SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934, for the fiscal year ended
      December 31, 1998 or

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934, for the transition period
      from    N/A    to __________.

                        Commission File Number 0-16533
                                       
                             OLD GUARD GROUP, INC.                 
            (Exact name of Registrant as specified in its charter)

         Pennsylvania                             23-2852984     
(State or other jurisdiction of                 (I.R.S. Employer
incorporation or organization)                Identification No.)

       2929 Lititz Pike, Lancaster, Pennsylvania           17601 
       (Address of principal executive offices)        (Zip Code)

      Registrant's telephone number:  (717) 569-5361

      Securities registered pursuant to Section 12(b) of the Act: 
None

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

                          Common Stock (no par value)
                               (Title of class)

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       .

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

The aggregate market value of the shares of Common Stock of the
Registrant held by nonaffiliates of the Registrant was
$45,290,215 at March 25, 1999.  As of March 25, 1999, the
Registrant had 4,256,327 shares of Common Stock outstanding.
<PAGE>
                      DOCUMENTS INCORPORATED BY REFERENCE

The Registrant's Proxy Statement with respect to its 1999 annual
meeting of shareholders is incorporated by reference into Part
III hereof.
<PAGE>
      Item 1.   BUSINESS.

                                  THE COMPANY

General

      Old Guard Group, Inc. (Company) was incorporated under the
laws of the Commonwealth of Pennsylvania in May 1996 for the
purpose of serving as a holding company for Old Guard Insurance
Company (Old Guard), Old Guard Fire Insurance Company (Old Guard
Fire), and First Patriot Insurance Company (First Patriot). 

      On February 11, 1997, the Company became a holding company
for Old Guard, Old Guard Fire and First Patriot upon the
completion of their Conversion from Pennsylvania mutual insurance
companies to Pennsylvania stock insurance companies and the
simultaneous acquisition of their capital stock by the Company
pursuant to a Joint Plan of Conversion adopted by the Boards of
Directors of each company on May 31, 1996, as amended and
restated on July 19, 1996 and January 10, 1997 (the Plan).

      On February 11, 1997, pursuant to the Plan, the Company
completed the sale of 4,204,910 shares of its common stock, no
par value per share (the "Common Stock") at the price of $10.00
per share in contemporaneous subscription and community offerings
(collectively the "Offering") for gross proceeds of approximately
$42,049,100, including the conversion of a $1.5 million surplus
note into Common Stock.  The conversion from mutual to stock
form, the issuance of capital stock to the Company and the
Offering are collectively referred to herein as the "Conversion".

      The Company's executive offices are located at 2929 Lititz
Pike, Lancaster, Pennsylvania 17601, and its main telephone
number is (717) 569-5361.  Old Guard Group, Inc. and its
subsidiaries are collectively referred to herein as "OGGI".

Old Guard Insurance

      Old Guard, Old Guard Fire and First Patriot are each
Pennsylvania-chartered insurance companies that converted from
mutual to stock form on February 11, 1997.  They are wholly-owned
subsidiaries of the Company and operate as members of Old Guard
Insurance (OGI), a group of insurance companies under common
management.  OGI also includes First Delaware Insurance Company
(see "First Delaware Insurance Company Acquisition"), New Castle
Insurance Company of Delaware (see "New Castle Insurance Company
of Delaware Investment"), and through common management,
Neffsville Mutual Fire Insurance Company (Neffsville).  The
members of OGI are property and casualty insurers of farms, small
and medium-sized businesses and residences primarily in rural and
suburban communities in Pennsylvania, Maryland and Delaware.  OGI
markets farmowners, homeowners and businessowners policies, as
well as personal and commercial automobile, workers' compensation 
<PAGE 1> and commercial multi-peril coverages through
approximately 500 independent agents.

      Old Guard, Old Guard Fire and First Patriot operate under an
intercompany reinsurance pooling agreement pursuant to which all
premium revenue, loss and loss adjustment expense are ceded to
Old Guard and a fixed percentage of those items is retroceded by
Old Guard to Old Guard Fire and First Patriot.  The allocation of
pooled revenue and expense is determined by the parties and is
currently as follows:  Old Guard - 60%, Old Guard Fire - 29% and
First Patriot - 11%.  Investment income and investment gains and
losses are not pooled.  In addition, Neffsville reinsures 90% of
its book of business with Old Guard Fire.  

      Old Guard.  Old Guard was originally chartered in 1896.  At
December 31, 1998, Old Guard had total assets of $127.0 million
(prior to the elimination of intercompany accounts in
consolidation) and equity of $38.1 million.

      Old Guard Fire.  Old Guard Fire was originally chartered in
1872.  At December 31, 1998, Old Guard Fire had total assets of
$44.0 million (prior to the elimination of intercompany accounts
in consolidation) and equity of $17.6 million.

      First Patriot.  First Patriot was originally chartered in
1843.  At December 31, 1998, First Patriot had total assets of
$24.0 million (prior to the elimination of intercompany accounts
in consolidation) and equity of $6.9 million.

      First Delaware.  First Delaware was originally chartered in
1987.  At December 31, 1998, First Delaware had total assets of
$8.8 million (prior to the elimination of intercompany accounts
in consolidation) and equity of $4.4 million.

      New Castle.  New Castle was originally chartered in 1849. 
At December 31, 1998, New Castle had total assets of $8.6 million
(prior to elimination of intercompany accounts in consolidation)
and equity of $2.5 million.         

      The members of OGI are subject to examination and
comprehensive regulation by Insurance Regulatory Authorities. 
See "Business -- Regulation."

Strategy

      OGGI's principal strategies for the future are to:

      --    Achieve geographic diversification of risk by
            acquisition of other insurance companies or licensing
            its insurance subsidiaries in other jurisdictions with
            reduced or different loss exposure;

      --    Improve the mix of business by increasing personal
            automobile and other casualty coverages in order to 
            <PAGE 2> enhance profitability and lessen the impact of
            property losses on overall results and provide total
            property and casualty insurance on larger commercial
            accounts, also to lessen the impact of catastrophe
            losses on overall results; and

      --    Improve efficiency and maintain the high level of
            personal service delivered to agents and insureds
            through continued enhancement of OGGI's management
            information systems (MIS).

      Geographic Diversification.  OGGI's goal is to achieve
geographic diversification of risk outside Pennsylvania to areas
with reduced or different catastrophic loss exposure and in which
management believes insurers generally have been permitted to
manage risk selection and pricing without undue regulatory
interference.  Concentration of property insurance in
Pennsylvania has caused Old Guard, Old Guard Fire and First
Patriot to be susceptible to localized catastrophic events
primarily related to severe weather.  OGGI continues to diversify
geographically, principally through acquisition, but expects also
to seek authority for its insurance subsidiaries to do business
in additional jurisdictions.  The acquisition of First Delaware
Insurance Company (First Delaware) and  New Castle Insurance
Company of Delaware (New Castle) represent initial steps to
diversify geographically.  (See "First Delaware Insurance Company
Acquisition" and "New Castle Insurance Company of Delaware"
herein.)

      OGGI plans to seek additional acquisitions outside
Pennsylvania.  OGGI is currently targeting companies located in
jurisdictions adjacent to its current markets and in the upper
Midwest.  On March 5, 1999, OGGI completed its acquisition of
Investors Southern Corporation and its principal operating
subsidiary, Southern Title Insurance Corporation (collectively
referred to herein as Southern).  Southern provides title
insurance and related services through a network of agencies in
Virginia, North Carolina, the District of Columbia, Ohio and
Pennsylvania.  The acquisition of Southern furthers OGGI's
strategy of diversifying both geographically and by product line.

      Insurance companies acquired may be added to the existing
intercompany reinsurance pool. The determination whether to add
acquired companies to the intercompany reinsurance pooling
arrangement will be made on a case by case basis as acquisitions
are completed.  Some of the factors considered in evaluating an
acquired company for possible inclusion in the reinsurance pool
will include the acquired company's capital position, the quality
of the book of business, liabilities for losses and loss
adjustment expenses, claims settlement practices, the lines of
business written, existing reinsurance relationships, the level
of control which management of OGGI will have over the operations
of the acquired company, and rating agency considerations.
  <PAGE 3>
      Diversification of Lines of Business.  OGGI has taken, and
will continue to take, steps to increase commercial and casualty
premium volume, both to reduce property loss exposure and to
provide greater product diversification from personal into
commercial lines that may provide a countercyclical balance to
personal lines.

      OGGI has reorganized its underwriting departments in three
distinct strategic business units (SBU): Commercial Risk
Solutions, Agri-Business Solutions and Personal Insurance Group. 
In addition, First Delaware will remain a separate SBU and
continue its focus on construction related commercial accounts in
Delaware and Maryland.  It is management's belief that the
development of autonomous business units will enable each SBU
manager to focus on the development of markets, products and
distribution systems. 

      During 1998, the Personal Insurance Group has been focusing
on cross selling.  OGGI's ratio of homeowners to personal
automobile is 3:1.  In order to encourage the sale of more
personal automobile policies to existing homeowner accounts, we
have emphasized cross-policy discounts and implemented incentive
programs with our agents that encourage the placement of the
automobile risk with OGGI.  Commercial Risk Solutions and Agri-
Business Solutions have targeted larger accounts where there is
more opportunity to underwrite and price. 

      Management believes that it has the opportunity to increase
the volume of casualty business by focused marketing to existing
agents.  For instance, New Castle began writing personal
automobile business in 1997 and First Patriot began to do so in
1998. Management believes an increasing share of this market is
desirable and attainable given the existing relationships among
OGGI, its agents and its insureds.

      Service Capabilities.  Management believes that OGI has a
strong reputation for personal attention to agents and insureds. 
OGGI has undertaken a program to enhance its MIS capabilities,
with the goal of improving efficiency, internal reporting and
service to agents and insureds, as well as facilitating
acquisitions.  OGGI has been actively involved in the search,
review, selection, customization and testing of a new policy
processing software system since the second quarter of 1994.  The
licensing rights for the new software system were acquired from
Inspire, an insurance industry software specialty company.  The
software system is a personal computer database system designed
to eliminate most paperwork required in traditional systems. 
Claims, billing and accounting functions are also fully
integrated in the new software system.  The ability to operate
multiple companies, maintain on-line remote offices and
enhancements in the quality and timeliness of management
information are additional benefits of the new software system. 
Effective January 1, 1997, personal automobile was the first line
of business phased into the new software system.  During the 
<PAGE 4> second quarter of 1999, management expects to integrate
homeowners into the new software system and by the end of 1999
expects to have workers' compensation and commercial lines of
business processed on a new software system.  This new MIS
environment should permit a greater volume of business to be
processed by the same or fewer number of staff and has
successfully passed Year 2000 compliance testing.  It will also
allow direct agent interface to enhance service to agents and
insureds and build upon OGGI's reputation in this area.

First Delaware Insurance Company Acquisition

      On February 14, 1997, the Company, pursuant to an agreement
with First Delaware and International Corporation (IC), First
Delaware's sole shareholder, acquired 80% of the capital stock of
First Delaware. The acquisition was made through a combination of
(i) a $1.5 million cash investment in First Delaware in exchange
for a number of shares of First Delaware common stock equal to
$1.5 million divided by 1.5 times the GAAP book value per share
of First Delaware as of December 31, 1996 and (ii) the purchase
from IC for cash of a number of additional shares of First
Delaware at a price per share equal to 1.5 times the GAAP book
value per share of First Delaware.  The Company now holds 80% of
the stock of First Delaware.  The total acquisition price equaled
approximately $3.3 million.

