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 March 31, 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 April 30, 1999

 Class A Common Stock, $.01 par value                       14,258,671
 Class B Common Stock, $.01 par value                       24,334,443


                                    1
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<TABLE>
<CAPTION>

                                                        INDEX



                                                                                                          Page No.
Part I     Financial Information

           Item 1.         Financial Statements
<S>                                                                                                 <C>
                           Consolidated Balance Sheets -
                               March 31, 1999 and December 31, 1998                                      3 - 4

                           Consolidated Statements of Operations -
                               For the three months ended March 31, 1999 and 1998                            5

                           Consolidated Statements of Cash Flows -
                               For the three months ended March 31, 1999 and 1998                            6

                           Consolidated Statements of Comprehensive Income                                   7

                           Notes to Consolidated Financial Statements                                   8 - 13


           Item 2.         Management's Discussion and Analysis of Financial                           14 - 19
                           Condition and Results of Operations


Part II    Other Information

           Item 1.         Legal Proceedings                                                           19 - 21

           Item 2.         Changes to Securities                                                            21

           Item 3.         Defaults Upon Senior Securities                                                  21

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

           Item 5.         Other Information                                                                22

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


                           Signatures                                                                       23

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                                     2
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Part I   Financial Information
Item 1.  Financial Statements
<TABLE>
<CAPTION>
                                            RISCORP, INC. AND SUBSIDIARIES

                                             Consolidated Balance Sheets
                                                    (in thousands)


                                                                                            March 31, 1999   December 31, 1998
                                                                                             (Unaudited)
Assets                                                                                      

Investments:
<S>                                                                                      <C>                  <C>    

   Fixed maturities available for sale, at fair value
      (amortized cost $65,723 in 1999 and $6,666 in 1998)                                $       65,758       $       6,716

   Fixed maturities  available for sale, at fair value (amortized cost $9,044 in
      1999 and $9,047 in 1998)-restricted                                                         9,226               9,264
                                                                                                  -----               -----
      Total investments                                                                          74,984              15,980


Cash and cash equivalents                                                                         9,679               6,864
Cash and cash equivalents-restricted                                                             17,073              14,842
Receivable from Zenith                                                                              582              49,933
Accounts receivable--other                                                                        6,932               7,674
Prepaid expenses                                                                                  5,005               5,171
Income taxes recoverable                                                                          5,331              17,277
Deferred income taxes                                                                             3,158               3,141
Property and equipment, net                                                                         297                 337
Other assets                                                                                        245               2,174
                                                                                                  -----               -----  
      Total assets                                                                        $     123,286       $     123,393
                                                                                          =============       =============



See accompanying notes to consolidated financial statements.

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                                       3
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<TABLE>
<CAPTION>


                                            RISCORP, INC. AND SUBSIDIARIES

                                             Consolidated Balance Sheets
                                                    (in thousands)


                                                                                           March 31, 1999   December 31, 1998
                                                                                             (Unaudited)
Liabilities and Shareholders' Equity                                                     

Liabilities:
<S>                                                                                     <C>                 <C>   
    Accrued expenses and other liabilities                                              $       28,591      $       27,827
                                                                                        --------------      --------------
          Total liabilities                                                                     28,591              27,827


Shareholders' equity:
   Class A Common Stock, $.01 par value, 100,000,000
       shares authorized; 14,258,671 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 earnings (deficit)                                                                 (46,519)            (45,680)
   Treasury Class A Common Stock - at cost, 112,582 shares                                          (1)                 (1)
   Accumulated Other Comprehensive Income:
      Net unrealized gains on investments                                                           141                173
                                                                                                    ---                ---

          Total shareholders' equity                                                             94,695             95,566
                                                                                         --------------     --------------

          Total liabilities and shareholders' equity                                     $     123,286      $      123,393
                                                                                         =============      ==============



See accompanying notes to consolidated financial statements.
</TABLE>


                                   4
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<TABLE>
<CAPTION>


                                            RISCORP, INC. AND SUBSIDIARIES

                                        Consolidated Statements of Operations
                                   (in thousands, except share and per share data)


