceeds from Zenith, the investment of the $50.8 million of sale
       proceeds and interest collected from Zenith on March 26, 1999, efforts to
       maximize asset recoveries, and the administration of the day-to-day
       activities of the surviving corporate entities. Compliance with the
       provisions of the Asset Purchase Agreement included the transfer of all
       of the assets and liabilities, not retained by the Company, to Zenith,
       and assisting with the orderly transition of the Company's insurance
       operations to Zenith.

       SIX MONTHS ENDED JUNE 30, 1999

       An analysis of certain balances contained on the June 30, 1999
       consolidated balance sheet is as follows:

       -      At June 30, 1999, the $15 million of restricted cash and cash
              equivalents consisted of $12.8 million held in escrow in
              connection with the sale to Zenith, $1.9 million on deposit with
              various governmental agencies, and $0.3 million pledged to secure
              a letter of credit.

       -      The $51 million increase in investments in the first six months of
              1999 resulted from the collection and subsequent investment of the
              proceeds from the sale to Zenith and of certain tax refunds.

       -      The decrease in the amount of the receivable from Zenith from
              December 31, 1998 to June 30, 1999 resulted from the collection of
              the remaining receivable from the sale to Zenith in March 1999.

       -      The decrease in other assets from December 31, 1998 to June 30,
              1999 resulted from the collection of interest due from the sale to
              Zenith in March 1999.

       -      The $4.8 million of prepaid expenses at June 30, 1999 consisted of
              $3.7 million of prepaid insurance coverages and $1.1 million of
              retainers paid to certain professionals and consultants.



                                       14
<PAGE>   15

       -      A summary of the accrued expenses and other liabilities at June
              30, 1999 is as follows (in millions):

<TABLE>
                           <S>                                            <C>
                           Payable to Zenith                              $   6.2  (1)
                           Income taxes payable                               1.7
                           Other accruals and payables                        1.2
                           Accrued legal, accounting, auditing,
                              and actuarial services                          1.1
                           Trade accounts payable                             0.5
                           Other                                              0.3
                                                                          -------

                           Total                                          $  11.0
                                                                          =======
</TABLE>

                      (1) Based on the Settlement Agreement, as more fully
                          discussed in Note 2 to the consolidated financial
                          statements.


       The Company's operating results for the six months ended June 30, 1999
       resulted in a net loss of $4.2 million.

       The $3 million of net investment income for the six months ended June 30,
       1999 consisted of $1.3 million of interest income on the receivable from
       Zenith, $0.2 million of interest income on the $12.8 million balance in
       escrow, and $1.5 million of investment portfolio income.

       Operating expenses for the six months ended June 30, 1999 totaled $5.7
       million and consisted of the following:

       -      The $4.4 million of commissions, underwriting, and administrative
              expenses consisted of $0.6 million of management expenses, $0.7
              million of accounting and auditing expenses, $1.6 million of legal
              expenses, $0.6 million of recurring operating expenses such as
              rent, telephone, insurance, and similar costs, and $0.9 million of
              other expenses.

       -      The $1.2 million of interest expense consisted principally of the
              interest paid in March 1999 on the settlement of a class action
              lawsuit.

       -      Depreciation and amortization expense was $76,000. The Company
              transferred all assets subject to amortization to Zenith in
              connection with the sale and retained $0.4 million of fixed assets
              (consisting principally of computer equipment) that are being
              depreciated over three years.

       As of June 30, 1999, the Company recorded an additional net loss of $4.8
       million on the sale to Zenith due to the final terms of the Settlement
       Agreement, as discussed more fully in Note 2 to the consolidated
       financial statements.

       The weighted average common and common share equivalents outstanding for
       the six months ended June 30, 1999 was 37,419,156 as compared to
       36,892,420 for the six months ended June 30, 1998. This includes, for
       each period presented, the vested portion only, as of the end of such
       period, of shares issued in April 1998 under a Restricted Stock Award
       Agreement between RISCORP and Phoenix Management Company, Ltd.