      At closing of the acquisition, the Company and IC executed a
shareholder agreement that, among other things, prohibits IC from
transferring its remaining 20% interest in First Delaware prior
to December 31, 2003 to anyone other than the Company or one of
its affiliates.  The shareholder agreement also gives the parties
certain "put" and "call" rights prior to December 31, 2003 during
specified periods with respect to the remaining 20% of the common
stock of First Delaware held by IC at a purchase price of between
1 and 1.5 times then current GAAP book value per share.  The
exercise price of the put or call varies depending upon the time
period when the put or call is exercised and is payable in cash
or common stock at the election of the party exercising the put
or call right.  In addition, after December 31, 1999, IC can
relinquish its put right and extinguish the Company's call right
in exchange for a payment from the Company to IC of 10% of the
put price.

      Following closing, the First Delaware Board of Directors was
expanded to consist of five members, three of whom were elected
by the Company.  David E. Hosler, the Chairman of the Company,
became Chairman of First Delaware.  First Delaware and Old Guard
Insurance Management, Co. (OGIM), a subsidiary of the Company,
also executed a management agreement pursuant to which OGIM
provides management advice on actuarial services, reinsurance
purchasing, investment management, management information
systems, security custody services, independent
accounting/auditing services, human resource services and
employee benefits.  In order to retain the services of the two 
<PAGE 5> principals of First Delaware, First Delaware entered
into employment agreements acceptable to the Company with such
principals.

      The acquisition of First Delaware furthers OGGI's strategic
goals of geographic and product line diversification because
First Delaware's business is principally commercial lines,
including surety business in the Delaware and Maryland markets.  

New Castle Insurance Company of Delaware Investment

      Effective October 1, 1998, the Company's $2.5 million
surplus note investment in New Castle Mutual Insurance Company
was converted into 1,500 shares of common stock in conjunction
with a conversion from mutual to stock form by New Castle.  New
Castle, now known as New Castle Insurance Company of Delaware,
converted into stock form pursuant to a plan of conversion
approved by policyholders and the Delaware Insurance Department. 
Effective with the conversion, the Company owns 100% of the
outstanding common stock of New Castle. 

      During 1998, Old Guard maintained a quota share reinsurance
agreement with New Castle whereby Old Guard reinsured 100% of New
Castle's premiums and losses in return for a 35% ceding
commission. 

      The investment in New Castle furthers OGGI's strategic goal
of geographic diversification because New Castle's business is
principally located in the Delaware market.

Products

      OGGI's insurance subsidiaries offer a variety of property
and casualty insurance products primarily designed to meet the
insurance needs of the rural and suburban communities in which
OGGI does business, including their agricultural clients.  The
following tables set forth the direct premiums written, net
premiums earned, net loss ratios, expense ratios and combined
ratios by product line for the periods indicated:
  <PAGE 6>
<TABLE>
<CAPTION>
                                                              Year Ended December 31

                                             % of               % of               % of               % of               % of
Direct Premiums Written:            1998     Total     1997     Total     1996     Total     1995     Total     1994     Total
                                     (Dollars in Thousands)
<S>                               <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>       <C> 
Farmowners                        $18,397    21.0%   $17,819    21.0%   $16,365    20.6%   $15,494    20.2%   $16,080    20.7%
Homeowners                         22,009    25.2     21,142    25.0     21,577    27.2     21,157    27.6     20,509    26.3
Businessowners and commercial                   
  multi-peril                      12,741    14.6     12,605    14.9     10,577    13.3     11,083    14.4     10,587    13.6
Personal automobile                21,074    24.1     19,949    23.6     18,617    23.5     16,810    21.9     15,928    20.5
Commercial automobile               2,486     2.8      2,201     2.6        886     1.1        776     1.0        815     1.0
Workers' compensation               6,574     7.5      6,245     7.4      5,912     7.4      5,432     7.1      5,562     7.1
Fire, allied, inland marine         2,374     2.7      2,850     3.4      4,078     5.2      3,668     6.1      7,073     9.1
Surety                                 33     - -        113     0.1        - -     - -        - -     - -        - -     - - 
Other liability                     1,790     2.1      1,740     2.0      1,372     1.7      1,317     1.7      1,331     1.7

Total                             $87,478   100.0%   $84,664   100.0%   $79,384   100.0%   $75,737   100.0%   $77,885   100.0%
                                  =======   ======   =======   =====    =======   =====    =======   =====    =======   ===== 
<CAPTION>
                                                              Year Ended December 31

                                             % of               % of               % of               % of               % of
Net Premiums Earned (1)             1998     Total     1997     Total     1996     Total     1995     Total     1994     Total
                                     (Dollars in Thousands)
<S>                               <C>       <C>     <C>       <C>    <C>      <C>       <C>      <C>      <C>      <C> 
Farmowners                        $14,547    19.3%   $12,309    19.7%   $ 9,907    18.5%   $13,413    20.1%   $13,315    21.0%
Homeowners                         20,478    27.2     16,114    25.8     14,898    27.6     18,391    27.6     16,755    26.4
Businessowners and commercial
   multi-peril                      9,965    13.2      8,576    13.8      7,078    13.2      8,828    13.2      8,387    13.2
Personal automobile                18,393    24.4     14,800    23.7     12,766    23.8     14,459    21.7     12,521    19.8
Commercial automobile               1,742     2.3      1,239     2.0        565     1.1        769     1.2        717     1.1
Workers' compensation               4,657     6.2      4,388     7.0      3,564     6.6      4,233     6.4      4,266     6.7
Fire, allied, inland marine         4,831     6.4      4,378     7.0      4,538     8.5      6,294     9.4      6,930    10.9
Surety                                187     0.3        172     0.3        - -     - -        - -     - -        - -     - - 
Other liability                       546     0.7        453     0.7        276     0.5        276     0.4        574     0.9

Total                             $75,346   100.0%   $62,429   100.0%   $53,592   100.0%   $66,663   100.0%   $63,465   100.0%
                                  =======   =====    =======   =====    =======   =====    =======   =====    =======   =====
<CAPTION>
                                                  Year Ended December 31

Net Loss Ratios                     1998     1997    1996    1995    1994
<S>                                 <C>      <C>      <C>      <C>     <C>
Farmowners                          58.8%   68.5%   94.2%   78.7%    8.8%
Homeowners                          69.8    62.1    95.5    80.8    98.0
Business owners and commercial
   multi-peril                      58.2    66.5    76.5    62.2    47.8
Personal automobile                 83.3    75.3    82.5    90.4    70.9
Commercial automobile               65.3    82.5    63.6    70.9    53.8
Workers' Compensation               24.0    (7.8)   45.7    43.0    58.3
Fire, allied, inland marine         35.1    52.4    58.5    53.4    49.7
Surety                              (6.8)   (9.3)    - -     - -     - -
Other liability                     58.0    58.2    87.8   326.3    49.9

  Total                             64.2%   61.7%   82.8%   75.8%   73.2%
                                    ====    ====    ====    ====    ====
<CAPTION>
                                                  Year Ended December 31 

Expense Ratios (2)                  1998     1997     1996     1995     1994
<S>                                 <C>      <C>      <C>      <C>     <C>
Farmowners                         48.9%    47.8%    46.4%    36.6%    34.1%
Homeowners                         46.6     37.8     31.8     39.0     39.7
Businessowners and commercial
    multiple peril                 63.6     58.3     57.1     41.2     36.4
Personal automobile                29.3     23.8     20.4     22.6     24.0
Commercial automobile              44.9     33.0     27.9     24.9     27.3
Workers' Compensation              57.1     39.1     21.4     23.6     25.7
Fire, allied, inland marine        39.0     33.8     34.8     47.2     49.6  <PAGE 7>
Surety                             38.1     59.7      - -      - -      - -
Other liability                    57.1     52.1     50.7     46.9     25.2

Total                              44.7%    39.1%    34.7%    34.9%    34.8%
                                   ====     ====     ====     ====     ====
<CAPTION>

Combined Ratios (2)(3) 
<S>                                 <C>     <C>      <C>      <C>      <C>
Farmowners                        107.7%   116.2%   138.7%   115.2%   112.8%
Homeowners                        116.4     99.9    127.3    119.7    137.7
Businessowners and commercial
    multiple peril                121.8    124.8    133.6    103.4     84.1
Personal automobile               112.6     99.1    102.9    113.1     94.8
Commercial automobile             110.2    115.5     91.5     95.8     81.2
Workers' Compensation              81.1     31.3     67.1     66.7     84.1
Fire, allied, inland marine        74.1     86.1     93.3    100.6     99.2
Surety                             31.3     50.4      - -      - -      - -
Other liability                   115.1    110.3    138.5    373.2     75.1

Total                             108.9%   100.8%   120.3%   107.9%   106.3%
                                  =====    =====    =====    =====    ====
Industry combined ratio (4)       105.0%   101.6%   105.8%   106.4%   108.4%

</TABLE>
 
(1)   Effective January 1, 1996, Old Guard, Old Guard Fire and
      First Patriot entered into a quota share reinsurance
      agreement pursuant to which they ceded 20% (reduced to 15%
      effective January 1, 1997 and cancelled on a run-off basis
      effective January 1, 1998) of their liability remaining
      after cessions of excess and catastrophic risks through
      other reinsurance contracts.  Pro rata cessions of unearned
      premiums as of January 1, 1996 and the transfer of premiums
      written during the year ended December 31, 1996 accounts, in
      part, for the decline in net premiums earned when the year
      ended December 31, 1996 is compared to the year ended
      December 31, 1995.

(2)   Excludes effect of other revenue on ratio.

(3)   A combined ratio over 100% means that an insurer's
      underwriting operations are not profitable.

(4)   Per A.M. Best



Farmowners Policy

      The farmowners policy is a flexible, multi-line package of
insurance coverages.  As a result of its flexible features, this
product can be adapted to meet the needs of a variety of
agricultural and related businesses.  The farmowners policy
combines property and liability insurance for the farm owner, as
well as owners of other agricultural related businesses, such as
nurseries and greenhouses.  The largest numbers of farmowners
policies written by OGGI are for dairy, beef, poultry and crop
farming risks.  In general, standing crops are not insured except
under limited circumstances but harvested and stored crops 
<PAGE 8> generally are insured.  Policyholders may select
property damage coverages for specific peril groups, such as
basic perils that include fire and allied lines, extended
coverage and vandalism or broad form and special perils. 
Personal liability coverage insures policyholders against third
party liability from accidents occurring on their premises or
arising out of their operations or from their products.  The
farmowners policy contains a limited liability extension of
pollution-type coverage for damages caused to third persons or
their crops resulting from above-ground, off-premises
contamination, such as overspray of fertilizers and pesticides.

Homeowners Policy

      Homeowners insurance is a multi-peril policy providing
property and liability coverages and optional inland marine
coverage.  The homeowners policy is sold to provide coverage for
the insured's principal residence.

Businessowners and Commercial Multi-Peril

      Businessowners. Businessowners insurance provides property
and liability coverages to small businesses within rural and
suburban markets.  This product is marketed to six distinct
groups:  (i) apartment owners with relatively small property-
based risks; (ii) condominium owners; (iii) landlords with
dwelling properties of up to four family units; (iv) mercantile
businessowners, such as florists, gift shops and antique dealers,
with property-based risks; (v) offices with owner and/or tenant
occupancies; and (vi) religious institutions consisting of
smaller, rural properties.

      Commercial Multi-Peril. Commercial multi-peril policies
provide property and liability coverage to accounts that, because
of their larger size, do not meet the eligibility requirements
for the businessowners product.  OGGI is working to increase
market penetration for this product because it includes
commercial liability risks that help to diversify exposures and
lessen the impact of property losses on overall results.  One
such marketing initiative is the promotion of commercial multi-
peril packages targeted to the following businesses:  (i) food
processing, (ii) retailing, (iii) manufacturing, (iv) metal
working, (v) offices, (vi) contractors, and (vii) service
operations.  These packages are being written using existing
policy forms and were chosen based on the experience of the
underwriting staff and market opportunities available to existing
agents.  The packages are of a type generally written by larger
companies and should permit OGGI to sell commercial packages as
well as accompanying workers' compensation and commercial
automobile coverages to larger accounts.
  <PAGE 9>
Personal Automobile

      Personal automobile policies insure individuals against
claims resulting from injury and property damage and can be
marketed in conjunction with OGGI's other products, such as the
farmowners policy, the businessowners policy or the homeowners
policy.