                                                                                                  Three Months
                                                                                                Ended March 31,
                                                                                       -----------------------------------
                                                                                            1999                1998
                                                                                       ---------------     ---------------
                                                                                        (Unaudited)         (Unaudited)
   Revenue:
<S>                                                                                      <C>               <C>

      Premiums earned                                                                    $        --       $      25,819
      Fee income                                                                                  --               5,723
      Net realized gains                                                                          --               1,461
      Net investment income                                                                    1,799               3,306
                                                                                               -----               -----
          Total revenue                                                                        1,799              36,309
                                                                                               -----              ------

   Expenses:
      Losses and loss adjustment expenses                                                         --              24,016
       Unallocated loss adjustment expenses                                                       --               2,561
       Commissions, underwriting, and administrative expenses                                  1,157              15,515
       Interest expense                                                                        1,441                 469
       Depreciation and amortization                                                              40               3,069
                                                                                                  --               -----
          Total expenses                                                                       2,638              45,630
                                                                                               -----              ------

   Loss before income taxes                                                                     (839)             (9,321)

   Income tax expense (benefit)                                                                   --                  --
                                                                                               -----               -----
   Net loss                                                                                   $ (839)            $(9,321)
                                                                                              =======            ========


   Per share data:
      Net loss per common share - basic                                                       $(0.02)             $(0.25)
                                                                                               ======              ======

     Net loss per common share - diluted                                                      $(0.02)             $(0.25)
                                                                                               ======              ======

   Weighted average common shares outstanding                                             37,347,281           36,868,114
                                                                                         ===========          ===========

   Weighted average common and common share
     equivalents outstanding                                                              37,347,281           36,868,114
                                                                                         ===========          ===========



See accompanying notes to consolidated financial statements.

</TABLE>


                                      5
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<TABLE>
<CAPTION>

                                            RISCORP, INC. AND SUBSIDIARIES

                                        Consolidated Statements of Cash Flows
                                                    (in thousands)


                                                                                                  Three Months
                                                                                                Ended March 31,
                                                                                       -----------------------------------
                                                                                               1999             1998
                                                                                          ---------------   --------------
                                                                                            (Unaudited)       (Unaudited)
<S>                                                                                        <C>               <C>           
Net cash provided by (used in) operating activities                                        $   13,533        $  (20,882)
                                                                                           ----------        ----------

Cash flows from investing activities:
     Purchase of fixed maturities available for sale                                         (192,877)          (14,684)
     Purchase of fixed maturities held to maturity                                                 --            (2,903)
     Proceeds from sale of fixed maturities available for sale                                133,819            31,623
     Proceeds from maturities of fixed maturities available for sale                               --             5,369
     Proceeds from maturities of fixed maturities held to maturity                                 --             3,250
     Cash received from Zenith for sale of net assets                                          50,572                --
     Purchase of property and equipment                                                            --              (693)
                                                                                           ----------        ----------
       Net cash (used in) provided by investing activities                                     (8,486)           21,962
                                                                                           ----------        ----------

Cash flows from financing activities:
     Principal repayments of notes payable                                                         --               (82)
     Decrease in deposit balances payable                                                          --            (1,598)
     Transfer of cash and cash equivalents to restricted                                       (2,232)           (1,090)
                                                                                           ----------        ----------
       Net cash used in financing activities                                                   (2,232)           (2,770)
                                                                                           ----------        ----------

Net increase (decrease) in cash and cash equivalents                                            2,815            (1,690)

Cash and cash equivalents, beginning of period                                                  6,864            16,858
                                                                                           ----------        ----------
Cash and cash equivalents, end of period                                                   $    9,679        $   15,168
                                                                                           ==========        ==========

Supplemental disclosures of cash flow information:

     Cash paid during the period for:
           Interest                                                                        $        3        $       460
                                                                                           ===========       ===========
           Income taxes                                                                    $       82        $     1,585
                                                                                           ===========       ===========







See accompanying notes to consolidated financial statements

</TABLE>
                                       6
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<TABLE>
<CAPTION>



                                            RISCORP, INC. AND SUBSIDIARIES

                                   Consolidated Statements of Comprehensive Income
                                                    (in thousands)