                                       15
<PAGE>   16

       THREE MONTHS ENDED JUNE 30, 1999 AND 1998

       The Company's operating results for the three months ended June 30, 1999
       and 1998 resulted in a net loss of $3.4 million and $6.2 million,
       respectively.

       The components of net investment income for the three months ended June
       30, 1999 and 1998 are summarized as follows (in millions):

<TABLE>
<CAPTION>

                                                                  1999          1998
                                                                 -----         ------
                 <S>                                             <C>           <C>
                 Interest income on the Zenith sale
                    proceeds                                     $ 0.1          $ 1.6
                 Interest income on the balance in escrow          0.1            0.1
                 Other investment income                           1.0            0.6
                                                                 -----          -----
                 Total                                           $ 1.2          $ 2.3
                                                                 =====          =====
</TABLE>

       The components of commissions, underwriting, and administrative expenses
       for the three months ended June 30, 1999 and 1998 are summarized as
       follows (in millions):

<TABLE>
<CAPTION>
                                                                  1999           1998
                                                                 -----          -----
                 <S>                                             <C>            <C>
                 Management expenses                             $ 0.3          $  0.4
                 Accounting and auditing expenses                  0.4             0.3
                 Transition expenses incurred as a result
                    of the sale to Zenith                          0.1             0.3
                 Legal expenses                                    1.3             0.3
                 Recurring operating expenses
                    (rent, telephone, insurance, and
                    similar costs)                                 0.4             1.0
                 Other expenses                                    0.7             0.8
                 Significant non-recurring expenses
                    discussed below                                 --             8.3
                                                                 -----          ------
                 Total                                           $ 3.2          $ 11.4
                                                                 =====          ======
</TABLE>

       Interest expense (income) for the three months ended June 30, 1999 and
       1998 was $(0.2) million and $8,255, respectively. The 1999 interest item
       is net of $0.3 million reimbursed to the Company by RISCORP's majority
       shareholder for interest previously paid by the Company on the
       shareholder's behalf.

       Operating expenses for the three months ended June 30, 1998 included
       three significant non-recurring expenses that arose due to the sale to
       Zenith, namely, $3.2 million of severance payments to certain of the
       Company's former executives and employees, $4.1 million for the issuance
       of RISCORP stock to Phoenix Management Company, Ltd. in accordance with a
       Restricted Stock Award Agreement, and $1 million of adjustments to the
       Proposed Business Balance Sheet.

       As of June 30, 1999, the Company recorded an additional net loss of $4.8
       million on the sale to Zenith due to the terms of the Settlement
       Agreement, as discussed more fully in Note 2 to the consolidated
       financial statements.

       Depreciation and amortization expense was $36,000 and $31,000 for the
       three months ended June 30, 1999 and 1998, respectively. The Company
       transferred all assets subject to amortization to Zenith in


                                       16
<PAGE>   17

       connection with the sale and retained $0.4 million of fixed assets
       (consisting principally of computer equipment) that is being depreciated
       over three years.

       The weighted average common and common share equivalents outstanding for
       the three months ended June 30, 1999 was 37,491,031 as compared to
       36,916,725 for the three months ended June 30, 1998. This includes, for
       each period presented, the vested portion only, as of the end of such
       period, of shares issued in April 1998 under a Restricted Stock Award
       Agreement between RISCORP and Phoenix Management Company, Ltd.

       THREE MONTHS ENDED MARCH 31, 1998

       The discussion that follows relates to the operations and operating
       philosophy of the Company's activities that existed prior to April 1,
       1998 and addresses the operating results for the three months ended March
       31, 1998.

       Prior to 1996, the Company's at-risk operations were focused in Florida.
       During 1996, the Company acquired RNIC and its 19 state licenses and
       assumed business from several self insurance funds outside of Florida
       which allowed the Company to diversify its at-risk operations.