Commercial Automobile

      Commercial automobile policies are generally marketed in
conjunction with farmowners, businessowners or commercial multi-
peril policies.  Commercial automobile is one of OGGI's lower
volume products.

Workers' Compensation

      Workers' compensation policies are generally issued in
conjunction with farmowners policies, businessowners policies or
other commercial packages.  However, the stand-alone workers'
compensation policies may be written.  A recent initiative is
tiered pricing for workers' compensation coverage with the
introduction of a policy with more attractive pricing and the
opportunity for dividends.

Fire, Allied, Inland Marine

      Fire and allied lines insurance generally covers fire,
lightning and extended coverage.  Inland marine coverage insures
merchandise or cargo in transit and business and personal
property. Fire, allied and inland marine insurance coverages are
offered only as endorsements available under the other insurance
products.

Other Liability

      Umbrella Liability. Commercial and personal line excess
liability policies are offered to cover business, farm and
personal liabilities in excess of amounts covered under
farmowners, homeowners, businessowners, commercial multi-peril
and automobile policies.  Such policies are available generally
with limits of $1 million to $5 million. Excess liability
policies are generally not marketed to individuals and farmowners
unless they also purchase an underlying liability policy. 
However, excess liability coverage may be written for commercial
accounts without all underlying liability coverages.

      Commercial General Liability. Stand-alone commercial general
liability policies are written for certain business situations
that do not meet the criteria for liability coverage under a
farmowners, businessowners or commercial multi-peril policy.  The
policy insures businesses against third party liability from
accidents occurring on their premises or arising out of their 
<PAGE 10> operations or products.  Most of OGGI's products
liability line is written as part of the commercial general
liability product.

Marketing

      OGGI markets its property and casualty insurance products in
Pennsylvania, Maryland and Delaware through independent agencies. 
These agencies collectively employ a force of approximately 3,500
agents. Most of the agents represent multiple carriers and are
established residents of the rural and suburban communities in
which they operate.  OGGI's agents generally market and write the
full range of OGGI's products.  OGGI considers their
relationships with agents to be excellent.  As of December 31,
1998, no agency accounted for more than 5% of direct premiums
written.

      OGGI emphasizes personal contact between their agents and
policyholders.  OGGI believes that their name recognition,
policyholder loyalty and policyholder satisfaction with agent and
claims relationships are the principal sources of new customer
referrals, cross-selling of additional insurance products and
policyholder retention.

      OGGI depends upon their agency force to produce new business
and to provide customer service.  The network of independent
agents also serves as an important source of information about
the needs of the communities served by OGGI.  This information is
utilized to develop new products and new product features.

      Agency compensation is based on one of three compensation
plans.  Each agency may elect:  fixed base commission only, fixed
base commission with some opportunity for bonus commission based
on the agency's loss experience, or floating base commission
based on the agency's three year loss ratio with some opportunity
to earn bonus commission depending on the agency's one-year loss
experience.

      OGGI has introduced a new agency compensation system
effective January 1, 1999, which will better compensate those
agents whose historical profitability, size and ability to grow
has been superior.  Each agent has been assigned a tier (1-4)
which is indicative of their historical results.  Each agent's
compensation, regardless of tier, will then have a fixed base
component plus an ability to earn a bonus commission depending on
profitability.  Those agents which are ranked higher will receive
a higher base and the opportunity to earn a higher bonus
commission.

      OGGI believes that the new compensation system is a tool
that will enable better planning, organization and control of
agency resources and compensate those agents that are able to
contribute to our corporate-wide goals. 
  <PAGE 11>
      Independent agencies are supported by agent representatives,
who are employees of OGGI and who have principal responsibility
for recruiting agencies and training new agents.  To support its
marketing efforts, OGGI develops and produces advertising in
partnership with their agencies.  The ability to customize this
advertising to reflect the agent's and their communities' needs
is a unique feature of the marketing effort.  OGGI and agent
representatives conduct training programs that provide both
technical training about products and sales training on how to
market insurance products.

      Computer software is provided to agencies that allow them to
quote rates on homeowners, farmowners, businessowners and
personal auto.  In addition, a home page has been established on
the Internet for the public that is periodically updated with
pertinent information about OGGI and their products.  OGGI now
provides most agencies with the ability to share records and
information electronically which increases the efficiency of both
OGGI and their agents.

Underwriting

      OGGI seeks to write their commercial and personal lines by
evaluating each risk with consistently applied standards.  OGGI
maintains information on all aspects of their business that is
regularly reviewed to determine product line profitability. 
OGGI's underwriters generally specialize in personal or
commercial/farm lines.  Specific information is monitored with
regard to individual insureds that is used to assist in making
decisions about policy renewals or modifications. OGGI's
underwriters have an average of over 15 years of experience as
underwriters.  OGGI believes their extensive knowledge of local
markets is a key underwriting advantage.

      OGGI relies on information provided by their independent
agents, who, subject to certain guidelines, also act as field
underwriters and pre-screen policy applicants.  The independent
agents have the authority to sell and bind insurance coverages in
accordance with pre-established guidelines.  Agents' underwriting
results are monitored and on occasion agents with historically
poor loss ratios are placed on rehabilitation until more
profitable underwriting results are achieved, or if
rehabilitation is unsuccessful, the relationship is terminated..

Claims

      Claims on insurance policies written by OGGI are usually
investigated and settled by one of OGGI's staff claims
representatives who work in teams led by a supervisor. 
Supervisors report to the claims manager.  OGGI claims philosophy
emphasizes timely investigation, evaluation and fair settlement
of claims, while maintaining adequate case reserves and
controlling claim adjustment expenses.  The claims philosophy is
designed to support marketing efforts by providing prompt service 
<PAGE 12> and making the claims process a positive experience for
agents and policyholders. 

      Claims settlement authority levels are established for each
representative and claims manager based upon their level of
experience.  Claims are typically reported by the agents.  Multi-
line teams exist to handle all claims.  Subrogation recovery is
centralized in the Lancaster, Pennsylvania office.  The claims
department is responsible for reviewing all claims, obtaining
necessary documentation, estimating the loss reserves and
resolving the claims.  OGGI engages independent appraisers and
adjusters to evaluate and settle claims as claims volume or
specialized needs require.

      OGGI attempts to minimize claims costs by encouraging the
use of alternative dispute resolution procedures. Litigated
claims are assigned to outside counsel, who then work closely as
a team with a staff claims representative.  OGGI has a panel of
law firms carefully selected for their insurance defense
expertise.  Billing is on a negotiated flat fee basis as
negotiated with the individual firm.  These fees are tracked
quarterly to assure fairness to both parties. 

Reinsurance

      In accordance with insurance industry practice, OGGI
reinsures a portion of their exposure and pay to the reinsurers a
portion of the premiums received on all policies reinsured. 
Insurance is ceded principally to reduce net liability on
individual risks, to mitigate the effect of individual loss
occurrences (including catastrophic losses), to stabilize
underwriting results and to increase underwriting capacity. 

      Reinsurance can be facultative reinsurance or treaty
reinsurance.  Under facultative reinsurance, each risk or portion
of a risk is reinsured individually.  Under treaty reinsurance,
an agreed-upon portion of business written is automatically
reinsured.  Treaty reinsurance can be further defined as quota
share or excess of loss reinsurance.  Under quota share
reinsurance, the ceding company cedes a percentage of its
insurance liability to the reinsurer in exchange for a like
percentage of premiums less a ceding commission, and in turn will
recover from the reinsurer the reinsurer's share of all losses
and loss adjustment expenses incurred on those risks.  Under
excess reinsurance, an insurer limits its liability to all or a
particular portion of the amount in excess of a predetermined
deductible or retention.  Regardless of type, reinsurance does
not legally discharge the ceding insurer from primary liability
for the full amount due under the reinsured policies.  However,
the assuming reinsurer is obligated to reimburse the ceding
company to the extent of the coverage ceded.  OGGI places its
reinsurance directly or through the use of brokers. 
  <PAGE 13>
      OGGI determines the amount and scope of reinsurance coverage
to purchase each year based upon their evaluation of the risks
accepted, consultations with reinsurance representatives and a
review of market conditions, including the availability and
pricing of reinsurance. In 1998, 1997 and 1996, OGGI ceded earned
premiums of $18.4 million, $24.8 million and $27.5 million,
respectively. 

      OGGI's reinsurance arrangements are placed with non-
affiliated reinsurers, principally American Re-Insurance Company
(American Re), and are generally renegotiated annually. 
Coverages described herein are generally for 1998.

      Except for certain excluded classes of property and losses
due to flood, the largest exposure retained by OGGI on any one
individual property risk is $150,000. Individual property risks
in excess of $150,000 are covered on an excess of loss basis up
to $2.0 million per risk pursuant to reinsurance agreements with
American Re.

      For 1998, individual casualty risks for most lines of
business, excluding umbrella liability, that were in excess of
$150,000 were covered on an excess of loss basis up to $2.0
million per occurrence pursuant to reinsurance agreements with
American Re.  In addition, casualty losses arising from workers'
compensation claims were reinsured on a per occurrence and per
person basis by various reinsurers up to $10.0 million.  Umbrella
liability losses were reinsured by American Re on a 95% quota
share basis up to $1.0 million and a 100% quota share basis in
excess of $2.0 million up to $5.0 million.

      The first layers ($350,000 excess of $150,000) of both the
property and casualty reinsurance programs are subject to annual
aggregate loss deductibles equal to 6.0% and 6.5% of subject
premiums, respectively.  These layers are also subject to
retrospectively rated premium provisions whereby the ultimate
premium is adjusted based upon actual loss experience, limited to
minimums and maximums, plus a load or risk charge. 

      Catastrophic reinsurance protects the ceding insurer from
significant aggregate loss exposure arising from a single event
such as windstorm, hail, tornado, hurricane, earthquake, riot,
blizzard, freezing temperatures or other extraordinary events. 
For 1998, OGGI purchased layers of catastrophic property
reinsurance, which reinsured 95.0% of losses over $3.5 million up
to a maximum of $10.0 million and 100% of losses between
$13.5 million and $31.5 million per occurrence.  OGGI also had an
underlying catastrophe and aggregate excess of loss reinsurance
agreement with American Re designed to protect against multiple
events each of which was below the $3.5 million retention under
the primary catastrophe reinsurance.  Under this agreement,
losses were reinsured to the extent of (A) aggregate net losses
exceeding a 75% loss ratio in any accident year up to the lesser
of a 78.33% loss ratio or $5.0 million, and (B) 100% of losses in 
<PAGE 14> excess of $5.0 million for winter storm losses during
specified periods, up to a maximum of $5.0 million.  OGGI
recovered under this latter coverage provision for losses
attributable to the January 1996 blizzard.

      OGGI also maintained a quota share reinsurance agreement
with American Re for the benefit of all of its members except
First Delaware and New Castle.  Effective January 1, 1998, this
agreement is in a "run-off" basis whereby new or renewal policies
in 1998 are no longer covered by the agreement.  Under the terms
of this agreement, a percentage of the liability (15% in 1997 and
20% in 1996) remaining after cessions of excess and catastrophic
risks through other reinsurance contracts was ceded to American
Re.  The result of the quota share agreement was a pro rata
sharing of risk with American Re. This agreement protected
surplus from high frequency and low severity type losses. 
Reinsurance premiums due American Re on the quota share agreement
were reduced by a ceding allowance equal to a percentage (30% in
1997 and 35% in 1996) of the reinsurance premium.

