<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    FORM 10-Q

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

      FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                       OR

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

    FOR THE TRANSITION PERIOD FROM __________________ TO __________________


                     AMERICAN BANKERS INSURANCE GROUP, INC.
                             11222 QUAIL ROOST DRIVE
                              MIAMI, FLORIDA 33157
                                 (305) 253-2244

Commission File Number:                                                 0-9633

State of Incorporation:                                                Florida

I.R.S. Employer Identification Number:                              59-1985922


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 report), and (2) has been subject to such
filing requirements for the past 90 days.

                              YES [X]   NO  [ ]

Common Stock - Par Value $1.00
 43,085,965 Shares Outstanding on August 3, 1998




                                       1
<PAGE>   2


                                                                       Form 10-Q


Company or group of companies for which report is filed:



                     AMERICAN BANKERS INSURANCE GROUP, INC.

This quarterly report, filed pursuant to Rule 13A-13 of the General Rules and
Regulations under the Securities Exchange Act of 1934, consists of the following
information as specified in Form 10-Q.

Part I - Financial Information

      Item 1 - Financial Statements

      1.    Consolidated Balance Sheets at June 30, 1998 and December 31, 1997.

      2.    Consolidated Statements of Income for the three months ended June
            30, 1998 and 1997.

      3.    Consolidated Statements of Comprehensive Income for the three months
            ended June 30, 1998 and 1997.

      4.    Consolidated Statements of Income for the six months ended June 30,
            1998 and 1997.

      5.    Consolidated Statements of Comprehensive Income for the six months
            ended June 30, 1998 and 1997.

      6.    Consolidated Statements of Cash Flows for the six months ended June
            30, 1998 and 1997.

      7.    Notes to Consolidated Financial Statements.

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

Part II - Other Information

      Item 1 - Legal Proceedings

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

      Item 6 - Exhibits and Reports

      a.    Exhibits.

            The following exhibits are included herein:

            (2.1) Agreement and Plan of Merger among American Bankers Insurance
                  Group, Inc., ABIG acquisition Corp. A. and MS Diversified
                  Corporation dated as of May 18, 1998.

            (2.2) Purchase Agreement among American Bankers Insurance Group,
                  Inc. and Dominion Automobile Association Limited dated as of
                  March 9, 1998.

            (3.1) Corporate By-Laws, as amended, through May 1998.

            (27)  Financial Data Schedule

      b.    Report on Form 8-K.

            None



                                       2
<PAGE>   3

                                                                       Form 10-Q





                                    SIGNATURE


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.

                                                         AMERICAN BANKERS
                                                       INSURANCE GROUP, INC.



August 10, 1998
    Date

                                                           Robert Hill
                                                   Principal Accounting Officer










                                       3

<PAGE>   4









                                     PART I

                              FINANCIAL INFORMATION




















                                       4
<PAGE>   5

                     AMERICAN BANKERS INSURANCE GROUP, INC.
                           CONSOLIDATED BALANCE SHEETS
                       JUNE 30, 1998 AND DECEMBER 31, 1997
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                       1998               1997
                                                                                    -----------       -----------
                                                                                   (unaudited)
<S>                                                                                 <C>               <C>        
ASSETS

Investments
    Held-to-maturity securities, at amortized cost                                  $   806,494       $   836,608
    Available-for-sale securities, at fair value                                      1,077,785           973,790
    Equity securities, at approximate market value                                      147,694           141,274
    Mortgage loans on real estate                                                         6,975             9,322
    Policy loans                                                                          9,676             9,315
    Short-term and other investments                                                    190,749           184,923
                                                                                    -----------       -----------
         Total investments                                                            2,239,373         2,155,232
                                                                                    -----------       -----------

Cash                                                                                      5,896            23,265
Accounts receivable, net of allowance for doubtful
  accounts of $6,059 in 1998 and $5,619 in 1997                                         134,990           144,330
Reinsurance receivable                                                                  293,257           270,692
Accrued investment income                                                                25,289            25,228
Deferred policy acquisition costs                                                       450,546           458,289
Prepaid reinsurance premiums                                                            607,236           565,162
Other assets                                                                            151,364           140,253
                                                                                    -----------       -----------
         Total assets                                                               $ 3,907,951       $ 3,782,451
                                                                                    ===========       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Policy liabilities                                                                  $   320,967       $   311,181
Unearned premiums                                                                     1,477,003         1,436,034
Claim liabilities                                                                       570,027           555,797
                                                                                    -----------       -----------
                                                                                      2,367,997         2,303,012

Other policyholders' funds                                                                4,878             4,786
Notes payable                                                                           353,725           242,592
Deferred income taxes                                                                    48,076            51,666
Accrued commissions and other expenses                                                  135,667           150,147
Other liabilities                                                                       187,422           216,379
                                                                                    -----------       -----------
         Total liabilities                                                            3,097,765         2,968,582
                                                                                    -----------       -----------
Commitments and Contingencies (Note 5)