                                                                                          Three Months Ended March 31
                                                                                      --------------------------------------
                                                                                             1999                1998
                                                                                      -------------------  -----------------
                                                                                            (Unaudited)       (Unaudited)
<S>                                                                                     <C>                   <C>

Net loss                                                                                $   (     839)        $   (9,321)
                                                                                           ------------          ----------

Other comprehensive loss, before income taxes:
  Unrealized losses on securities available for sale:
    Unrealized holding losses arising during year                                                 (49)               (68)
Income tax benefit related to items of other
  comprehensive loss                                                                              (17)               (24)
                                                                                         --------------       -------------
Other comprehensive loss, net of income taxes                                                     (32)               (44)
                                                                                         --------------       -------------

Total comprehensive loss                                                                $        (871)        $   (9,365)
                                                                                         =============         ==========



























See accompanying notes to consolidated financial statements.
</TABLE>

                                       7
<PAGE>



                           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,  reflect  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  assets and 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 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 that  certain  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.

       In connection  with the  determination  of the final purchase price to be
       paid by Zenith,  on July 10, 1998 RISCORP and Zenith engaged a nationally
       recognized  independent  accounting firm to serve as neutral auditors and
       neutral actuaries (the "Independent  Expert") to resolve various items in
       dispute  between the parties and to determine the Final Business  Balance
       Sheet, as that term is defined in the Asset Purchase Agreement.  On March
       19, 1999, the Independent Expert delivered its determination of the Final
       Business  Balance Sheet and, as such, its conclusion  that the book value
       of the  transferred  assets  exceeded  the book value of the  transferred
       liabilities  assumed by Zenith at closing  by $92.3  million.  Therefore,
       pursuant to the terms of the Asset  Purchase  Agreement and given the $35
       million previously paid by Zenith at closing,  Zenith was required to pay
       an additional  $57.3 million in immediately  available funds on or before
       March 26, 1999, plus interest  thereon of 6.25 percent from April 1, 1998
       through the final payment  date.  On March 26, 1999,  Zenith paid RISCORP
       $50.8  million  (including  $3.1  million in  interest),  deposited  $2.8
       million into escrow to secure the Company's  indemnification  obligations
       to Zenith, and RISCORP retained,  with Zenith's approval, $6.8 million of
       cash,  certificates  of deposit and securities  that were identified as a
       transferred  asset, but had not been physically  transferred to Zenith by
       such date.  RISCORP  reported  the  results of the  Independent  Expert's


                                       8
<PAGE>

       determinations in the accompanying  1998  consolidated  balance sheet. On
       April 16, 1999,  RISCORP received an additional  payment of $0.6 million,
       including  interest,  from  Zenith  relating to an asset  transferred  to
       Zenith that Zenith had not  previously  recognized as  transferred.  This
       payment has not been included in the accompanying  consolidated financial
       statements.

       While the Asset  Purchase  Agreement  provides  that the  decision of the
       Independent  Expert is final,  binding and conclusive,  RISCORP  believes
       that the Independent  Expert may have understated the amount by which the
       book  value of the  transferred  assets  exceeded  the book  value of the
       transferred  liabilities by approximately $6 million in its determination
       of the Final Business Balance Sheet. The $6 million relates to the impact
       on the final  determination  of premiums ceded under certain  reinsurance
       agreements for the years 1991, 1992 and 1993 that contained provisions to
       calculate  the  final  premiums  based  on  losses   incurred  under  the
       reinsurance agreements. RISCORP is reviewing this matter with Zenith and,
       pending final resolution of these issues,  has not included the impact of
       this potential  adjustment in the accompanying  1999 or 1998 consolidated
       financial statements.

       In accordance with the terms of the Asset Purchase Agreement,  15 percent
       of the total purchase price is required to be held in escrow for a period
       of two years from the Closing Date.  The escrowed funds are to be used to
       indemnify Zenith against any liabilities or obligations (other than those
       transferred) arising out of or related to any misrepresentation,  breach,
       or  nonfulfillment  of any  covenant or  agreement  by the  Company.  The
       escrowed  funds are to be  invested  in  United  States  government  debt
       obligations  or in money market funds  secured by such debt  obligations,
       with such  funds to be  disbursed  pursuant  to the  terms of the  Escrow
       Agreement.  Interest  income on the escrowed  funds is paid to RISCORP at
       the end of each calendar quarter.