      Quota share reinsurance may be used to moderate the adverse
impact of underwriting losses to the ceding company but also
decreases underwriting profits which would otherwise be retained
by the ceding company.  The quota share reinsurance agreement
with American Re had a material effect on the financial condition
and results of operations of OGGI during the term of the
reinsurance agreement. 

      The insolvency or inability of any reinsurer to meet its
obligations could have a material adverse effect on the results
of operations or financial condition of the Group.  American Re
is OGGI's major reinsurer.  American Re is rated A++ (superior)
by A.M. Best.  The A++ rating is the highest of A.M. Best's
fifteen ratings. In 1998, 1997 and 1996, OGGI paid reinsurance
premiums in an aggregate amount of approximately $10.4 million,
$18.2 million and $31.2 million to American Re, respectively.
OGGI monitors the solvency of reinsurers through regular review
of their financial statements and A.M. Best ratings.  OGGI has
not experienced significant difficulties collecting amounts due
from reinsurers.

Losses and LAE Liabilities

      Property and Casualty Reserves. Insurance companies are
required by applicable insurance laws and regulations to maintain
liabilities for payment of losses and loss adjustment expenses
("LAE") for both reported claims and for claims incurred but not
reported ("IBNR"), arising from the policies they have issued. 
These laws and regulations require that provision be made for the
ultimate cost of those claims without regard to how long it takes
to settle them or the time value of money.  The determination of
the liabilities involves actuarial and statistical projections of
what is expected to be the cost of the ultimate settlement and
administration of such claims based on facts and circumstances 
<PAGE 15> then known, estimates of future trends in claims
severity, and other variable factors such as inflation and
changing legal theories of liability. 

      The estimation of ultimate liability for losses and LAE is
an inherently uncertain process and does not represent an exact
calculation of that liability.  OGGI's estimation policy
recognizes this uncertainty by maintaining liabilities at a level
providing for the possibility of adverse development relative to
the estimation process.  OGGI does not discount their liabilities
to recognize the time value of money.

      When a claim is reported to OGGI, claims personnel establish
a "case reserve" for the estimated amount of the ultimate
payment.  This estimate reflects an informed judgment based upon
general insurance reserving practices and on the experience and
knowledge of the estimator regarding the nature and value of the
specific claim, the severity of injury or damage, and the policy
provisions relating to the type of loss.  Case reserves are
adjusted by OGGI's claims staff as more information becomes
available.  It is OGGI's policy to settle each claim as
expeditiously as possible. 

      OGGI maintains IBNR reserves to provide for future reporting
of already incurred claims and developments on reported claims. 
The IBNR reserve is determined by estimating OGGI's ultimate net
liability for both reported and IBNR claims and then subtracting
the case reserves for reported claims. 

      Quarterly, OGGI computes its estimated ultimate liability
using principles and procedures applicable to the lines of
business written.  Such liabilities are also considered annually
by OGGI's independent auditors in connection with their audit of
OGGI's consolidated financial statements. However, because the
establishment of these liabilities are an inherently uncertain
process, there can be no assurance that ultimate losses will not
exceed the estimated losses.  Adjustments in aggregate
liabilities, if any, are reflected in the operating results of
the period during which such adjustments are made.  As required
by insurance regulatory authorities, OGGI submits to the various
jurisdictions in which they are licensed a statement of opinion
by its appointed actuary concerning the adequacy of statutory
liabilities.  The results of these actuarial studies have
consistently indicated that the liabilities are adequate. 
Management does not believe that OGGI is subject to any material
potential asbestos or environmental liability claims. 

      A table providing a reconciliation of beginning and ending
liability for losses and LAE of OGGI for 1998, 1997 and 1996 is
included in footnote 4 to the consolidated financial statements
included herein.

      The following table shows the development of the liabilities
for loss and LAE from 1988 through 1998 for OGGI.  The top line 
<PAGE 16> of the table shows the liabilities at the balance sheet
date, including losses incurred but not yet reported.  The upper
portion of the table shows the cumulative amounts subsequently
paid as of successive years with respect to the liability.  The
lower portion of the table shows the reestimated amount of the
previously recorded liability based on experience as of the end
of each succeeding year.  The estimates change as more
information becomes known about the frequency and severity of
claims for individual years.  The redundancy (deficiency) exists
when the reestimated liability at each December 31 is less
(greater) than the prior liability estimate.  The "cumulative
redundancy (deficiency)" depicted in the table, for any
particular calendar year, represents the aggregate change in the
initial estimates over all subsequent calendar years.

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                                        (000s)
                                   1988     1989     1990     1991     1992     1993     1994     1995     1996     1997    1998
<S>                              <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>     <C>
Liability for unpaid Losses
  and LAE net of reinsurance
  recoverable                    $14,097  $22,404  $25,477  $29,291  $34,895  $36,882  $32,810  $36,091  $34,515  $31,717  $31,681
Acquisition                          -        -        -        -        -        -       -        -         668      747     - 
Adjusted liability                14,097   22,404   25,477   29,291   34,895   36,882   32,810   36,091   35,183   32,464  31,681 
Cumulative amount of liability
  paid through:
  One year later                   6,554   10,425   10,713   10,867   14,126   15,386   17,468   16,289   14,704   14,915
  Two years later                  9,589   13,770   14,904   16,318   20,871   22,331   22,959   22,314   21,182 
  Three years later               11,380   16,098   18,438   20,368   24,346   25,109   26,788   25,718 
  Four years later                12,256   17,793   20,987   22,588   24,422   27,562   28,625 
  Five years later                13,264   19,293   21,947   23,274   25,675   28,563 
  Six years later                 14,281   19,786   22,270   24,035   25,984 
  Seven years later               14,646   20,112   22,753   24,251 
  Eight years later               14,887   20,353   22,921 
  Nine years later                15,057   20,454 
  Ten years later                 15,067 

Liability re-estimated as of: 
  One year later                  15,787   22,120   25,094   28,404   32,099   31,363   35,252   36,648   30,840   30,207 
  Two years later                 15,747   22,060   25,117   28,052   28,821   32,503   34,000   31,705   29,992 
  Three years later               15,570   21,416   25,008   26,143   28,165   31,375   32,134   30,868 
  Four years later                15,237   21,696   23,809   25,467   27,740   30,637   31,552 
  Five years later                15,367   20,969   23,781   25,153   27,036   30,200 
  Six years later                 15,338   20,911   23,488   24,757   26,906
  Seven years later               15,357   20,895   23,255   24,665 
  Eight years later               15,298   20,639   23,201 
  Nine years later                15,157   20,593 
  Ten years later                 15,137 
                                            
Cumulative total redundancy
  (deficiency)                   $(1,040) $ 1,811  $ 2,276  $ 4,626  $ 7,989  $ 6,682  $ 1,258  $ 5,223  $ 5,191  $ 2,257 

Gross Liability  end of year                                                  $59,057  $51,309  $52,091  $57,565  $51,172  $52,708 
Reinsurance recoverables                                                       22,175   18,499   16,000   22,382   18,708   21,027 
Net Liability, end of year                                                     36,882   32,810   36,091   35,183   32,464   31,681 

Gross reestimated Liability                                                    47,026   49,550   46,024   51,096   48,706       - 
Reestimated reinsurance
  recoverables                                                                $16,389  $17,416  $14,319  $20,240  $18,499       - 
Net reestimated Liability                                                      30,637   32,134   31,705   30,856   30,207       -   
        
</TABLE>
  <PAGE 17>
      The following table is derived from the preceding table and
summarizes the effect of reserve re-estimates, net of
reinsurance, on calendar year operations for the same ten-year
period ended December 31, 1998. The total of each column details
the amount of reserve re-estimates made in the indicated calendar
year and shows the accident years to which the re-estimates are
applicable. The amounts in the total accident year column on the
far right represent the cumulative reserve re-estimates for the
indicated accident year(s). 

<TABLE>
<CAPTION>
                                                                                                         Cumulative
                                                                                                         Deficiency
                              Effect of Reserve Reestimates on Calendar Year Operations                   from
                              Increase (Decrease) in Reserves for Calendar Year                          Reestimates
                                                                                                         for each
Accident Year   1989    1990    1991    1992      1993      1994     1995     1996      1997      1998  Accident Year
<S>            <C>     <C>     <C>     <C>     <C>       <C>       <C>      <C>      <C>       <C>      <C> 
        1989   1,690    (40)   (177)   (333)      130       (29)      19      (59)     (141)      (20)        1,040 
        1990           (244)    117    (311)      150      (698)     (77)      43      (115)      (26)       (1,161)
        1991                   (323)    667      (389)     (472)      30     (277)       23        (8)         (749)
        1992                           (910)     (243)     (710)    (648)     (21)     (163)      (38)       (2,733)
        1993                                   (2,444)   (1,369)      20     (111)     (308)      (38)       (4,250)
        1994                                             (2,241)   1,796     (703)      (34)     (307)       (1,489)
        1995                                                       1,302     (124)   (1,128)     (145)          (95)
        1996                                                                1,809    (3,077)     (255)       (1,523)
        1997                                                                            600      (679)          (79)
        1998                                                                                     (741)         (741)

Total          1,690   (284)   (383)   (887)   (2,796)   (5,519)   2,442      557    (4,343)   (2,257)      (11,780)
</TABLE>

Investments

      OGGI's investments are classified as either available for
sale or held to maturity. An important component of the operating
results of OGGI has been the return on invested assets. OGGI's
investment objective is to maximize current yield while
maintaining safety of capital together with adequate liquidity
for its insurance operations.  OGGI's investments are managed by
outside investment advisors.

      Certain consolidated information concerning OGGI's
investments and their maturities is set forth in footnote 3 to
the consolidated financial statements contained elsewhere herein.

      The average duration of OGGI's fixed maturity investments,
as of December 31, 1998 was approximately 4.1 years.  The market
value of OGGI's investments may fluctuate significantly in
response to changes in interest rates.  In addition, OGGI may
experience investment losses to the extent its liquidity needs
require the disposition of fixed maturity securities in
unfavorable interest rate environments.

A.M. Best Rating  <PAGE 18>

      A.M. Best, which rates insurance companies based on factors
of concern to policyholders, currently assigns an "A-"
(Excellent) rating (its fourth highest rating category out of
15 categories) to Old Guard, Old Guard Fire, First Patriot and
New Castle as a group.  In addition, First Delaware has received
a "A-" rating from A.M. Best.  A.M. Best assigns "A" or "A-"
ratings to companies which, in its opinion, have demonstrated
excellent overall performance when compared to the standards
established by A.M. Best.  Companies rated "A" and "A-" have a
strong ability to meet their obligations to policyholders over a
long period of time. In evaluating a company's financial and
operating performance, A.M. Best reviews the company's
profitability, leverage and liquidity, as well as the company's
book of business, the adequacy and soundness of its reinsurance,
the quality and estimated market value of its assets, the
adequacy of its loss reserves, the adequacy of its surplus, its
capital structure, the experience and competency of its
management and its market presence. No assurance can be given
that A.M. Best will not reduce the current rating in the future.