       The majority of the Company's premiums were written in Florida, a
       regulated pricing state where premiums for guaranteed cost products were
       based on state-approved rates. However, prior to the sale to Zenith, the
       Company also offered policies that were subject to premium reductions on
       high deductible plans, participating dividend plans, or other loss
       sensitive plans. Pricing for those plans tended to be more competitively
       based, and the Company experienced increased competition during 1997 and
       1998 in pricing those plans.

       In June 1997, the Company implemented a strategic plan to consolidate
       several of its field offices and announced its intention to close all
       field offices, except Charlotte, North Carolina, and Birmingham, Alabama,
       by the end of 1997, and to cease writing new business in certain states,
       including Oklahoma, Virginia, Missouri, Mississippi, Louisiana, and
       Kansas. The estimated impact of the decision to discontinue writing
       business in those states was a reduction of $16 million in direct
       premiums written.

       The Company attempted to lower claims costs by applying managed care
       techniques and programs to workers' compensation claims, particularly by
       providing prompt medical intervention, integrating claims management and
       customer service, directing care of injured employees through a managed
       care provider network, and availing itself of potential recoveries under
       subrogation and other programs.

       Part of the Company's claims management philosophy was to seek recoveries
       for claims that were reinsured or that could be subrogated or submitted
       for reimbursement under various states' recovery programs. As a result,
       the Company's losses and loss adjustment expenses were offset by
       estimated recoveries from reinsurers under specific excess of loss and
       quota share reinsurance agreements, subrogation from third parties, and
       state "second disability" funds, including the Florida Special Disability
       Trust Fund ("SDTF").



                                       17
<PAGE>   18



       The direct, assumed, ceded, and net earned premiums for the first quarter
       of 1998 are summarized as follows (in thousands):

<TABLE>
                    <S>                                    <C>
                    Direct premiums earned                 $ 48,416
                    Assumed premiums earned                      79
                    Premiums ceded to reinsurers            (22,676)
                                                          ---------

                    Net premiums earned                    $ 25,819
                                                           ========
</TABLE>


       There were no direct, assumed, ceded, or net earned premiums after the
       April 1, 1998 sale to Zenith. At March 31, 1998, there were 18,145
       policies in force.

       Fee income for the first three months of 1998 was $5.7 million. After
       April 1, 1998, the Company ceased generating fee income when those
       activities were transferred to Zenith.

       Net realized gains during the first quarter of 1998 were $1.5 million,
       consisting principally of the $1.3 million gain on the sale of an
       interest in a joint venture.

       Net investment income for the three months ended March 31, 1998 was $3.3
       million, consisting entirely of earnings from the investment portfolio,
       excluding realized gains and losses.

       For the three months ended March 31, 1998, the loss ratio was 93 percent,
       losses and loss adjustment expenses were $24 million, unallocated loss
       adjustment expenses were $2.6 million, commissions, underwriting, and
       administrative expenses were $15.5 million, interest expense was $0.5
       million, and depreciation and amortization expense was $3.1 million.

       The weighted average common and common share equivalents outstanding for
       the three months ended March 31, 1998 was 36,868,114.

       LIQUIDITY AND CAPITAL RESOURCES

       The Company historically met its cash requirements and financed its
       growth through cash flows generated from operations and borrowings. The
       Company's primary sources of cash flow from operations were premiums and
       investment income, and its cash requirements consisted principally of
       payment of losses and loss adjustment expenses, support of its operating
       activities, including various reinsurance agreements and managed care
       programs and services, capital surplus needs for the insurance
       subsidiaries, and other general and administrative expenses. RISCORP and
       certain of its subsidiaries sold substantially all of their assets and
       transferred certain liabilities to Zenith on April 1, 1998. In connection
       with that sale to Zenith, the Company ceased substantially all of its
       former business operations and, accordingly, after April 1, 1998, the
       Company's primary source of cash flows has been generated from investment
       income. The Company's future cash requirements are expected to be
       satisfied through investment income and the liquidation of investments.