STOCKHOLDERS' EQUITY
Preferred stock: $3.125 Series B Cumulative Convertible Preferred Stock 
  Authorized 10,000 shares 
  Issued and Outstanding 1,983 shares in 1998 and 2,300 shares in 1997              $    99,163       $   115,000
Common stock of $1 par value.  Authorized 100,000 shares 
  Issued and Outstanding 43,088 shares in 1998 and 41,806 shares in 1997                 43,088            41,806
Additional paid-in capital                                                              243,210           212,010
Accumulated Other Comprehensive Income                                                   18,670            12,096
Retained earnings                                                                       424,204           449,444
Less:
  Treasury stock, at cost - 271 shares in 1998 and 271 shares in 1997                    (8,110)           (8,110)
  Unamortized restricted stock                                                          (10,039)           (6,252)
  Collateralization of loan to Leveraged Employee
    Stock Ownership Plan                                                                      0            (2,125)
                                                                                    -----------       -----------
         Total stockholders' equity                                                     810,186           813,869
                                                                                    -----------       -----------

         Total liabilities and stockholders' equity                                 $ 3,907,951       $ 3,782,451
                                                                                    ===========       ===========

</TABLE>


          See accompanying notes to consolidated financial statements.

                                        5







<PAGE>   6
                     AMERICAN BANKERS INSURANCE GROUP, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                  FOR THREE MONTHS ENDED JUNE 30, 1998 AND 1997
                   (in thousands except per common share data)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                    1998            1997
                                                                  ---------      ---------
<S>                                                               <C>            <C>      
Gross collected premiums                                          $ 696,939      $ 666,605
                                                                  =========      =========

Premiums and other revenues:
   Net premiums earned                                            $ 362,860      $ 365,011
   Net investment income                                             36,527         33,342
   Realized investment gains                                          6,836          3,104
   Other income                                                       7,790          4,583
                                                                  ---------      ---------
         Total premiums and other revenues                          414,013        406,040
                                                                  ---------      ---------

Benefits and expenses:
   Net benefits, claims, losses and settlement expenses             126,249        134,038
   Commissions                                                      158,960        148,862
   Operating expense                                                 82,613         78,907
   Merger termination fee                                                 0              0
   Interest expense                                                   5,482          4,062
                                                                  ---------      ---------
         Total benefits and expenses                                373,304        365,869
                                                                  ---------      ---------

Income before taxes                                                  40,709         40,171
                                                                  ---------      ---------

Income tax expense (benefit):
   Current                                                            9,563         14,074
   Deferred                                                             977         (2,521)
                                                                  ---------      ---------
                                                                     10,540         11,553
                                                                  ---------      ---------

Net Income                                                        $  30,169      $  28,618
                                                                  =========      =========

Per common share and common equivalent share data
  Basic:
   Net Income                                                     $    0.67      $    0.65
                                                                  =========      =========
   Weighted average number of shares outstanding                     42,662         41,522
                                                                  =========      =========

  Diluted:
   Net Income                                                     $    0.64      $    0.61
                                                                  =========      =========

   Weighted average number of shares outstanding                     46,932         46,996
                                                                  =========      =========

Dividends per common share                                        $    0.11      $    0.11
                                                                  =========      =========


</TABLE>



          See accompanying notes to consolidated financial statements.

                                        6







<PAGE>   7

                     AMERICAN BANKERS INSURANCE GROUP, INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                  FOR THREE MONTHS ENDED JUNE 30, 1998 AND 1997
                                 (in thousands)
                                   (unaudited)



<TABLE>
<CAPTION>
                                                                                       1998           1997
                                                                                     --------       --------
<S>                                                                                  <C>            <C>     
Net income                                                                           $ 30,169       $ 28,618
                                                                                     --------       --------

Other comprehensive income, net of tax:

       Foreign currency translation adjustments                                          (779)        (2,383)

       Unrealized gains on securities:
             Unrealized holding gains arising during period                             2,985         10,100
             Less: reclassification adjustment for gains included in net income        (4,311)             0
                                                                                     --------       --------
       Subtotal unrealized gains on securities                                         (1,326)        10,100

       Minimum pension liability adjustment                                                 0              0
                                                                                     --------       --------

Other comprehensive (loss) income                                                      (2,105)         7,717
                                                                                     --------       --------

Comprehensive income                                                                 $ 28,064       $ 36,335
                                                                                     ========       ========



</TABLE>






          See accompanying notes to consolidated financial statements.

                                        7




<PAGE>   8

                     AMERICAN BANKERS INSURANCE GROUP, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                   FOR SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                      1998              1997
                                                                  -----------       ----------
<S>                                                               <C>               <C>       
Gross collected premiums                                          $ 1,394,810       $1,303,731
                                                                  ===========       ==========

Premiums and other revenues:
   Net premiums earned                                            $   719,707       $  728,786
   Net investment income                                               71,705           65,448
   Realized investment gains                                            9,014            5,034
   Other income                                                        13,754           11,653
                                                                  -----------       ----------
         Total premiums and other revenues                            814,180          810,921
                                                                  -----------       ----------