Competition

      The property and casualty insurance market is highly
competitive.  OGGI's insurance subsidiaries compete with other
stock insurance companies, mutual companies, local cooperatives
and other underwriting organizations.  Certain of these
competitors have substantially greater financial, technical and
operating resources.  OGGI's ability to compete successfully in
its principal markets is dependent upon a number of factors, many
of which (including market and competitive conditions) are
outside OGGI's control.  Many of the lines of insurance written
by OGGI are subject to significant price competition.  Some
companies may offer insurance at lower premium rates through the
use of salaried personnel or other methods, rather than through
independent agents paid on a commission basis, as OGGI does.  In
addition to price, competition in the lines of business written
by OGGI is based on quality of the products, quality and speed of
service (including claims service), financial strength, ratings,
distribution systems and technical expertise.
  <PAGE 19>
Regulation

      Insurance companies are subject to supervision and
regulation in the states in which they transact business.  Such
supervision and regulation relates to numerous aspects of an
insurance company's business and financial condition.  The
primary purpose of such supervision and regulation is the
protection of policyholders.  The extent of such regulation
varies, but generally derives from state statutes which delegate
regulatory, supervisory and administrative authority to state
insurance departments.  Accordingly, the authority of the state
insurance departments includes the establishment of standards of
solvency which must be met and maintained by insurers, the
licensing to do business of insurers and agents, the nature of
and limitations on investments, premium rates for property and
casualty insurance, the provisions which insurers must make for
current losses and future liabilities, the deposit of securities
for the benefit of policyholders, the approval of policy forms,
notice requirements for the cancellation of policies and the
approval of certain changes in control.  State insurance
departments also conduct periodic examinations of the affairs of
insurance companies and require the filing of annual and other
reports relating to the financial condition of insurance
companies.

      Examinations are conducted by the insurance department of
the state of domicile every three to five years.  The last
examinations of Old Guard, Old Guard Fire, First Patriot and
First Delaware were as of December 31, 1996.  These examinations
did not result in any material adjustments to the financial
position of any of the companies.  In addition, there were no
substantive qualitative matters indicated in the examination
reports that had a material adverse impact on the operations of
the companies.  In addition, the Delaware Insurance Department is
currently finalizing its examination of New Castle as of December
31, 1996.   To date, no material findings have been brought to
the attention of management.

      In addition to state-imposed insurance laws and regulations,
the NAIC has adopted risk-based capital ("RBC") requirements that
require insurance companies to calculate and report information
under a risk-based formula that attempts to measure statutory
capital and surplus needs based on the risks in a company's mix
of products and investment portfolio.  Under the formula, a
company first determines its Authorized Control Level risk-based
capital ("ACL") by taking into account (i) the risk with respect
to the insurer's assets; (ii) the risk of adverse insurance
experience with respect to the insurer's liabilities and
obligations, (iii) the interest rate risk with respect to the
insurer's business; and (iv) all other business risks and such
other relevant risks as are set forth in the RBC instructions.  A
company's "Total Adjusted Capital" is the sum of statutory
capital and surplus and such other items as the RBC instructions 
<PAGE 20> may provide.  The formula is designed to allow state
insurance regulators to identify potential weakly capitalized
companies.

      The requirements provide for four different levels of
regulatory attention.  The "Company Action Level" is triggered if
a company's Total Adjusted Capital is less than 2.0 times its ACL
but greater than or equal to 1.5 times its ACL.  At the Company
Action Level, the company must submit a comprehensive plan to the
regulatory authority which discusses proposed corrective actions
to improve the capital position.  The "Regulatory Action Level"
is triggered if a company's Total Adjusted Capital is less than
1.5 times but greater than or equal to 1.0 times its ACL.  At the
Regulatory Action Level, the regulatory authority will perform a
special examination of the company and issue an order specifying
corrective actions that must be followed.  The "Authorized
Control Level" is triggered if a company's Total Adjusted Capital
is less than 1.0 times but greater than or equal to 0.7 times its
ACL, and the regulatory authority may take action it deems
necessary, including placing the company under regulatory
control.  The "Mandatory Control Level" is triggered if a
company's Total Adjusted Capital is less than 0.7 times its ACL,
and the regulatory authority is mandated to place the company
under its control.  OGGI's insurance subsidiaries have never
failed to exceed the required levels of capital.  However, there
can be no assurance that the capital requirements applicable to
the businesses will not increase in the future.

      The NAIC has also developed a set of eleven financial
ratios, referred to as the Insurance Regulatory Information
System (IRIS), for use by state insurance regulators in
monitoring the financial condition of insurance companies.  The
NAIC has established an acceptable range of values for each of
the eleven IRIS financial ratios.  Generally, an insurance
company will become the subject of increased scrutiny when four
or more of its IRIS ratio results fall outside the range deemed
acceptable by the NAIC.  The nature of increased regulatory
scrutiny resulting from IRIS ratio results outside the acceptable
range is subject to the judgment of the applicable state
insurance department, but generally will result in accelerated
review of annual and quarterly filings.  Depending on the nature
and severity of the underlying cause of the IRIS ratio results
being outside the acceptable range, increased regulatory scrutiny
could range from increased but informal regulatory oversight to
placing a company under regulatory control.  During the last
three years, each of OGGI's insurance subsidiaries have reported
results outside the acceptable range for certain IRIS tests but
none reported four or more IRIS ratios outside the acceptable
range.

      The states in which OGGI does business (Pennsylvania,
Maryland and Delaware), have guaranty fund laws under which
insurers doing business in such states can be assessed on the
basis of premiums written by the insurer in that state in order 
<PAGE 21> to fund policyholder liabilities of insolvent insurance
companies.  Under these laws in general, an insurer is subject to
assessment, depending upon its market share of a given line of
business, to assist in the payment of policyholder claims against
insolvent insurers.  Each of OGGI's insurance subsidiaries makes
accruals for their portion of assessments related to such
insolvencies when notified of assessments by the guaranty
associations.  During 1998 OGGI was notified of two large medical
malpractice insurance company insolvencies.  Based upon current
estimates of the costs of these insolvencies, OGGI expects to be
assessed the maximum allowable by law (2% of subject premiums in
Pennsylvania) for up to five years.  OGGI has incurred charges of
$2.0 million in 1998 related to these insolvencies based upon its
1997 and 1998 premiums and expects to incur additional charges of
$1.0 million per year based upon current premium volume until
these insolvencies are paid.

      Most states have enacted legislation that regulates
insurance holding company systems.  Each insurance company in a
holding company system is required to register with the insurance
supervisory agency of its state of domicile and furnish
information concerning the operations of companies within the
holding company system that may materially affect the operations,
management or financial condition of the insurers within the
system.  Pursuant to these laws, the respective insurance
departments may examine OGGI and their respective insurance
subsidiaries at any time, require disclosure of material
transactions by OGGI and/or its subsidiaries and require prior
approval of certain transactions, such as "extraordinary
dividends" to OGGI from its insurance subsidiaries.

      All transactions within the holding company system affecting
OGGI and its subsidiaries must be fair and equitable.  Approval
of the applicable insurance commissioner is required prior to
consummation of transactions affecting the control of an insurer.
In some states, including Pennsylvania, the acquisition of 10% or
more of the outstanding capital stock of an insurer or its
holding company is presumed to be a change in control.  In
addition, the Pennsylvania Insurance Department's (Department)
approval of the acquisition by OGGI of all of the common stock of
Old Guard, Old Guard Fire and First Patriot prohibits OGGI from
paying any dividends or making other distributions to
shareholders (i) other than from earnings of Old Guard, Old Guard
Fire and First Patriot or (ii) in excess of $500,000 per year for
a period of three years following the Conversion without the
approval of the Department.  These laws also require notice to
the applicable insurance commissioner of certain material
transactions between an insurer and any person in its holding
company system and, in some states, certain of such transactions
cannot be consummated without the prior approval of the
applicable insurance commissioner.
  <PAGE 22>
Other Subsidiaries

      As of December 31, 1998, OGGI owns all the capital stock of
OGIM, a Pennsylvania corporation. OGIM is a management company
that employs and pays senior management of OGGI.  OGIM derives
all its revenues from management agreements with OGGI.  OGGI also
owns 2929 Service Corporation, a licensed insurance agency that
distributes products of OGGI to customers whose agents are no
longer in business or no longer an agent for OGGI.  During 1998,
Old Guard Investment Holding Co., Inc. (Old Guard Investment) was
merged into OGGI.  Old Guard Investment was a Delaware
corporation which had previously been the parent of First
Delaware, OGIM and 2929 Service Corporation.

Employees 

      As of December 31, 1998, the total number of full-time
equivalent employees of OGGI and its subsidiaries was 224.  None
of these employees are covered by a collective bargaining
agreement and OGGI believes that employee relations are good.

Item 2.  PROPERTIES

      OGGI's main offices are located at 2929 Lititz Pike,
Lancaster, Pennsylvania in a 33,000 square foot facility owned by
Old Guard.  Old Guard Fire owns a 25,000 square foot office
facility near the main office at 147 West Airport Road in
Lancaster.  First Patriot leases 7,500 square feet of office
space in Quakertown, Pennsylvania and First Delaware and New
Castle occupy 6,750 square feet of leased office space in Smyrna,
Delaware.

      On February 21, 1997, OGGI purchased a 21,500 square foot
facility situated on 8 acres of land adjacent to OGGI's
headquarters.  The purchase price was $1.1 million.  The parcel
of land allowed for the expansion of an additional 50,000 square
foot facility. This expansion was begun in late 1997 and was
completed in the fall of 1998. In addition, Old Guard Fire has
listed the Airport Road facility for sale.

      In March 1999, OGGI announced its intention to close the
operation in Quakertown and integrate those functions within its
Lancaster office.  The lease on the space in Quakertown will be
allowed to expire in late 1999.

Item 3.  LEGAL PROCEEDINGS

      On February 10, 1997, OGGI, Old Guard, Old Guard Fire, First
Patriot (the Insurance Companies) and each of their respective
directors were served with an eleven count combination class
action and derivative lawsuit, filed in the United States
District Court for the Eastern District of Pennsylvania by four
policyholders.  By filing the class action portion of the
lawsuit, these four policyholders purport to represent all 
<PAGE 23> 141,000 policyholders of the Insurance Companies. 
Seven of the eleven counts challenge the constitutionality of the
Pennsylvania Insurance Company Mutual to Stock Conversion Act
(the "Act"), which permitted the Insurance Companies plan of
demutualization in 1997.  The plaintiffs are contending that the
Plan violated the rights of the plaintiffs and members of the
class under the United States and Pennsylvania constitutions, and
that the Act is unconstitutional as applied by the Plan.  The
remainder of the class action claims assert theories regarding
purported violations of the Act, principally relating to the
description of the Plan in the proxy statement approved by the
Department and mailed to policyholders.  The derivative claim was
brought against the directors of the Insurance Companies,
purportedly on behalf of the Insurance Companies, alleging breach
of the fiduciary duty of care in approving and implementing the
Plan and the fiduciary duty of loyalty, presumably in approving
the stock-based compensation plans which were contemplated by the
Plan.  The stock-based compensation plans are expressly permitted
by the Act, were approved by the Department and have subsequently
been approved by shareholders.  The suit seeks such compensatory
damages as may be allowed by law, a declaration that the Plan
violates the Act and the United States and Pennsylvania
Constitutions and the rights of the plaintiffs thereunder, and
such other relief as the court deems appropriate.

      OGGI, the Insurance Companies and the individual defendants
filed a motion to dismiss the complaint in May 1997. In December
1997, the Court granted the motion with respect to two of the
constitutional counts and denied the motion with respect to the
remaining nine counts, including five of the constitutional
claims.

      On January 15, 1998, the plaintiffs filed a motion for class
certification.  On September 30, 1998, the Court granted the
motion, appointing plaintiffs as class representatives and
certifying the class as all policyholders of the Insurance
Companies as of February 7, 1997. 

      OGGI, the Insurance Companies and the individual defendants
filed a motion for summary judgment with respect to the remaining
federal constitutional claims on July 13, 1998.  On March 5,
1999, the Court granted the motion with respect to the two
remaining counts under the U.S. Constitution and retained
supplemental jurisdiction over the remaining state law claims. 