       Cash flows from operations for the six months ended June 30, 1999 and
       1998 was $2.2 million and ($15.8) million, respectively. The change from
       1998 to 1999 was due primarily to the sale to Zenith and the cessation of
       substantially all the Company's former business operations.



                                       18
<PAGE>   19

       The Company has projected cash flows through December 1999 and believes
       it has sufficient liquidity and capital resources to support its
       operations.

       As of June 30, 1999 and 1998, RISCORP's insurance subsidiaries had
       combined statutory capital and surplus of $129.8 million and $151.9
       million, respectively. The individual capital and surplus of each of
       RISCORP's insurance subsidiaries exceeded the minimum statutory capital
       and surplus required by their respective state of domicile.

       The National Association of Insurance Commissioners has adopted
       risk-based capital standards to determine the capital requirements of an
       insurance carrier based on the risks inherent in its operations. The
       standards, which have not yet been adopted in Florida, require the
       computation of a risk-based capital amount that is then compared to a
       carrier's actual total adjusted capital. The computation involves
       applying factors to various financial data to address four primary risks:
       asset risk, insurance underwriting risk, credit risk, and off-balance
       sheet risk. Those standards provide for regulatory intervention when the
       percentage of total adjusted capital to authorized control level
       risk-based capital is below certain levels. At December 31, 1998,
       RISCORP's insurance subsidiaries' statutory surplus was in excess of any
       risk-based capital action level requirements.

       YEAR 2000

       The term "Year 2000 issue" is a general term used to describe various
       problems that may result from the improper processing of date and
       date-sensitive calculations by computers and other machinery as the Year
       2000 is approached and reached. These problems may arise from hardware
       and software unable to distinguish dates in the "2000's" from dates in
       the "1900's" and from other sources, such as the use of special codes and
       conventions that make use of a date field.

       Effective April 1, 1998, RISCORP ceased substantially all of its former
       business operations, including its core insurance and managerial services
       operations. RISCORP's computer systems and proprietary computer software,
       including the policy issue and management system and the claims systems,
       were included in the assets sold to Zenith pursuant to the Asset Purchase
       Agreement.

       Effective April 1, 1998, the Company entered into a computer outsourcing
       agreement. Under the terms of that agreement, the vendor is to provide
       the Company with computer configuration, software installation, network
       configuration and maintenance, telecommunication coordination, computer
       maintenance, and other computer-related services. The agreement is for a
       period of 36 months.

       Due to the cessation of its operations, RISCORP does not believe it has
       any material third-party relationships that present significant Year 2000
       risks. The Company has requested confirmation from the financial
       institutions with which it maintains accounts that such institutions are
       Year 2000 compliant.

       Based on its limited operations, the Company believes its most reasonable
       likely worst case scenario Year 2000 problem would be a temporary
       inability to access its accounts with financial institutions if such
       institutions' systems are not Year 2000 compliant. Because the Company
       does not expect that the Year 2000 will have a material adverse effect on
       the Company, it has determined that it is unnecessary to develop a
       contingency plan.


                                       19
<PAGE>   20


PART II    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

           On or about January 11, 1999, Zenith filed a lawsuit against RISCORP
           and certain of its subsidiaries in federal court in New York setting
           forth 14 separate causes of action arising out of the Asset Purchase
           Agreement and certain ancillary agreements. The complaint sought an
           unspecified total amount of damages, but the amount of compensatory
           damages sought was in excess of $30 million, together with an
           unspecified amount of punitive damages and attorneys' fees. As more
           fully disclosed in Note 2 of the consolidated financial statements,
           on July 7, 1999, the Company and Zenith settled those claims and, in
           connection therewith, this lawsuit has been dismissed with prejudice
           by Zenith.