Benefits and expenses:
   Net benefits, claims, losses and settlement expenses               249,187          272,928
   Commissions                                                        312,725          300,499
   Operating expense                                                  171,516          151,990
   Merger termination fee                                             100,000                0
   Interest expense                                                     9,659            8,019
                                                                  -----------       ----------
         Total benefits and expenses                                  843,087          733,436
                                                                  -----------       ----------

(Loss) income before taxes                                            (28,907)          77,485
                                                                  -----------       ----------

Income tax (benefit) expense:
   Current                                                            (10,383)          23,578
   Deferred                                                            (6,013)          (1,130)
                                                                  -----------       ----------
                                                                      (16,396)          22,448
                                                                  -----------       ----------

Net (Loss) Income                                                 $   (12,511)      $   55,037
                                                                  ===========       ==========



Per common share and common equivalent share data
   Primary:
     Net (Loss) Income                                            $     (0.37)      $     1.24
                                                                  ===========       ==========

     Weighted average number of shares outstanding                     42,328           41,365
                                                                  ===========       ==========

   Diluted:
     Net Income                                                   $       N/A       $     1.18
                                                                  ===========       ==========

     Weighted average number of shares outstanding                     46,951           46,836
                                                                  ===========       ==========

Dividends per common share                                        $      0.22       $     0.21
                                                                  ===========       ==========

</TABLE>






          See accompanying notes to consolidated financial statements.

                                        8





<PAGE>   9

                     AMERICAN BANKERS INSURANCE GROUP, INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                   FOR SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                                                     1998            1997
                                                                                                   --------       --------

<S>                                                                                                <C>            <C>     
Net (loss) income                                                                                  $(12,511)      $ 55,037
                                                                                                   --------       --------

Other comprehensive income, net of tax:

       Foreign currency translation adjustments                                                      (1,174)        (3,423)

       Unrealized gains on securities:
           Unrealized holding gains (losses) arising during period                                   12,290           (493)
           Less: reclassification adjustment for gains included in net income                        (4,542)             0
                                                                                                   --------       --------
       Subtotal unrealized gains on securities                                                        7,748           (493)

       Minimum pension liability adjustment                                                               0              0
                                                                                                   --------       --------

Other comprehensive income (loss)                                                                     6,574         (3,916)
                                                                                                   --------       --------

Comprehensive (loss) income                                                                        $ (5,937)      $ 51,121
                                                                                                   ========       ========


</TABLE>












          See accompanying notes to consolidated financial statements.

                                        9






<PAGE>   10

                     AMERICAN BANKERS INSURANCE GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
                                                                                 1998             1997
                                                                               ---------       ---------
<S>                                                                            <C>             <C>      
OPERATING ACTIVITIES:
Net (loss) income                                                              $ (12,511)      $  55,037
Adjustment to reconcile net income to net cash provided by
  operating activities:
   Change in policy liabilities, unearned premiums, claim
     liabilities, reinsurance receivable and prepaid reinsurance premiums          5,418          77,599
   Change in other assets and other liabilities                                  (45,943)        (26,459)
   Decrease in accounts receivable                                                 9,468          14,656
   Increase in accrued investment income                                             (61)         (1,032)
   Decrease in accrued commissions and expenses                                  (14,480)        (33,321)
   Increase (decrease) in policyholders' funds                                        92            (973)
   Increase in policy loans                                                         (361)           (469)
   Amortization of deferred policy acquisition costs                             267,336         272,162
   Amortization of cost of insurance acquired                                        616             759
   Policy acquisition costs deferred                                            (259,594)       (300,786)
   Provision for amortization and depreciation                                     6,330           6,205
   Provision for deferred income taxes                                            (6,013)         (1,130)
   Net gain on sale of investments                                                (9,014)         (5,034)
   Compensation and tax effect on stock option shares                              6,809           1,091
   Net cash flow from purchases and sales of trading securities                        0           8,880
                                                                               ---------       ---------
   Net cash (used in) provided by operating activities                           (51,908)         67,185
                                                                               ---------       ---------

INVESTING ACTIVITIES:
Purchase of investments
   Held-to-maturity securities                                                   (27,731)        (51,457)
   Available-for-sale securities                                                (434,849)       (809,411)
Proceeds from sale of investments
   Available-for-sale securities                                                 272,102         728,472
   Mortgage loans                                                                  2,348             395
   Real Estate                                                                        12              18
Proceeds from maturities of investments
   Held-to-maturity securities                                                    55,951          36,734
   Available-for-sale securities                                                  71,633          34,465
Increase in short-term investments                                                (6,665)        (29,502)
Transactions related to capital assets
   Capital expenditures                                                           (4,713)        (10,306)
   Sales of capital assets                                                            56              58
                                                                               ---------       ---------
   Net cash used in investing activities                                         (71,856)       (100,534)
                                                                               ---------       ---------

FINANCING ACTIVITIES:
Proceeds of issuance of debt                                                     116,981          20,384
Dividends paid to shareholders                                                   (12,718)        (12,050)
Proceeds from issuance of stock                                                    2,197           2,080
                                                                               ---------       ---------
   Net cash provided by financing activities                                     106,460          10,414
                                                                               ---------       ---------

Net decrease in cash                                                             (17,304)        (22,935)
Cash as beginning of period                                                       23,265          30,434
Rate change effect on cash flow                                                      (65)             80
                                                                               ---------       ---------
Cash at end of period                                                          $   5,896       $   7,579
                                                                               =========       =========

Supplemental disclosures of cash flow information

Cash paid during the period for:
   Interest                                                                    $  10,303       $   7,942
   Income taxes                                                                $   4,769       $  21,222

</TABLE>


          See accompanying notes to consolidated financial statements.