      If the plaintiffs prevail in the above litigation, the
remedy a court would grant or the amount of damages it might
award is uncertain.  A court has broad discretion to fashion a
fair and equitable remedy in light of the nature of the
constitutional or other violation, the relative harm to the
parties, and the public interest.  In some cases, relief is
applied on a prospective basis only; in other cases, relief is
applied on a retroactive basis.  No prediction can be made
concerning the remedy a court would fashion or the amount of 
<PAGE 24> damages it might award.  However, two of the more far-
reaching possibilities include: 

      -     A requirement that OGGI pay all purchasers of common
            stock, either on a mandatory basis or at the election
            of the purchaser, as damages or otherwise, (i) the
            purchase price paid per share of common stock acquired
            in the subscription offering, plus interest, (ii) the
            market value per share of common stock acquired, or
            (iii) the greater of (i) or (ii), less, in each case,
            any proceeds received by such purchaser from the sale
            of the common stock.  No assurance can be given that
            OGGI would have sufficient funds at that time to honor
            any such obligation; or

      -     OGGI could be required to pay or distribute to all or
            some policyholders of the Insurance Companies, either
            on a mandatory basis or at the election of the
            policyholders, an amount equal to the statutory surplus
            of the Insurance Companies as of the date of the
            subscription offering (approximately $38 million), as
            damages or otherwise.  Such distribution could be
            required to be made in cash, common stock or other debt
            or equity securities.  No assurance can be given that
            OGGI would have sufficient funds, or the capacity to
            borrow sufficient funds, at that time to honor any such
            obligation.  Any required distribution of common  stock
            or other equity securities would materially dilute the
            interests of existing shareholders.

      In the event that OGGI could not honor its obligations under
any remedy imposed by the Court, Old Guard Group, Inc. could be
forced to seek the protection of the bankruptcy laws and the
Insurance Companies could be deemed insolvent and seized by the
Department.

      OGGI and its subsidiaries are also parties to other
litigation in the normal course of business. Based upon
information presently available to them, OGGI does not consider
any threatened or pending litigation to be material, except as
described above. However, given the uncertainties attendant to
litigation, there can be no assurance that OGGI's results of
operations and financial condition will not be materially
adversely affected by any threatened or pending litigation.

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.

      None.
  PAGE 25
<PAGE>
                                    PART II

Item 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS

      OGGI's common stock commenced trading on the Nasdaq Stock
Market under the symbol OGGI on February 18, 1997, after
completion of the Offering.  Prior to the Offering, no shares of
common stock were issued or outstanding.  As of March 22, 1999,
OGGI had approximately 3,200 shareholders of record.  The table
below sets forth for the periods indicated the amount of
dividends declared per share and the quarterly ranges of high and
low bid prices for the common stock as reported by Nasdaq and
does not necessarily reflect mark-ups, mark-downs or commissions.

                                                            Cash
                                                            Dividends
      1998              High              Low               Declared 

First Quarter           $19.75            $17.75            $.05 
Second Quarter           21.61             17.00               -
Third Quarter            19.75             14.75             .05
Fourth Quarter           16.38             13.38               -

                                                            Cash
                                                            Dividends
      1997              High              Low               Declared 

First Quarter           $15.00            $13.00            $  - 
Second Quarter           14.75             13.38               -
Third Quarter            19.44             14.75             .05
Fourth Quarter           19.13             16.88               -

      Subsequent to December 31, 1998, the Board declared a $.05
per share dividend payable on March 15, 1999.
      
      The payment of dividends is subject to determination and
declaration by OGGI's Board of Directors. Any dividend policy of
OGGI will depend upon the financial condition, results of
operations and future prospects of OGGI.  In addition, the
Department's approval of the Conversion prohibits OGGI from
paying any dividends or making other distributions to
shareholders (i) other than from earnings of Old Guard, Old Guard
Fire and First Patriot, or (ii) in excess of $500,000 per year
for a period of three years following the Conversion without the
prior approval of the Department.  At present, OGGI intends to
pay an annual dividend of $.10 per share.   However, there can be
no assurance that dividends will be permitted to be paid under
the terms of the Department's approval order or, if paid
initially, that they will continue to be paid in the future. In
addition, because OGGI initially will have no significant source
of income other than dividends from its subsidiaries and earnings
from investment on the net proceeds of the Conversion retained by 
<PAGE 26> OGGI, the payment of dividends by OGGI will depend
significantly upon receipt of dividends from its subsidiaries. 
Old Guard, Old Guard Fire and First Patriot intend to seek
Department approval to pay dividends that, in the aggregate, will
permit OGGI to pay an annual dividend of $.10 per share.  No
assurance can be given, however, that the Department will grant
such approval.  See "Business -- Regulation."

      Except as described above, OGGI is not subject to regulatory
restrictions on the payment of dividends to shareholders.  OGGI
is subject to the requirements of the Pennsylvania Business
Corporation Law of 1988, as amended, which generally permits
dividends or distributions to be paid as long as, after making
the dividend or distribution, OGGI will be able to pay its debts
in the ordinary course of business and OGGI's total assets will
exceed its total liabilities plus the amount that would be needed
to satisfy the preferential rights upon dissolution of holders of
stock with senior liquidation rights if OGGI were to be dissolved
at the time the dividend or distribution is paid.
  PAGE 27
<PAGE>
Item 6.   SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>
                                                                        Year Ended December 31,

                                                          1998       1997        1996        1995        1994
<S>                                                    <C>         <C>        <C>          <C>          <C>                         
 Statement of Income Data: 
    Revenues:
      Direct and assumed premiums written              $ 97,448    $ 87,936    $ 82,109    $ 78,946    $ 78,110 
      Net premiums written                               83,926      66,064      47,692      67,115      65,649 
      Net premiums earned                                75,346      62,429      53,592      66,663      63,465 
      Net investment income                               6,179       5,877       4,495       4,686       4,241 
      Net realized investment gains                       1,290       2,326       1,385       1,011         476 
      Other revenue                                       2,150         413         322         274         266 
               Total revenue:                            84,965      71,045      59,794      72,634      68,448 

    Losses and Expenses:
      Losses and LAE incurred                            48,395      38,514      44,359      50,509      46,440 
      Other underwriting expenses                        35,824      24,436      18,397      23,227      22,087 
      Stock option compensation                             - -       2,017         - -         - -         - - 
      Interest                                              503         591         385         266         309 
               Total losses and expenses                 84,722      65,558      63,141      74,002      68,836 

      Income (loss) before income tax (benefit)
        and minority interest                               243       5,487      (3,347)     (1,368)       (388)
      Income tax expense (benefit)                          (90)      2,009      (1,427)       (684)       (532)
      Minority interest in income (loss) of
        consolidated subsidiary                              54          (7)       - -         - -         - - 
      Net income (loss)                                $    279    $  3,485    $ (1,920)   $   (684)   $    144 

    Selected Balance Sheet Data (at period end):
      Total investments                                $121,878    $118,123    $ 84,131    $ 92,335    $ 82,879 
      Total assets                                      188,632     175,399     137,462     134,853     127,831 
      Line of credit outstanding                            - -         - -       1,550         - -         - - 
      Subordinated debt                                     - -         - -       1,500       2,250       3,000 
      Total liabilities and minority interest           110,856      96,744      98,451      93,956      91,300 
      Total equity                                    $  77,776    $ 78,654    $ 39,011    $ 40,897    $ 36,531 

    GAAP Ratios:
      Loss and LAE ratio                                   64.2%       61.7%       82.8%       75.8%       73.2%
      Underwriting expense ratio                           44.7%       38.5%       33.7%       34.4%       34.4%
      Combined ratio                                      108.9%      100.2%      116.5%      110.2%      107.6%

    Statutory Data:
      Statutory combined ratio                            105.6       101.7       120.3       107.9       106.3
      Industry combined ratio                             105.0       101.6       105.8       106.4       108.4
      Statutory surplus                                $ 54,323    $ 51,691    $ 30,759    $ 32,249    $ 31,097
      Ratio of annual statutory net premiums
           written to statutory surplus                   1.5:1       1.3:1       1.6:1       2.2:1       2.2:1
</TABLE>
  PAGE 28
<PAGE>
Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Year Ended December 31, 1998 Compared to Year Ended December 31,
1997

      Premiums.  Gross (direct plus assumed) premiums written
increased $9.5 million, or 10.8%, in 1998 compared to 1997.  The
increase in gross premiums written can be attributed primarily to
the affiliation with New Castle Insurance which contributed $8.0
million of homeowners and personal auto premiums.  Specifically,
$1.4 million of the increase from New Castle is attributable to
direct premiums written in the fourth quarter (subsequent to
OGGI's acquisition of New Castle) with the remaining increase of
$6.6 million attributable to the assumption, through reinsurance,
of 100% of New Castle's business during the first nine months of
1998. The remaining increase can be attributed to increases in
direct premiums written for personal and commercial automobile,
farmowners business and workers' compensation offset by a
decrease in fire, allied line, and inland marine business.
Farmowners, homeowners, and personal automobile direct writings
as a percentage of the total book of business were 21.0%, 25.2%,
and 24.1%, respectively, in 1998 and 21.0%, 25.0% and 23.6%, 
respectively, for 1997.

      Ceded premiums written decreased $8.3 million to $13.5
million in 1998 compared to 1997.  The decrease in premiums ceded
was directly attributable to the elimination of the 15% quota
share reinsurance agreement with our primary reinsurer, American
Re-Insurance Company (American Re).  This agreement was cancelled
on a run-off basis whereby new or renewal policies in 1998 are no
longer covered.  Ceded premiums written under this agreement
amounted to nil and $9.4 million for 1998 and 1997, respectively. 

      Net premiums written increased $17.9 million, or 27.0%, in
1998 to $83.9 million from $66.1 million in 1997.  For the same
comparative periods, net premiums earned increased $12.9 million,
or 20.7%, to $75.3 million from $62.4 million.  The increases in
net premiums written and net premiums earned were directly
attributable to the effects of eliminating the quota share
reinsurance agreement with American Re and the contribution of
New Castle premiums to OGGI.

      Net Investment Income. Net investment income increased
$303,000, or 5.2%, to $6.2 million in 1998 from $5.9 million in
1997 while average cash and invested assets increased $3.0, or
2.6%.  In addition to the increase in average invested assets,
investment income increased in 1998 because of $169,000 of
distributions from limited partnerships which did not make
distributions in 1997.  For 1998, the yield on average cash and
invested assets was 5.2% compared to 5.3% for 1997. 
  <PAGE 29>
      Net Realized Investment Gains.  Net realized investment
gains were $1.3 million for 1998 compared to $2.3 million in
1997, a decrease of $1.0 million or 44.6%.  The decrease in
realized gains were a result of the market volatility in the
fourth quarter of 1998 which increased the spread between bid and
ask prices making the sale of bonds and convertible securities
unattractive and a loss of $817,000 related to the acquisition of
New Castle.  The loss resulted from writing down the carrying
value of OGGI's surplus note investment in New Castle,
forgiveness of interest on the note and costs related to the
transaction.

      Other Revenue.  Other revenue increased $1.7 million, or
419.8%, in 1998 to $2.1 million from $414,000 in 1997.  This
increase is attributable to increased management fees from
Neffsville Mutual Fire Insurance Company and New Castle. 

      Losses and Loss Adjustment Expenses.  Net losses and loss
adjustment expenses incurred increased by $9.9 million, or 25.7%,
to $48.4 million in 1998 from $38.5 million in 1997.  Losses and
loss adjustment expenses increased in 1998 as compared to 1997
because of the $3.4 million of claims from tornadoes and severe
thunderstorms during the first week of June 1998 compared to the
absence of severe storms in 1997, more losses being retained by
OGGI as a result of the termination of the quota share
reinsurance agreement, and the $2.3 million favorable loss
development in 1998 compared to 1997's favorable development of
$4.3 million.