       As more fully  disclosed  in Note 5, both  RISCORP  and Zenith have filed
       separate  causes of  action in  Florida  and New York,  alleging  various
       breaches of the terms of the Asset Purchase Agreement. Given the inherent
       uncertainties  associated  with the  litigation  process,  management  is
       unable to predict the ultimate outcome of these lawsuits.

       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)    Sale of Joint Venture

       Joint Venture Arrangement

       In January 1996,  RISCORP,  through one of its  wholly-owned  subsidiary,
       RISCORP of Illinois, entered into a joint venture arrangement with Health
       Care Service  Corporation  ("HCSC"),  a subsidiary of Blue Cross and Blue
       Shield  of  Illinois,  to  underwrite  and  sell  managed  care  workers'
       compensation insurance in Illinois. RISCORP and HCSC each held 50 percent
       ownership  in the joint  venture  known as Third  Coast  Holding  Company
       ("Third Coast"). RISCORP contributed the use of its expertise,  insurance
       systems,  and intellectual  property,  while HCSC contributed cash of $10
       million.  RISCORP's contributed property in Third Coast was valued at $10
       million;  however,  the Company's cost basis in the contributed  property
       was $0 and as of December  31,  1996,  the Company  recorded  its initial
       investment in Third Coast at $0.


                                       9
<PAGE>

       Initially, RISCORP accounted for its 50 percent investment in Third Coast
       on the equity basis of accounting,  whereby RISCORP's recorded investment
       was adjusted for its  proportionate  share of earnings or losses of Third
       Coast.  RISCORP  discontinued  the use of the equity method of accounting
       for Third Coast in the first quarter of 1997 when the  cumulative  losses
       reduced  RISCORP's  investment in Third Coast to $0. RISCORP has not made
       any  financial  guarantees  relating  to Third Coast and has not made any
       financial commitments to provide any future funding to Third Coast.

       Effective January 1, 1998, RISCORP entered into an agreement with HCSC to
       sell RISCORP's 50 percent  interest in Third Coast for $1.3 million.  The
       $1.3 million gain on the sale of Third Coast was included in the 1998 net
       realized  gains.  RISCORP  received the funds due in connection with this
       transaction in April 1998. In connection  with the closing of the sale to
       Zenith,  RISCORP received notice that Zenith believes that it is entitled
       to the proceeds from the sale of Third Coast.  RISCORP disputes  Zenith's
       entitlement to these proceeds and intends to vigorously  defend any claim
       asserted by Zenith related to the Third Coast transaction.


(4)    Issuance of Additional Shares of Stock

       In September 1996,  RISCORP purchased all of the outstanding stock of IAA
       and 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.

       During  the  first  quarter  of 1997,  the  Company  determined  that the
       goodwill  recorded  when IAA and RISC  were  acquired  could not be fully
       recovered from the  profitability of the workers'  compensation  business
       that was then under  contract.  Therefore,  as of December 31, 1996, $2.8
       million of  goodwill  was written  off and was  reported as  amortization
       expense.   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 on January 9, 1998 to the former shareholders of
       IAA.


(5)    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 seeks an unspecified total
       amount of damages,  but the amount of  compensatory  damages sought is in
       excess of $30 million,  together with an  unspecified  amount of punitive
       damages and attorneys' fees. Zenith's claims include,  among others, that
       the Company (i) breached certain representations and warranties set forth
       in the Asset Purchase  Agreement,  (ii) failed to transfer certain assets
       to Zenith,  (iii) failed to operate its business in the ordinary  course,
       (iv)  failed  to  reimburse   Zenith  for  certain   payments,   and  (v)
       fraudulently  induced Zenith to execute the Asset Purchase  Agreement due
       to certain alleged verbal  representations made with respect to RISCORP's
       Year 2000 compliance.