                                       10






<PAGE>   11


                     AMERICAN BANKERS INSURANCE GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1998
                                   (unaudited)
(1)  Financial Statements

The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the period ended June 30,
1998 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1998. These statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report Form 10-K for the year ended December 31, 1997. Certain items have been
reclassed to conform with 1998 presentation.

(2)  Adoption of New FASB Statement

The Company adopted FASB Statement 130, "Reporting Comprehensive Income."
Components of comprehensive income for the Company include items such as foreign
currency translation and unrealized gains (losses) of available-for-sale
securities.

(3)  Comprehensive Income

Related tax effects allocated to each component of other comprehensive income
for the six months June 30, 1998 (000's omitted)

<TABLE>
<CAPTION>
                                                                             Tax
                                                            Before-Tax     (Expense)      Net-of-Tax
                                                              Amount       or Benefit       Amount
                                                            ----------     ----------     ----------
<S>                                                          <C>            <C>            <C>
Foreign currency translation adjustments                     $ (2,336)      $  1,162       $ (1,174)
                                                             --------       --------       --------
Unrealized gains on securities:
   Unrealized holding gains arising during period              17,790         (5,500)        12,290
   Less: reclassification adjustment for gains
     realized in net income                                     6,987         (2,445)         4,542
                                                             --------       --------       --------
   Net unrealized gains                                        10,803         (3,055)         7,748
                                                             --------       --------       --------
Minimum pension liability adjustment                                0              0              0
                                                             --------       --------       --------
Other comprehensive income                                   $  8,467       $ (1,893)      $  6,574
                                                             ========       ========       ========

</TABLE>


                                       11

<PAGE>   12


Accumulated Other Comprehensive Income Balances

                                                           Accumulated
                                Foreign       Unrealized       Other
                                Currency       Gains on    Comprehensive
                                 Items        Securities      Income
                                --------      ----------   -------------
Beginning balance               $(14,141)      $ 26,237      $ 12,096
Current-period change             (1,174)         7,748         6,574
                                --------       --------      --------
Ending balance                  $(15,315)      $ 33,985      $ 18,670
                                ========       ========      ========


The provisions of FASB Statement 130 were adopted as of January 1, 1998.

(4) Reinsurance

The Company accounts for reinsurance contracts under FASB Statement 113. The
Company recognizes the income on reinsurance contracts principally on a pro-rata
basis over the life of the policies covered under the reinsurance agreements.
Reinsurance Recoverables on Unpaid Losses are included as an asset in the
Balance Sheet under the caption "Reinsurance Receivable." Ceded Unearned
Premiums are included as an asset in the Balance Sheet under the caption
"Prepaid Reinsurance Premiums."

The effect of reinsurance on premiums earned is as follows for the six months
and three months ended June 30, 1998 and 1997:


                                       (in thousands)
                                     Six Months Ended
                              June 30, 1998     June 30, 1997
                              ------------      -------------
Direct premiums                $ 1,284,949       $ 1,216,630

Reinsurance assumed                 60,643            80,862

Reinsurance ceded                 (625,885)         (568,706)
                               -----------       -----------
Net premiums earned            $   719,707       $   728,786
                               ===========       ===========


                                      (in thousands)
                                    Three Months Ended
                             June 30, 1998    June 30, 1997
                             -------------    -------------

Direct premiums                $ 648,614       $ 618,688

Reinsurance assumed               23,605          45,791

Reinsurance ceded               (309,359)       (299,468)
                               ---------       ---------
Net premiums earned            $ 362,860       $ 365,011
                               =========       =========



                                       12

<PAGE>   13


(5)   Commitments and Contingencies

For a comprehensive description of the Company's litigation, see Item III of the
Company's 1997 Form 10-K.

Alabama and Related Litigation:

Certain of ABIG's subsidiaries, including the Company, are presently parties to
a number of individual consumer and class action lawsuits pending in Alabama
involving premium, rate, marketing, sales practices, disclosure, and policy
coverage issues. While a number of similar suits have been filed in other
jurisdictions, the insurance and finance industries have been targeted in
Alabama by plaintiffs' lawyers who enjoy a favorable judicial climate. The
Company typically has been named as a co-defendant with one or several retailer
or finance companies who have sold the Company's product to a consumer. Other
insurers are also joined as co-defendants in some of the suits.

Although the Alabama lawsuits and similar suits pending in Mississippi and other
jurisdictions generally involve relatively small amounts of actual or
compensatory damages, they typically assert claims requesting substantial
punitive awards or purport to represent a large class of policyholders. The
Company denies any wrongdoing in any of these suits and believes that it has not
engaged in any conduct that would warrant an award of punitive damages or that
the class allegations have merit. The Company has been advised by legal counsel
that it has meritorious defenses to all claims being asserted against it.