      Underwriting Expenses.  Underwriting expenses, which include
amortization of deferred policy acquisition costs and operating
expenses, increased $11.4 million, or 46.6%, in 1998 to $35.8
million from $24.4 million in 1997.  The increase is primarily
the result of the loss of commission income from the termination
of the quota share reinsurance agreement in 1998 and additional
commission expense on assumed business from New Castle, as well
as pretax charges of $2.0 million for guaranty fund assessments
related to the insolvencies of PIC Insurance Group, Inc. and
P.I.E. Mutual Insurance Company.  Assessment from these
insolvencies are expected to continue for the next two to three
years.  Based upon OGGI's current premium volume this amounts to
approximately $1.0 million each year.  Other increases in
underwriting expenses relate to Old Guard Insurance Management
Co.'s management agreement with New Castle.  Expenses related to
this agreement are offset by increases in other revenue.
 
      Federal Income Tax Expense (Benefit).  Federal income tax
expense (benefit) as a percentage of pre-tax income or loss was
(37.3%) in 1998 compared to 36.6% in 1997.  The unusual
relationship of income tax benefit versus pretax income in 1998
is attributable to the low level of pretax income versus the
magnitude of tax preference items (primarily tax exempt income
and dividends received deduction) which do not vary with pretax
income.  In 1998, tax preference items were large enough to 
<PAGE 30> offset pretax income.  Assessment from these
insolvencies are expected to continue for the next two to three
years.  Based upon OGGI's current premium volume this amounts to
approximately $1.0 million each year.  

Year Ended December 31, 1997 Compared to Year Ended December 31,
1996

      Premiums.  Gross premiums written increased $5.8 million, or
7.1%, in 1997 compared to 1996.  The increase can be attributed,
in part, to the acquisition of First Delaware which contributed
$3.6 million to the increase. The remaining increase can be
attributed to increases in direct premiums written for personal
and commercial automobile and farmowners business offset by a
decrease in homeowners business.  The increases in automobile
writings reflect OGGI's focus on increasing liability business in
an effort to balance the overall book of business between
property and liability exposures.  The farmowners line increased
due to premium rate increases as competition eased somewhat in
OGGI's primary market, Pennsylvania. Homeowners premiums
decreased $435,000, or 2.0%, in 1997 as a result of a
reunderwriting initiative which commenced in 1997 and is designed
to improve the portfolio mix to include higher value dwellings
and to ensure that the appropriate premium is received for the
risk underwritten.  This initiative was successful as the number
of homeowners policies in force has declined at a faster and
faster rate than written premiums indicating that OGGI received
more premium dollars for less risk.  Workers' compensation
premium rates decreased in 1997 because of a 25% rate reduction
mandated by the Pennsylvania Workers' Compensation Rating Bureau.
The decrease was driven by lower claim costs arising out of
reforms adopted in 1994-1995.  This rate reduction was offset by
increases in policy count as OGGI implemented several safety
group programs to attract new and maintain existing business. The
safety group programs offer dividends based upon the group's loss
experience and to policyholders who are otherwise unable to
obtain a dividend participating policy. By creating safety
groups, OGGI is able to offer this benefit and attract new
business. Farmowners, homeowners, and personal automobile direct
writings as a percentage of the total book of business were
21.0%, 25.0%, and 23.6%, respectively, in 1997 as compared to
20.6%, 27.2%, and 23.5%, respectively, for 1996.

      Ceded premiums written decreased $12.5 million to $21.9
million in 1997 compared to 1996.  The decrease in premiums ceded
was directly attributable to the effects of reducing from 20% to
15% the quota share reinsurance agreement with our primary
reinsurer, American Re. Ceded premiums written under this
agreement amounted to $9.4 million and $20.1 million for 1997 and
1996, respectively. The remaining decrease in ceded premiums
written related to a restructuring of our property reinsurance
program effective January 1, 1997, from a combination of pro-rata
and excess of loss to 100% excess of loss. This change in the
property reinsurance program resulted in a $2.9 million decrease 
<PAGE 31> in ceded premiums written.  Decreases in ceded premiums
as a result of the aforementioned changes in our property
reinsurance were offset by a $1.6 million increase associated
with the acquisition of First Delaware.

      Net premiums written increased $18.4 million, or 38.5%, in
1997 to $66.1 million from $47.7 million in 1996.  For the same
comparative periods, net premiums earned increased $8.8 million,
or 16.5%, to $62.4 million from $53.6 million.  The increases in
net premiums written and net premiums earned were directly
attributable to the effects of reducing the quota share
reinsurance agreement with American Re as well as the other
factors discussed above.

      Net Investment Income. Net investment income increased $1.4
million, or 30.7%, to $5.9 million in 1997 from $4.5 million in
1996 while average cash and invested assets increased $28.2
million, or 31.8%.  For 1997, the yield on average cash and
invested assets was 5.3% compared to 5.1% for 1996. The increase
in average cash and invested assets can be attributed primarily
to the $33.7 million in net proceeds from OGGI's subscription
offering in February 1997 and the increase in gross unrealized
gains on investments of $2.8 million.

      During the third quarter of 1997, OGGI transferred $38.1
million of fixed income securities from available to sale to held
to maturity reflecting management's intention and ability to hold
these securities until maturity.  This will enable OGGI to extend
the duration of this portion of the portfolio which will allow
for the purchase of higher yielding securities. The change in
classification from available to sale to held to maturity did not
have a material effect on OGGI's financial position or results of
operations. 

      Net Realized Investment Gains.  Net realized investment
gains were $2.3 million for 1997 compared to $1.4 million in
1996, an increase of $900,000 or 68.0%.  The additional gains
were realized as interest rate and general economic conditions in
1997 created capital gains opportunities particularly in the
equity portfolio.

      Losses and Loss Adjustment Expenses.  Net losses and loss
adjustment expenses incurred decreased by $5.8 million, or 13.2%,
to $38.5 million in 1997 from $44.4 million in 1996.  Losses and
loss adjustment expenses decreased in 1997 as compared to 1996
because of the absence of catastrophic claims in 1997 which
amounted to $3.7 million in 1996 and favorable loss development
in 1997 on prior losses of $4.3 million as compared to adverse
development in 1996 of $557,000.  These decreases were offset by
losses incurred associated with First Delaware that amounted to
$1.1 million and the decrease in the quota share reinsurance
agreement which increased incurred losses and loss adjustment
expenses by $836,000. 
  <PAGE 32>
      Underwriting Expenses.  Underwriting expenses, which include
amortization of deferred policy acquisition costs and operating
expenses, increased $6.0 million, or 32.8%, in 1997 to $24.4
million from $18.4 million in 1996.  The increase is primarily
due to a $4.5 million reduction in ceded commissions arising out
of the decrease in the quota share reinsurance agreement and a
$1.4 million increase in other underwriting expenses.  The other
underwriting expense increase can be attributed to the
acquisition of First Delaware that contributed $650,000 to the
increase and initiatives undertaken by OGGI's subsidiaries to
upgrade their computer systems and to reunderwrite the homeowners
book of business. 

      Stock Option Compensation.  The $2.0 million charge for
stock compensation expense is a non-recurring, non-cash expense
resulting from the grant of 237,286 stock options on February 11,
1997, at an exercise price equal to the $10 per share offering
price in OGGI's subscription offering, and approved by
shareholders at OGGI's first Annual Meeting on August 19, 1997. 
At the time of shareholder approval OGGI's stock price was $18.50
per share.  In accordance with OGGI's accounting policy for
stock-based compensation (the optional accounting treatment
afforded under Statement of Financial Accounting Standards (SFAS)
No. 123 which allows companies to follow the expense recognition
criteria of Accounting Principles Board Opinion No. 25), the
difference between the stock price at the approval date and the
exercise price is charged to earnings.  Further changes in OGGI's
stock price or future grants of options, shareholder approval of
which will not be required and which are expected to be made at
the then current price of OGGI's stock, will not result in
additional charges to earnings. 

      Federal Income Tax Expense (Benefit).  Federal income tax
expense (benefit) as a percentage of pre-tax income or loss was
36.6% in 1997 compared to 42.6% in 1996.  The increase in the
rate can be attributed to the return to profitable operations in
1997, which generated taxable income versus operating losses in
1996, and the realization of $128,000 in research and
experimentation tax credits in 1996. 

Liquidity and Capital Resources

      The principal sources of OGGI's cash flow are premiums,
investment income, maturing investments and proceeds from sales
of invested assets.  In addition to the need for cash flow to
meet operating expenses, the liquidity requirements of OGGI
relate primarily to the payment of losses and loss adjustment
expenses.  The short and long-term liquidity requirements of OGGI
vary because of the uncertainties regarding the settlement dates
for liabilities for unpaid losses and because of the potential
for large losses, either individually or in the aggregate.

      OGGI and its subsidiaries have in place unsecured lines of
credit with a local financial institution under which they may 
<PAGE 33> borrow up to an aggregate of $1.5 million.  As of
December 31, 1998 and 1997, no amounts were borrowed against
these lines of credit.

      Net cash provided (used) by operating activities was
$5.1 million, $4.1 million and $(10.7) million during 1998, 1997,
and 1996, respectively.  Negative cash flow from operating
activities during 1996 was primarily attributable to the net loss
for the period and an increase in reinsurance receivables and
prepaid reinsurance premiums as a result of implementing the
quota share agreement with American Re. 

      In 1998, investing activities used cash of $6.8 million
primarily because of the expansion of our home office which was
completed in the fall of 1998 and continued investments in
technology.  In 1997, investing activities used cash of $33.5
million primarily because of the investment of the net proceeds
from the subscription offering and the continuing costs of
improvements to our computer systems.  In 1996, investing
activities provided cash of $7.4 million primarily as a result of
decreases in the fixed income portfolio needed to fund
unprofitable operations in that year.  

      In February 1996, OGGI and American Technologies, Inc., a
California based software lessor, entered into a lease financing
agreement in connection with the acquisition by OGGI of a new
policy processing software system for approximately $2.5 million. 
The terms of the lease financing agreement provide for an
aggregate lease facility up to $1.5 million.  The implied
interest rate under the lease is 9.5%.  As of December 31, 1996,
the lease facility was fully utilized. During 1998, this lease
was repaid.

      As a holding company, the principal source of liquidity for
Old Guard Group, Inc. will be dividend payments and other fees
received from its subsidiaries.  The Company's insurance
subsidiaries are restricted by the insurance laws of the state of
domicile as to the amount of dividends or other distributions
they may pay to the Company without the prior approval of the
state regulatory authority.  Under Pennsylvania law, the maximum
amount that may generally be paid by an insurance company during
any twelve-month period after notice to, but without prior
approval of, the Insurance Department cannot exceed the greater
of 10% of the insurance company's statutory surplus as reported
on the most recent annual statement filed, or the net income of
the insurance company for the period covered by such annual
statement.  However, Old Guard, Old Guard Fire and First Patriot
are further restricted as to the amount of dividends that they
may pay. These restrictions do not allow the insurance companies
to pay any dividend without prior approval of the Pennsylvania
Insurance Department for a 36 month period following the
conversion.
        <PAGE 34>
      The ESOP borrowed $4.1 million from an unaffiliated lender
and $100,000 from OGGI to purchase 10% of the common stock issued
in OGGI's subscription offering (see Note 1).  The loans bear an
8.45% interest rate, and will require the ESOP to make monthly
payments of $50,417 for a term of 10 years.  The loan is secured
by the shares of common stock purchased and the earnings thereon. 
Shares purchased with such loan proceeds will be held in a
suspense account for allocation among participants as the loan is
repaid.  OGGI expects to contribute sufficient funds to the ESOP
to repay such loan, plus such other amounts as OGGI's Board of
Directors may determine at its discretion.

Effects of Inflation

      The effects of inflation on OGGI are implicitly considered
in estimating reserves for unpaid losses and loss adjustment
expenses, and in the premium rate-making process.  The actual
effects of inflation on OGGI's results of operations cannot be
accurately known until the ultimate settlement of claims. 
However, based upon the actual results reported to date, it is
management's opinion that the liability for losses and LAE,
including losses that have been incurred but not yet reported,
make adequate provision for the effects of inflation.