                                       10
<PAGE>

       On October 16,  1998,  RISCORP and certain of its  subsidiaries  filed an
       action  against  Zenith in  federal  court in Tampa,  Florida  alleging a
       breach of the Asset Purchase Agreement. The Company amended its complaint
       on January  25,  1999,  and added ten  additional  claims  arising out of
       Zenith's  failure to  indemnify  the Company for certain  claims of third
       parties.  The  Company  also  added two other  claims,  one for breach of
       contract  and one for  conversion,  related  to  Zenith's  taking of $4.1
       million  the  Company had on deposit  with the South  Carolina  Insurance
       Department.

       The Company intends to vigorously  defend those claims asserted by Zenith
       and to vigorously prosecute the Company's claims;  however,  there can be
       no assurance as to the ultimate outcome of this litigation.

       Between  November  20,  1996  and  January  31,  1997,  nine  shareholder
       class-action  lawsuits were filed against RISCORP and other defendants in
       the United States  District Court for the Middle District of Florida (the
       "Securities  Litigation").  In March 1997, the court  consolidated  these
       lawsuits  and  appointed  co-lead  plaintiffs  and co-lead  counsel.  The
       plaintiffs subsequently filed a consolidated complaint.  The consolidated
       complaint named as defendants  RISCORP,  three of its executive officers,
       one non-officer  director,  and three of the  underwriters  for RISCORP's
       initial public  offering.  The plaintiffs in the  consolidated  complaint
       purport to represent the class of  shareholders  who purchased  RISCORP's
       Class A Common Stock between February 28, 1996 and November 14, 1996. The
       consolidated  complaint alleges that RISCORP's Registration Statement and
       Prospectus  of  February  28,  1996,  as well as  subsequent  statements,
       contained false and misleading statements of material fact and omissions,
       in  violation  of  Sections  11  and 15 of the  Securities  Act of  1993,
       Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule
       10b-5   promulgated   thereunder.   The   consolidated   complaint  seeks
       unspecified compensatory damages.

       In July  1998,  the  parties  executed a  stipulation  and  agreement  of
       settlement  in which the  Company  agreed to pay $21 million in cash to a
       settlement fund to settle this litigation.  The Company paid $0.5 million
       as an advance to the settlement  fund. On July 29, 1998, the court issued
       a preliminary  approval  order in which it certified the purported  class
       for settlement purposes.  The court held a settlement fairness hearing on
       December 15, 1998. At that hearing,  the court announced its opinion that
       the settlement  was fair and reasonable and should be approved.  On April
       2, 1999, the remaining  balance of the  settlement  fund in the amount of
       $20.5 million,  plus interest thereon in the amount of $1.4 million,  was
       paid in full settlement of the litigation.

       The  Company  estimates  that $8 million of  insurance  proceeds  will be
       available for contribution to the settlement  amount,  as well as related
       costs and  expenses.  The Company  recognized  the $21  million  proposed
       settlement and the related  insurance  proceeds in the 1997  consolidated
       statement of operations.

       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  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


                                       11
<PAGE>

       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.  RNIC has
       appealed the trial court's ruling which prevents the American Arbitration
       Association from administering the arbitration between RNIC and the Fund.
       The Alabama Supreme Court has stayed the current arbitration. 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 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.  As of this date, the Eleventh Circuit has not
       ruled on the motion to remand.  Management  will  continue to monitor the
       progress of the appeals  process as  necessary  and intends to defend the
       case  vigorously  if it is  returned  to the  district  court for further
       proceedings.

       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.


                                       12
<PAGE>

(6)   Comprehensive Income

       As of  January  1, 1998,  the  Company  adopted  Statement  of  Financial
      Accounting  Standards No. 130,  "Reporting  Comprehensive  Income"  ("SFAS
      130").  SFAS 130  established  new rules for the  reporting and display of
      comprehensive  income and its  components;  however,  the adoption of this
      standard  had no  impact on the  Company's  net  income  or  shareholders'
      equity.  In  addition  to certain  other  adjustments,  SFAS 130  requires
      unrealized gains or losses on the Company's available for sale securities,
      which prior to adoption were reported separately in shareholders'  equity,
      to be included in other comprehensive income.