While no one case is necessarily significant in terms of financial risk to the
Company, the judicial climate in Alabama and Mississippi is such that the
outcome of these cases is extremely unpredictable. Moreover, class action
lawsuits to which the Company is a party do not lend themselves to potential
damage calculation. Without admitting any wrongdoing, the Company has settled a
number of these suits, but there are still a significant number of cases
pending, and it is expected that more suits alleging essentially the same causes
of action are likely to continue to be filed during 1998. The Company intends to
continue to defend itself vigorously against all such suits and believes, based
on information currently available, that any liabilities that could result are
not expected to have a material effect on the Company's financial position.

Merger-related Litigation:

In late January and early February 1998, Cendant Corporation ("Cendant")
commenced litigation (the "Cendant Florida Litigation") in the United States
District Court for the Southern District of Florida, Miami Division, against the
Company, members of the Company's Board, American International Group, Inc.
("AIG") and a wholly owned subsidiary of AIG, challenging the validity of
certain provisions in the merger agreement the Company originally entered into
with AIG on December 21, 1997, which agreement was amended in January 1998 and
again at the end of February 1998 ("AIG Merger Agreement"), with respect to
acquisition proposals by third parties. Cendant's complaint in the Cendant
Florida Litigation also challenged the terms of the stock option agreement
between the Company and AIG. Pursuant to the terms of a settlement agreement
providing for the termination of the AIG Merger Agreement and the payment to AIG
by the Company of $100 million and by Cendant of $10 million (the "Settlement
Agreement"), Cendant has taken the necessary actions to cause the dismissal of
all claims asserted in the Cendant Florida Litigation against all defendants,
including the Company and members of the Company's Board. Also pursuant to the
terms of the Settlement Agreement, AIG has taken the necessary actions to cause
the dismissal of claims against Cendant alleging violations of the federal
securities laws in connection with Cendant's bid to acquire the Company.

In late January and early February 1998, five putative class actions on behalf
of American Bankers' shareholders were filed in United States District Court for
the Southern District of Florida alleging causes of action arising out of the
proposed merger with AIG including claims that certain members of the Company's
Board breached their fiduciary duties and that the Company violated certain
provision of the federal securities laws in connection with the proposed merger
with AIG. The Company and its directors believe that the claims asserted in
these actions are totally without merit and intend to vigorously contest them.
The District Court judge ordered that these cases be consolidated and that the
plaintiffs file a consolidated complaint. That consolidated complaint was filed
and the Company and directors filed an answer. The parties are presently engaged
in various pretrial matters.



                                       13
<PAGE>   14


Other:

The Company is involved with a number of cases in the ordinary course of
business relating to insurance matters, or more infrequently, certain corporate
matters. Generally, the Company's liability is limited to specific amounts
relating to insurance or policy coverage for which provision has been made in
the financial statements. Other cases involve general corporate matters which
generally do not represent significant contingencies for the Company.




















                                       14
<PAGE>   15

(6) Segment Information

      Gross collected premiums, net premiums earned and (loss) income before
      federal income taxes are summarized as follows:

<TABLE>
<CAPTION>
                                                               (in thousands)
                                                              Six Months Ended
                                                                  June 30,
                                                        -----------------------------
                                                           1998               1997
                                                        -----------       -----------
<S>                                                     <C>               <C>

GROSS COLLECTED PREMIUMS:

Life                                                    $   474,637       $   404,389
Property and Casualty                                       920,173           899,342
                                                        -----------       -----------
     Total                                              $ 1,394,810       $ 1,303,731
                                                        ===========       ===========

NET PREMIUMS EARNED:

Life                                                    $   218,005       $   190,659
Property and Casualty                                       501,702           538,127
                                                        -----------       -----------
     Total                                              $   719,707       $   728,786
                                                        ===========       ===========

(LOSS) INCOME BEFORE INCOME TAXES:

Life                                                    $    33,244       $    32,465
Property and Casualty                                        63,492            59,722
Other                                                      (115,984)           (6,683)
                                                        -----------       -----------
                                                            (19,248)           85,504
Interest Expense                                              9,659             8,019
                                                        -----------       -----------

      Total (Loss) Income before Income Taxes           $   (28,907)      $    77,485
                                                        ===========       ===========

</TABLE>


(7) Accounting for Investments

The Company accounts for its investments according to the Financial Accounting
Standards Board's Statement 115 - Accounting for Certain Investments in Debt and
Equity Securities.

This Statement addresses the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all investments in
debt securities. Those investments are to be classified in three categories and
accounted for as follows:

Held-to-Maturity - Securities for which the enterprise has the positive intent
and ability to hold to maturity. These securities are carried at amortized cost.

Available-for-Sale - Securities not classified as trading or held-to-maturity.
These securities are carried at market value with the unrealized holding gain or
loss reported as a separate component of equity, net of the income tax effect.

Trading Securities - Securities that are bought and held principally for the
purpose of selling them in the near term. These securities are carried at market
value with the unrealized holding gain or loss included in earnings.