           On August 20, 1997, the Occupational Safety Association of Alabama
           Workers' Compensation Fund (the "Fund"), an Alabama self-insured
           workers' compensation fund, filed a breach of contract and fraud
           action against the Company and others. The Fund entered into a Loss
           Portfolio Transfer and Assumption Reinsurance Agreement dated August
           26, 1996 and effective September 1, 1996 with RNIC. Under the terms
           of the agreement, RNIC assumed 100 percent of the outstanding loss
           reserves (including incurred but not reported losses) as of
           September 1, 1996. Co-defendant Peter D. Norman ("Norman") was a
           principal and officer of IAA prior to its acquisition by RISCORP in
           September 1996. The complaint alleges that Norman and IAA breached
           certain fiduciary duties owed to the Fund in connection with the
           subject agreement and transfer. The complaint alleges that RISCORP
           has breached certain provisions of the agreement and owes the Fund
           monies under the terms of the agreement. The Fund claims, per a Loss
           Portfolio Evaluation dated February 26, 1998, that the Fund overpaid
           RNIC by $6 million in the subject transaction. The court has granted
           RNIC's Motion to Compel Arbitration per the terms and provisions of
           the agreement. On December 1, 1998, the trial court issued an order
           prohibiting the American Arbitration Association from administering
           the arbitration between RNIC and the fund, and RNIC has appealed the
           trial court's ruling. The Alabama Supreme Court has stayed the
           current arbitration. Despite the Alabama Supreme Court's stay, the
           dispute between the Fund and RNIC is expected to be resolved through
           arbitration. The other defendants, including IAA, have appealed to
           the Supreme Court of Alabama the trial court's denial of their
           motions to compel arbitration. RNIC intends to vigorously defend the
           Fund's claim.

           On March 13, 1998, RIC and RPC were added as defendants in a
           purported class action lawsuit filed in the United States District
           Court for the Southern District of Florida, styled Bristol Hotel
           Management Corporation, et. al., v. Aetna Casualty & Surety Company,
           a/k/a Aetna Group, et. al. Case No. 97-2240-CIV-MORENO. The
           plaintiffs purport to bring this action on behalf of themselves and a
           class consisting of all employers in the State of Florida who
           purchased or renewed retrospectively rated or adjusted workers'
           compensation policies in the voluntary market since 1985. The suit
           was originally filed on July 17, 1997 against approximately 174
           workers' compensation insurers as defendants. The complaint was
           subsequently amended to add the RISCORP defendants. The amended
           complaint named a total of approximately 161 insurer defendants. The
           suit claims that the defendant insurance companies violated the
           Sherman Antitrust Act, the Racketeer Influenced and Corrupt
           Organizations Act ("RICO"), and the Florida Antitrust Act, committed
           breach of contract and civil conspiracy, and were unjustly enriched
           by unlawfully adding improper and illegal charges and fees onto
           retrospectively rated premiums and otherwise charging more for those
           policies than allowed by law. The suit seeks compensatory and
           punitive damages, treble damages under the Antitrust and RICO claims,
           and equitable relief. RIC and RPC moved to dismiss the amended
           complaint and have also filed certain motions to dismiss the amended
           complaint filed by various other defendants.


                                       20
<PAGE>   21

           On August 26, 1998, the district court issued an order dismissing the
           entire suit against all defendants on one of the grounds identified
           in the various motions to dismiss filed by the defendants. The
           district court indicated that all other grounds and motions to
           dismiss that were pending at that time were mooted by the dismissal.
           On September 13, 1998, the plaintiffs filed a Notice of Appeal. On
           February 9, 1999, the district court issued, sua sponte, an Order of
           Reconsideration in which the court indicated its desire to vacate the
           dismissal of the RICO claims and pendant state claims based on a
           recent decision of the United States Supreme Court. On March 17,
           1999, plaintiffs-appellants filed an unopposed motion to remand the
           action to the district court, citing the Order of Reconsideration. On
           June 9, 1999, the Eleventh Circuit remanded the case to the district
           court. Management will resume its vigorous defense of the case once
           district court proceedings recommence.