(7)    Reclassifications

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




                                       13
<PAGE>



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,   including,   without  limitation,  the  litigation
       currently pending with Zenith; the Company's ability to gain approval and
       receive  payment from the Florida  Department of Labor for certain refund
       applications; 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.

                                       14
<PAGE>

       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 three  months ended March 31, 1999 to
       the comparable period in 1998 is meaningless.  Therefore,  the results of
       operations  for the  three  months  ended  March 31,  1999 are  explained
       separately with limited  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

       Three Months Ended March 31, 1999

       During the three  months  ended March 31,  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 receivable 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.

       The following is an analysis of other balances contained on the March 31,
       1999 balance sheet.

                 Restricted cash and cash equivalents consist primarily of $12.8
                million  held in escrow in  connection  with the sale to Zenith,
                $3.8 million on deposit with various governmental agencies, $0.3
                million  pledged to secure a letter of credit,  and $0.2 million
                held in trust in connection  with a fronting  agreement  between
                Virginia Surety Insurance  Company,  Inc. and RISCORP Management
                Services, Inc.

                 Investments   totaling   approximately   $75  million   consist
                primarily of United States Government obligations.

                 The  $0.6  million   receivable  from  Zenith   represents  the
                remaining   purchase   price  to  be  received  from  Zenith  as
                determined by the Company in connection  with the Final Business
                Balance  Sheet.  This  balance was  received by RISCORP in April
                1999.

                 Deferred  income taxes of $3.2  million  consist of federal and
                state  income  taxes that are  anticipated  to be  recovered  in
                future  periods.   

                 Income taxes  recoverable of $5.3 million represent tax refunds
                which  have been  applied  for.These  income  tax  refunds  were
                received in April 1999.

                 Other assets of $0.2  million  consist  principally  of accrued
                investment income.

                                       15
<PAGE>

                 Prepaid  expenses of $5 million consist  principally of prepaid
                insurance  coverages  of  $3.9  million  and  retainers  paid to
                certain professionals and consultants of $1.1 million.

                 Accounts  receivable-other  of $6.9 million consist principally
                of a receivable  of $2.3 million that is expected to be realized
                upon the  redemption  of  RISCORP's  outstanding  stock and $4.6
                million of certain  insurance  recoverables that was received in
                May 1999.

                 Accrued expenses and other  liabilities  totaled  approximately
                $28.6 million and consisted  principally  of $21.9 million of an
                accrued legal  settlement  (this amount was paid in April 1999),
                $0.6 million of trade accounts  payable,  $0.5 million of unpaid
                restructuring   cost   relating  to  the  June  1997   Corporate
                restructuring,   $1.1  million  of  accrued  legal,  accounting,
                auditing and  actuarial  expenses,  $1.3 million of income taxes
                payable, and $3.2 million of other accruals and payables.

       The Company's operating results for the three months ended March 31, 1999
       resulted in a net loss of $0.8 million.

       Net investment  income for the three months ended March 31, 1999 was $1.8
       million.  Net  investment  income  consisted  of  interest  income on the
       receivable  from  Zenith of $1.3  million,  interest  income on the $12.8
       million balance in escrow of $0.1 million, and other investment income of
       $0.4 million.

       Operating expenses for the three months ended March 31, 1999 totaled $2.6
       million and consisted of the following:

               Commissions,  underwriting,  and administrative  expenses totaled
              $1.2 million and consisted of $0.3 million of management expenses;
              $0.3 million of accounting and auditing expenses;  $0.3 million of
              legal expenses;  $0.2 million of recurring operating expenses such
              as rent, telephone,  insurance and similar costs, and $0.1 million
              of other expenses.

               Interest  expense of $1.4 million  consisted  principally  of the
              interest payable on the accrued legal settlement mentioned above.

               Depreciation  and amortization  expense was $40,000.  The Company
              transferred  all  assets  subject  to  amortization  to  Zenith in
              connection with the sale and retained  approximately  $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  March 31,  1999 was  37,347,281  as compared to
       36,868,114 for the three months ended March 31, 1998.