                                       15

<PAGE>   16


The detail of Cost and Statement Value for the Fixed Maturities and Equity
Securities held at June 30, 1998 is as follows: 

                                                (in thousands)
                                         Amortized       Statement
                                            Cost           Value
                                         ----------      ----------
Fixed Maturities
Held-to-Maturity Securities              $  806,494      $  806,494
Available-for-Sale Securities             1,057,299       1,077,785
Trading Securities                               --              --
                                         ----------      ----------
  Total Fixed Maturities                 $1,863,793      $1,884,279
                                         ==========      ==========

Net unrealized gain                                      $   20,486
                                                         ==========

                                                           Market
                                            Cost            Value
                                         ----------      ----------
Equity Securities
Held-to-Maturity Securities              $       --      $       --
Available-for-Sale Securities               118,073         147,694
Trading Securities                               --              --
                                         ----------      ----------
  Total Equity Securities                $  118,073      $  147,694
                                         ==========      ==========

Net unrealized gain                                      $   29,621
                                                         ==========

The net unrealized gain for "Available-for-Sale Securities" increased by
$7,748,000 (net of $3,055,000 in deferred income taxes) from December 31, 1997
to June 30, 1998.

An analysis of the realized gains and losses of the Company for the six months
ended June 30, 1998, is as follows:

<TABLE>
<CAPTION>
                                                                    (in thousands)
<S>                                                                    <C>
Gross realized gains from sales of Available-for-Sale Securities       $ 11,961
Gross realized losses from sales of Available-for-Sale Securities        (2,884)
                                                                       --------
Net realized gain from investment activity                                9,077
Net realized loss from other investment activity                            (63)
                                                                       --------
Total realized gain                                                    $  9,014
                                                                       ========

</TABLE>


The Company uses the specific identification method to determine cost for
computing the realized gains and losses.


                                       16

<PAGE>   17



(8) Earnings per Share

The Company adopted FASB Statement 128 "Earnings per Share" for the period
ending December 31, 1997. This Statement replaces the presentation of primary
and fully diluted EPS with a presentation of basic and diluted EPS. All prior
year data has been restated to conform with the provisions of this Statement and
to reflect the two-for-one stock split effective September 1997. The following
is the required reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.

<TABLE>
<CAPTION>
                                                                              Three Months Ended           Six Months Ended
                                                                                   June 30                      June 30
                                                                           ----------------------      -----------------------

                                                                             1998          1997          1998           1997
                                                                           --------      --------      --------       --------
<S>                                                                        <C>           <C>            <C>           <C>     
Basic EPS:
Net Income (Loss)                                                          $ 30,169      $ 28,618      $(12,511)      $ 55,037
Less convertible preferred stock dividends                                    1,554         1,797         3,351          3,594

                                                                           --------      --------      --------       --------
Income (Loss) available to common stockholders                               28,615        26,821       (15,862)        51,443
                                                                           ========      ========      ========       ========

Weighted average shares outstanding                                          42,662        41,522        42,328         41,365
                                                                           ========      ========      ========       ========

Net Income (Loss) - per share                                              $   0.67      $   0.65      $  (0.37)      $   1.24
                                                                           ========      ========      ========       ========

Diluted EPS:
Income (Loss) available to common stockholders                             $ 28,615      $ 26,821      $(15,862)      $ 51,443
Convertible preferred stock dividends                                         1,554         1,797         3,351          3,594
Convertible debentures interest                                                   0            58            15            114
                                                                           --------      --------      --------       --------
Income available to common stockholders plus assumed conversions             30,169        28,676           N/A         55,151
                                                                           ========      ========      ========       ========

Weighted average shares outstanding-Basic EPS                                42,662        41,522        42,328         41,365

Common stock options                                                            309           580           661            577
Convertible Preferred Stock                                                   3,961         4,594         3,962          4,594
Convertible debentures                                                            0           300             0            300

                                                                           --------      --------      --------       --------
Weighted average shares outstanding-Diluted EPS                              46,932        46,996        46,951         46,836
                                                                           ========      ========      ========       ========

Net Income - per share                                                     $   0.64      $   0.61           N/A       $   1.18
                                                                           ========      ========      ========       ========



</TABLE>











                                       17


<PAGE>   18

                     AMERICAN BANKERS INSURANCE GROUP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS



RESULTS OF OPERATIONS

Gross collected premiums increased $30.3 million or 5% to $696.9 million for the
three months ended June 30, 1998, from $666.6 million for the same period of
1997. Approximately 91% or $27.7 million of the increase came from the Company's
largest product lines - Credit Unemployment, Credit A&H, and Credit Life.

During the three months ended June 30, 1998, total premiums and other revenues
were $414.0 million, an increase of $8.0 million over total premiums and other
revenues of $406.0 million for the same period in 1997. The overall growth in
invested assets generated an additional $3.2 million of investment income for
the second quarter of 1998 as compared to the same period of 1997. Realized
gains contributed $3.7 million to the increase in revenues.