           On July 9, 1999, a shareholder class action lawsuit was filed against
           the Company, two of its executive officers, and two former executive
           officers in the United States District Court for the Middle District
           of Florida. The plaintiff in this action purports to represent the
           class of shareholders who purchased shares of RISCORP's Class A
           Common Stock between November 19, 1997 and July 20, 1998. The
           complaint alleges, among other things, that the financial statements
           included in the periodic reports filed by RISCORP with the Securities
           and Exchange Commission during the class period contain false and
           misleading statements of material fact and omissions, in violation of
           Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as
           amended, and Rule 10b-5 promulgated thereunder. These allegations
           principally relate to the difference between the net book value of
           the Company as reflected on its published financial statements during
           the class period and the net book value of the assets transferred to
           Zenith as determined by the neutral auditors and neutral actuaries
           pursuant to the terms of the Asset Purchase Agreement between the
           parties. The complaint seeks unspecified compensatory damages.
           RISCORP believes that these claims are without merit and intends to
           vigorously defend this suit.

           The Company, in the ordinary course of business, is party to various
           lawsuits. Based on information presently available, and in the light
           of legal and other defenses available to the Company, contingent
           liabilities arising from such threatened and pending litigation in
           the ordinary course of business are not presently considered by
           management to be material.

           Other than as noted herein, no provision had been made in the
           accompanying consolidated financial statements for the foregoing
           matters. Certain of the related legal expenses may be covered under
           directors and officers' insurance coverage maintained by the Company.

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

           None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

           None.

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

           On June 14, 1999, the Company held its 1999 Annual Meeting of
           Shareholders. The shareholders voted upon one proposal, to elect
           Frederick M. Dawson, Seddon Goode, Jr., George E. Greene III and
           Walter L. Revell to serve as directors of the Company until the next
           annual meeting of



                                       21
<PAGE>   22

       shareholders and until their successors are elected and qualified.
       Pursuant to the Company's Amended and Restated Articles of Incorporation,
       holders of Class B Common Stock are entitled to 10 votes per share and
       the holders of Class A Common Stock are entitled to one vote per share on
       all matters to be voted on by the shareholders of the Company. There were
       24,334,443 Class B votes cast "for" each of the nominees for director,
       consisting of 100 percent of the outstanding shares of Class B Common
       Stock. Holders of Class A Common Stock voted their shares as set forth
       below for each of the nominees:

<TABLE>
<CAPTION>
                                                            FOR                          WITHHELD
                                                 SHARES               VOTES        SHARES        VOTES
           <S>                    <C>          <C>                 <C>             <C>           <C>
           Frederick M. Dawson    Class A       7,964,703            7,964,703     79,398        79,398

           Seldon Goode, Jr.      Class A       7,960,788            7,960,788     83,313        83,313

           George E. Greene III   Class A       7,960,788            7,960,788     83,313        83,313

           Walter L. Revell       Class A       7,960,788            7,960,788     83,313        83,313
</TABLE>


ITEM 5.  OTHER INFORMATION

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a)       Exhibits

                  10.1   Form of Director Indemnity Agreement

                  10.2   Settlement Agreement with Zenith Insurance Company

                  11     Statement Re Computation of Per Share Net Loss

                  27     Financial Data Schedules


         b)       Reports on Form 8-K

                  RISCORP filed a report on Form 8-K on May 14, 1999 with
                  respect to the Shareholder Protection Rights Agreement adopted
                  by RISCORP.





                                       22
<PAGE>   23


                                   SIGNATURES


Pursuant to the requirements 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.

                  RISCORP, INC.
                  -----------------------------------
                  (Registrant)




                  By: /s/ Walter E. Riehemann
                  -----------------------------------

                  Walter E. Riehemann
                  Senior Vice President and Secretary

                  Date:





                  By: /s/ Edward W. Buttner
                  -----------------------------------

                  Edward W. Buttner IV, CPA
                  Principal Accounting Officer

                  Date: August 16, 1999




                                       23