       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 includes 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  RISCORP  National  Insurance  Company
       ("RNIC")  and its 19 licenses  and assumed  business  from  several  self
       insurance funds outside of Florida which allowed the Company to diversify
       its at-risk operations.


                                       16
<PAGE>

       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 as
       high  deductible  plans,  participating  dividend  plans,  or other  loss
       sensitive plans.  Pricing for these plans tended to be more competitively
       based, and the Company experienced  increased competition during 1997 and
       1998 in pricing these plans.

       In addition,  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
       approximately $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 which were reinsured or which 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").

       The following table shows direct,  assumed, ceded and net earned premiums
       for the first quarter of 1998 (in thousands):

                                                                  3-31-98
                                                              ---------------

                     Direct premiums earned                      $ 48,416
                     Assumed premiums earned                           79
                     Premiums ceded to reinsurers                 (22,676)
                                                                ----------
                     Net premiums earned                         $ 25,819
                                                                 ========


       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,
       consisted principally of the $1.3 million gain on the sale of Third Coast
       as  more  fully  discussed  in  Note 3 of the  accompanying  consolidated
       financial statements.

                                       17
<PAGE>

       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.

       The loss ratio for the three  months ended March 31, 1998 was 93 percent.
       Losses and loss adjustment  expenses for the three months ended March 31,
       1998 were $24 million. Unallocated loss adjustment expenses for the three
       months ended March 31, 1998 were $2.6 million. Commissions, underwriting,
       and  administrative  expenses  for the three  months ended March 31, 1998
       were $15.5 million. Interest expense for the three months ended March 31,
       1998 was $0.5  million.  Depreciation  and  amortization  expense for the
       three months ended March 31, 1998 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 flow 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 flow 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 flow from  operations  for the three months ended March 31, 1999 and
       1998 was $13.5 million, and ($20.9) million,  respectively.  The increase
       from  1998 to 1999  was  due  primarily  to the  sale to  Zenith  and the
       cessation of substantially all the Company's former business operations.

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

       As of March  31,  1999 and 1998,  RISCORP's  insurance  subsidiaries  had
       combined  statutory  capital  and  surplus  of $123.6  million  and $98.1
       million,  respectively.  The  individual  capital  and surplus of each of
       RISCORP's insurance  subsidiaries  exceeded the minimum statutory capital
       and surplus required by their 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 which 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. These standards provide for regulatory  intervention when the
       percentage  of  total  adjusted  capital  to  authorized   control  level
       risk-based  capital  is  below  certain  levels.  At March  31,  1999 and
       December 31, 1998,  RISCORP's insurance  subsidiaries'  statutory surplus
       was in excess of any risk-based capital action level requirements.


                                       18
<PAGE>

       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.


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  seeks an
       unspecified  total  amount of  damages,  but the  amount of  compensatory
       damages sought is in excess of $30 million,  together with an unspecified
       amount of punitive damages and attorneys' fees.  Zenith's claims include,
       among others,  that the Company (i) breached certain  representations and
       warranties  set forth in the Asset  Purchase  Agreement,  (ii)  failed to
       transfer  certain assets to Zenith,  (iii) failed to operate its business
       in the  ordinary  course,  (iv)  failed to  reimburse  Zenith for certain
       payments,  and (v)  fraudulently  induced  Zenith  to  execute  the Asset
       Purchase  Agreement due to certain  alleged verbal  representations  made
       with respect to RISCORP's Year 2000 compliance.

       On October 16,  1998,  RISCORP and certain of its  subsidiaries  filed an
       action  against  Zenith in  federal  court in Tampa,  Florida  alleging a
       breach of the Asset Purchase Agreement. The Company amended its complaint


                                       19
<PAGE>

       in Florida on January 25, 1999, and added ten  additional  claims arising
       out of Zenith's  failure to indemnify  the Company for certain  claims of
       third parties. The Company also added two other claims, one for breach of
       contract  and one for  conversion,  related  to  Zenith's  taking of $4.1
       million  the  Company had on deposit  with the South  Carolina  Insurance
       Department.