The benefits and claims ratio improved to 35% for the three months ended June
30, 1998 compared to 37% for the same period of 1997. However, this improvement
was partially offset by an increase in the commission ratio from 41% for the
three months ended June 30, 1997, to 44% for the same period in 1998.

Net income for the second quarter of 1998 was $30.2 million. Included in the net
income are merger related expenses of approximately $2.3 million, net of tax.
Excluding these expenses, the Company reported net income of $32.5 million. This
compares with net income of $28.6 million for the same period in 1997. (See
discussion in "Change of Control of the Company" below.)

Net loss for the six months ended June 30,1998 was $12.5 million. The loss is
primarily the result of a merger termination fee paid to American International
Group and other merger related expenses totaling $74.4 million, net of tax.
Excluding the termination fee and other merger related expenses, the Company's
net income for the six months ended June 30, 1998 was $61.9 million.



FINANCIAL CONDITION

Stockholders' Equity decreased $3.7 million from $813.9 million at December 31,
1997, to $810.2 million at June 30, 1998. The primary cause for the decrease was
the first quarter 1998 net loss of $42.7 million.


Liquidity and Capital Resources

On June 30, 1998, $2.2 billion of securities, short-term investments and cash
comprised 57% of the Company's total assets. The securities were principally
readily marketable and did not include any significant concentration in private
placements.

In connection with the execution of the Cendant Merger Agreement, (as discussed
in the "Change of Control of the Company" below) the Company paid American
International Group, Inc. (AIG) a fee of $100 million for the termination of the
AIG Merger Agreement and certain other related agreements. The Company paid the
fee principally with funds provided by its credit facility. The Cendant Merger
Agreement also requires the Company, under certain circumstances, to pay Cendant
a fee of $94.9 million plus expenses, if the Merger is not consummated. If such
payments were required, the Company expects to obtain such funds from available
credit facilities and/or operating cash flows.

Under the short-term credit facility and medium-term note programs, the Company
has available $96 million for short-term liquidity needs as of the end of second
quarter 1998. Consummation of the merger as contemplated by the Cendant Merger
Agreement will, unless consents or waivers are obtained from the group of banks
under the credit facility, constitute an event of default and result in the
termination of the credit facility. This event may impact the Company's
liquidity if it is required to repay all outstanding loans and advances pursuant
to the credit facility and the unavailability of further loans and advances
under the credit facility.




                                       18
<PAGE>   19

The Company does not hold significant investments in equity securities;
consequently, market changes in the equity securities markets do not
significantly affect the investment portfolio.

Prior to the closing of the pending merger with Cendant Corporation, the Company
expects to continue its policy of paying regular cash dividends; however, future
dividends are dependent on the Company's future earnings, capital requirements
and financial condition. In addition, the payment of dividends is subject to the
restrictions, and conditions described in the Company's Annual Report on Form
10-K for the year ended December 31, 1997.

CHANGE OF CONTROL OF THE COMPANY

The Company entered into an Agreement and Plan of Merger, dated March 23, 1998,
by and among Cendant Corporation ("Cendant"), Season Acquisition Corporation
("Season") and the Company (the "Cendant Merger Agreement") pursuant to which
(i) the previously announced tender offer by Season is being conducted (the
"Offer") and (ii) upon consummation of the Offer, the merger of the Company with
and into Season will be consummated (the "Merger"). The execution of the Cendant
Merger Agreement followed the public announcement by Cendant on January 27, 1998
of its proposal to acquire the Company for $58 per share of Common Stock, to be
paid in cash and common stock of Cendant and the subsequent announcement by
Cendant on March 16, 1998, increasing the per share price for its proposal from
$58 to $67.

Under the terms of the Cendant Merger Agreement, Season is offering to purchase
23,501,260 outstanding shares of Common Stock at a price of $67.00 per Common
Share, net to the seller in cash, without interest thereon. Following the
consummation of the Offer, the Company will be merged with and into Season with
Season continuing as the surviving corporation. Season will succeed to the
business of the Company and will assume the name American Bankers Insurance
Group, Inc. As a result of the Merger, each Common Share then outstanding (other
than Common Shares owned by Cendant, Season or any direct or indirect subsidiary
of the company and in each case not held on behalf of third parties) will be
converted into, and become exchangeable for, that number of shares of Cendant
Common Stock having a value equal to the amount derived by dividing $67.00 by
the average closing prices of the Cendant Common Stock as reported on the NYSE
composite transactions reporting system (as reported by the New York City
edition of the Wall Street Journal) for the ten trading days ending on the third
trading day prior to the date the Merger is consummated. In addition, pursuant
to the Merger, each of the then outstanding $3.125 Series B Cumulative
Convertible Preferred Shares ("Preferred Shares") will be converted into one
share of Cendant Preferred Stock having substantially similar terms to the
Preferred Shares, except that such shares shall be convertible into shares of
Cendant Common Stock in accordance with the terms of the Preferred Shares.

The consummation of the Merger is conditioned upon several requirements,
including shareholder and regulatory approval. If the Company fails to
consummate the Merger, under certain circumstances, the Company will be
obligated to pay a termination fee to Cendant of $94.9 million plus expenses.

Cendant's proposal to acquire the Company followed an announcement by the
Company that it had entered into an agreement with American International Group,
Inc. ("AIG") for the acquisition by AIG of 100 percent of the outstanding stock
of the Company pursuant to the merger (the "AIG Merger") of the Company with and
into AIGF, Inc., a Florida corporation and a newly formed wholly-owned
subsidiary of AIG, in accordance with the terms of the Agreement and Plan of
Merger, dated as of December 21, 1997 among the Company, AIG and AIGF as amended
and restated as of January 7, 1998, amended by Amendment No. 1 thereto dated as
of January 28, 1998, and as further amended and restated as of February 28, 1998
(the "AIG Merger Agreement"). In connection with the AIG Merger Agreement, the
Company had granted AIG an option to purchase a number of newly issued shares of
Common Stock equal to approximately 19.9% of the outstanding number of shares of
Common Stock pursuant to the Stock Option Agreement dated as of December 21,
1997, as amended and restated as of February 28, 1998 (the "Stock Option
Agreement"). In addition, Messrs. Landon and Gaston who hold approximately 8.3%
of the outstanding Common Stock had entered into a voting agreement (the "Voting
Agreement") with AIG pursuant to which these stockholders agreed to vote their
shares of Common Stock in favor of adoption of the AIG Merger Agreement and
approval of the AIG Merger and to grant to AIG an irrevocable proxy with respect
to such shares of Common Stock, subject to certain conditions.

The AIG Merger Agreement, Stock Option Agreement and Voting Agreement have been
terminated. On March 18, 1998, the Company, AIG and Cendant entered into a
settlement agreement (the "Settlement Agreement") pursuant to which AIG agreed
to temporarily waive certain provisions of the AIG Merger Agreement, which
waiver permitted the Company to terminate the AIG Merger Agreement and enter
into the Cendant Merger Agreement. On March 23, 1998, 


                                       19

<PAGE>   20

in accordance with the terms of the Settlement Agreement, the Company paid to
AIG a termination fee of $100 million principally from funds provided by its
short-term credit facility and Cendant paid $5 million, and agreed to pay an
additional $5 million to AIG in respect of AIG's expenses, and the Company and
AIG entered into a termination agreement which resulted in the termination of
the AIG Merger Agreement, the Stock Option Agreement and the Voting Agreement.

The merger is subject to approval by regulatory authorities and the Company's
shareholders which are expected to be obtained by the end of 1998. In connection
with the Merger, the Company will recognize certain expenses associated with the
accelerated vesting of benefits under several compensation plans, including
employee stock options and restricted stock. The Company estimates that the
after-tax charge related to the acceleration of such benefits will be
approximately $6 million. Certain officers of the Company have severance
agreements which entitle them to receive specified payments under certain
circumstances following a change in control. The maximum amount that the Company
could incur pursuant to such severance agreements is approximately $12.7
million, net of tax.

In April 1998, Cendant announced that it had discovered potential accounting
irregularities in certain of its business units, and that it expects to restate
annual and quarterly net income and earnings per share for 1997 and may restate
certain other previous periods relating to those businesses. Cendant further
announced that the Audit Committee of its Board of Directors was performing an
investigation into those potential accounting irregularities.

In early July 1998, Cendant announced that it believed that the potential
accounting irregularities were greater than those initially discovered in April
and revised its estimates for its restatement of net income and earnings per
share. In late July 1998, Cendant announced that the Audit Committee had
received an oral summary of the conclusions of Arthur Andersen LLP's virtually
complete forensic audit and that their conclusions were consistent with the
revised estimates announced in early July.

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 - SAFE HARBOR CAUTIONARY
STATEMENT

Except for the historical information contained herein, certain of the matters
discussed in this quarterly report are "forward-looking statements" as defined
in the Private Securities Litigation Reform Act of 1995, which involve certain
risks and uncertainties, including but not limited to, changes in general
economic conditions, interest rates, consumer confidence, competition,
environmental factors, and governmental regulations affecting the Company's
operations. See the Company's Annual Report Form on 10-K for the year ended
December 31, 1997, for a further discussion of these and other risks and
uncertainties applicable to the Company's business.




                                       20
<PAGE>   21











                                     PART II

                                OTHER INFORMATION






















                                       21
<PAGE>   22


Item 1 - Legal Proceedings

Commitments and Contingencies information which appears on page 13 elsewhere in
this report is incorporated by reference in this item. Additional information
regarding litigation can be found in the Company's 1997 Annual Report on Form
10-K.

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

None

Item 6(a) - Exhibits

(2.1) Agreement and Plan of Merger among American Bankers Insurance Group, Inc.,
      ABIG acquisition Corp. A. and MS Diversified Corporation dated as of May
      18, 1998.

(2.2) Purchase Agreement among American Bankers Insurance Group, Inc. and
      Dominion Automobile Association Limited dated as of March 9, 1998.

(3.1) Corporate By-Laws, as amended, through May 1998.

(27)  Financial Data Schedule (for SEC use only)


Item 6(b) - Reports on Form 8-K

None














                                       22