       The Company intends to vigorously  defend those claims asserted by Zenith
       and to vigorously prosecute the Company's claims;  however,  there can be
       no assurance as to the ultimate outcome of this litigation.

       Between  November  20,  1996  and  January  31,  1997,  nine  shareholder
       class-action  lawsuits were filed against RISCORP and other defendants in
       the United States  District Court for the Middle District of Florida (the
       "Securities  Litigation").  In March 1997, the court  consolidated  these
       lawsuits  and  appointed  co-lead  plaintiffs  and co-lead  counsel.  The
       plaintiffs subsequently filed a consolidated complaint.  The consolidated
       complaint named as defendants  RISCORP,  three of its executive officers,
       one non-officer  director,  and three of the  underwriters  for RISCORP's
       initial public  offering.  The plaintiffs in the  consolidated  complaint
       purport to represent the class of  shareholders  who purchased  RISCORP's
       Class A Common Stock between February 28, 1996 and November 14, 1996. The
       consolidated  complaint alleges that RISCORP's Registration Statement and
       Prospectus  of  February  28,  1996,  as well as  subsequent  statements,
       contained false and misleading statements of material fact and omissions,
       in  violation  of  Sections  11  and 15 of the  Securities  Act of  1993,
       Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule
       10b-5   promulgated   thereunder.   The   consolidated   complaint  seeks
       unspecified compensatory damages.

       In July  1998,  the  parties  executed a  stipulation  and  agreement  of
       settlement  in which the  Company  agreed to pay $21 million in cash to a
       settlement fund to settle this litigation.  The Company paid $0.5 million
       as an advance to the settlement  fund. On July 29, 1998, the court issued
       a preliminary  approval  order in which it certified the purported  class
       for settlement purposes.  The court held a settlement fairness hearing on
       December 15, 1998. At that hearing,  the court announced its opinion that
       the settlement  was fair and reasonable and should be approved.  On April
       2, 1999, the remaining  balance of the settlement  funds in the amount of
       $20.5 million,  plus interest thereon in the amount of $1.4 million, were
       paid in full settlement of the litigation.

       The  Company  estimates  that $8 million of  insurance  proceeds  will be
       available for contribution to the settlement  amount,  as well as related
       costs and  expenses.  The Company  recognized  the $21  million  proposed
       settlement and the related  insurance  proceeds in the 1997  consolidated
       statement of operations.

       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.  RNIC has appealed the trial court's ruling which prevents the
       American  Arbitration  Association  from  administering  the  arbitration
       between  RNIC and the Fund.  The  Alabama  Supreme  Court has  stayed the


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       current arbitration. 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 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.  As of this date, the Eleventh Circuit has not
       ruled on the motion to remand.  Management  will  continue to monitor the
       progress of the appeals  process as  necessary  and intends to defend the
       case  vigorously  if it is  returned  to the  district  court for further
       proceedings.

       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  underdirectors  and
       officers' insurance coverage maintained by the Company.

Item 2.    Changes to Securities

       None.

Item 3.Defaults Upon Senior Securities

       None.

                                       21
<PAGE>

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

           None.

Item 5.    Other Information

       Shareholder Proposals

       The proxy statement to be solicited by management of RISCORP with respect
       to the 1999 Annual  Meeting of  Shareholders  will  confer  discretionary
       authority to vote on proposals of shareholders of RISCORP  intended to be
       presented for  consideration at such Annual Meeting that are submitted to
       RISCORP after May 14, 1999.

Item 6.Exhibits and Reports on Form 8-K

       a)  Exhibits

            11    Statement Re Computation of Per Share Earnings

            27    Financial Data Schedules


       b)      Reports on Form 8-K

              The  Company  filed a report  on Form 8-K on March  23,  1999 with
              respect to the  determination  of the Final Business Balance Sheet
              by the Independent Expert.



                                       22
<PAGE>

                                  SIGNATURES


Pursuant to the  requirements  of the  Securities  and 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:    May 14, 1999




                  By:       /s/Edward W. Buttner IV

                  Edward W. Buttner IV, CPA
                  Principal Accounting Officer

                  Date:    May 14, 1999






                                       23
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