New Accounting Pronouncements

      In January 1997, the Accounting Standards Executive
Committee of the American Institute of Certified Public
Accountants issued Statement of Position 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related
Assessments" (SOP 97-3).  SOP 97-3, which is effective for fiscal
years beginning after December 31, 1998, provides guidance for
determining when an insurance company should recognize a
liability for guaranty fund and other insurance related
assessments and how to measure that liability.  The adoption of
SOP 97-3 is not expected to have a material impact on the
financial statements of OGGI.

      In June 1997, Statement of Financial Accounting Standards
(SFAS) No. 130, "Comprehensive Income", was issued.  SFAS No. 130
establishes standards for the reporting and disclosure of
comprehensive income and its components (revenues, expenses,
gains and losses).  SFAS No. 130 requires that all items that are
required to be recognized under accounting standards as
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements.  SFAS No. 130 requires that an enterprise
(a) classify items of other comprehensive income by their nature
in a financial statement and (b) display the accumulated balance
of other comprehensive income separately from retained earnings
and additional paid-in capital in the equity section of a
statement of financial position.  The effects of adopting SFAS
No. 130 are included in the consolidated financial statements
included herein.   <PAGE 35>

      In June 1997, SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," was issued.  SFAS No. 131
establishes standards for the way that public business
enterprises report information about operating segments in annual
financial statements and requires that those enterprises report
selected information about operating segments in interim
financial reports issued to shareholders.  SFAS  No. 131 also
establishes standards for related disclosures about products and
services, geographic areas and major customers.  SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. 
OGGI has determined that it manages one operating segment which
is comprised of its property and casualty business. 

Year 2000 Issue

      General:

      As the year 2000 approaches, concerns arise involving
business interruptions or failures of specific operations
performed by computer chips as a result of date sensitive
information.  The problem results because some current
information technology ("IT") systems and non-IT systems with
embedded computer chips are not prepared to recognize the year
change from 1999 to 2000.  Absent remediation of non-compliant
systems, there is a substantial risk to OGGI of business
interruption or failure.  Therefore, it is important to prepare a
contingency plan to insure that all affected areas within OGGI
have been reviewed. 

      Project:

      OGGI developed an enterprise-wide year 2000 Readiness
Initiative Program to identify the enterprise-wide business
impact(s) of the arrival of the year 2000.  A plan was developed
to ensure all applicable systems, equipment, vendors and external
agents are compliant.  OGGI has utilized the recommendations from
an outside consultant as a tool for project management. 

      In the process of identifying assets affected by the year
2000 problem, a year 2000 representative was selected from each
department within OGGI.  Each representative completed an
inventory of year 2000 affected assets utilized by their
department.  The inventory included:  infrastructure, including
non-IT assets such as elevators and security systems,
applications software, third-party suppliers and customers
(external agents). 

      The representatives prioritized assets by assigning a
criticality factor.  These factors consisted of "fatal,"
"critical," "marginal" and "desirable."  "Fatal" is defined as an
asset that is necessary for uninterrupted operations of OGGI and
will fail or terminate if there were year 2000 date processing
errors.  "Critical" is defined as an asset that is necessary for
the operation of the business, and year 2000-related failures 
<PAGE 36> will produce an inaccurate or incorrect result. 
"Marginal" is defined as an asset that is necessary for the
operation of the business, but year 2000-related failures will
cause minor inconveniences, annoyances, or irritations. 
"Desirable" is defined as an asset that is not mandatory for
operating the business.  All assets will continue to be evaluated
to determine whether they need to be replaced, repaired or are
compliant.  As of December 1998, OGGI has evaluated the majority
of assets and confirms all assessment work is substantially
completed. 

      OGGI's most "fatal" asset is older personal computers.  OGGI
has developed a plan to ensure these systems will be compliant by
the first quarter of 1999.  Information regarding BIOS upgrades
and recommendations have been received from the manufacturers of
each of the different computer systems that are not year 2000
compliant.  The software programs identified as not yet compliant
continue to be reviewed and remediation will be implemented
according to manufacturer recommendations.  Some of the computer
software programs currently being utilized will be replaced by
compliant systems. 

      Vendors and external agents also have been contacted by
phone and/or letter to request information regarding their year
2000 status.  OGGI has received some responses to date but all
vendors have not yet responded.  Alternative vendors have been
identified for those vendors that do not respond. 

      In addition, a process also was established for reviewing
new and existing contracts and maintenance agreements for
appropriate year 2000 compliance language.

      Costs:

      OGGI presently expects that substantially all future costs
associated with the year 2000 compliance will be internal and are
estimated to be less than $50,000.  Costs incurred to date have
been approximately $150,000.

      Contingency Plans:

      Although OGGI expects to finish testing its year 2000
compliance by June 30, 1999, it has considered contingencies in
case any of its fatal or critical assets, not already confirmed
as compliant, fail year 2000 compliance testing.  For such
assets, OGGI has identified alternatives that will not cause
significant interruptions to service or operation. 

      Policy Coverage:

      Many experts now believe that the year 2000 problem may have
a material adverse impact on the national and global economies. 
In addition, it seems likely that if businesses are materially
damaged as a result of the year 2000 problems, at least some such 
<PAGE 37> businesses may attempt to recoup their losses by
claiming coverage under various types of insurance policies. 
And, although management has concluded that under a fair reading
of the various policies of insurance issued by it, no coverage
for year 2000 problems should be considered to exist and has
included exclusionary language on certain policies beginning in
1998, it is not possible to predict whether or to what extent any
such coverage could ultimately be found to exist by courts in the
various jurisdictions.  Accordingly, important factors which
could cause actual results to differ materially from those
expressed in the forward looking statements include, but are not
limited to, the inability of OGGI to accurately estimate the
impact of the year 2000 problem on the insurance issued by, or
other business operations of OGGI. 

Forward-Looking Statements

      Certain statements contained in the Management's Discussion
and Analysis and other statements made throughout this report
constitute "forward-looking statements" (as such term is defined
in the Private Securities Litigation Reform Act of 1995).  Such
forward-forwarding statements involve certain assumptions, risks
and uncertainties that could cause actual results to differ
materially from those included in or contemplated by the
statements.  These assumptions, risks and uncertainties include,
but are not limited to those associated with factors affecting
the property-casualty insurance industry generally, including
price competition, size and frequency of claims, escalating
damage awards, natural disasters, fluctuations in interest rates
and general business conditions; OGGI's dependence on investment
income; the geographic concentration of OGGI's business in the
Northeast United States; the adequacy of OGGI's liability for
losses and loss adjustment expenses; government regulation of the
insurance industry and the other risks and uncertainties
discussed or indicated in all documents filed by OGGI with the
Securities and Exchange Commission. OGGI expressly disclaims any
obligation to update any forward-looking statements as a result
of developments occurring after the release of this report.  
  PAGE 38
<PAGE>
Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET   
          RISK

      Market Risk of Financial Instruments

      A significant portion of the OGGI's assets and liabilities
are financial instruments, which are subject to the market risk
of potential losses from adverse changes in market rates and
prices.  OGGI's primary market risk exposures relate to interest
rate risk on fixed rate domestic medium-term instruments and, to
a lesser extent, domestic short- and long-term instruments.  OGGI
has established strategies, asset quality standards, asset
allocations and other relevant criteria for its portfolio to
manage its exposure to market risk.  In addition, maturities are
structured after projecting liability cash flows with actuarial
models. OGGI currently has only one derivative instrument
outstanding, an interest rate swap on its long-term debt, which
is used as a hedge.  All of OGGI's financial instruments are held
for purposes other than trading. OGGI's portfolio does not
contain any significant concentrations in single issuers (other
than U.S. treasury and agency obligations), industry segments or
geographic regions (see Notes 3 and 7 to OGGI's Consolidated
Financial Statements for additional discussion).

      Caution should be used in evaluating the OGGI's overall
market risk from the information below, since actual results
could differ materially because the information was developed
using estimates and assumptions as described below, and because
insurance liabilities and reinsurance receivables are excluded in
the hypothetical effects (insurance liabilities represent 47.9%
of total liabilities and reinsurance receivables on unpaid losses
represent 11.1% of total assets).

      The hypothetical effects of changes in market rates or
prices on the fair values of financial instruments as of
December 31, 1998, excluding insurance liabilities, reinsurance
receivables on unpaid losses, and fixed income securities that
are classified as "held-to-maturity" because such assets and
liabilities are not carried at fair value, would have been as
follows:

      -     If interest rates had decreased by 100 basis points,
            there would have been no significant change in the fair
            value of OGGI's long-term debt or the related swap
            agreement.  The change in fair values was determined by
            estimating the present value of future cash flows using
            models that measure the change in net present values
            arising from selected hypothetical changes in market
            interest rates.

      -     If interest rates had increased by 100 basis points,
            there would have been an approximate $2.9 million net
            decrease in the fair value of OGGI's investment 
            <PAGE 39> portfolio.  The change in fair value was
            determined by estimating the present value of future
            cash flows using various models, primarily duration
            modeling.

      -     If the market prices of all equity securities decreased
            10%, there would have been an approximate $2.2 million
            decrease in the fair value of OGGI's investment
            portfolio. Common equity securities at December 31,
            1998 include $8.7 million which are managed under the
            value-style investment management approach and $6.9
            million which are managed under a growth-style
            investment approach.   Preferred equity securities at
            December 31, 1998 consist primarily of convertibles.


 
Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                       Report of Independent Accountants

To the Board of Directors and Shareholders
of Old Guard Group, Inc.:

In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of income and comprehensive
income, shareholders' equity and of cash flows present fairly, in
all material respects, the financial position of Old Guard Group,
Inc. and Subsidiaries at December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.  These financial
statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial
statements based on our audits.  We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.  We
believe that our audits provide a reasonable basis for the
opinion expressed above. 

/s/ PricewaterhouseCoopers LLP

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 24, 1999, except for Notes 15 and 16, for which the date
is March 5, 1999

  PAGE 40
<PAGE>
<TABLE>
<CAPTION>

                OLD GUARD GROUP, INC. AND SUBSIDIARIES
                             Consolidated Balance Sheets
                     As of December 31, 1998 and 1997 

ASSETS                                                                             1998           1997
<S>                                                                             <C>            <C>
Investments: 
  Fixed income securities
     Held to maturity, at amortized cost                                       $ 36,615,905    $ 38,382,722 
     Available for sale, at fair value                                           59,249,118      57,237,836 
    Preferred stocks, available for sale, at fair value                           5,979,443       4,626,565 
    Common stocks, available for sale, at fair value                             15,620,659      12,208,318 
    Other invested assets                                                         4,412,378       5,668,025 
       Total investments                                                        121,877,503     118,123,466 

Cash and cash equivalents                                                         6,121,983      10,214,908 
Receivables:
  Premiums                                                                        9,354,449       7,945,218 
  Reinsurance                                                                    15,138,801      10,767,770 
  Investment income                                                               1,194,031       1,236,186 
  Affiliates                                                                        479,989       1,093,062 
Prepaid reinsurance premiums                                                      3,631,428       6,285,844 
Deferred policy acquisition costs                                                 9,423,124       7,318,767 
Deferred income taxes                                                                   - -         262,750 
Property and equipment                                                           16,941,129      10,112,212 
Goodwill                                                                            716,879         772,023 
Other assets                                                                      3,752,624       1,266,509 

       Total assets                                                            $188,631,940    $175,398,715 

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
  Losses and loss adjustment expenses                                          $ 52,707,951    $ 48,718,666 
  Unearned premiums                                                              42,460,383      36,535,108 
  Accrued expenses                                                                4,250,938       2,541,896 
  Deferred income taxes                                                             420,654             - - 
  Capital lease obligations                                                             - -         796,558 
  Long-term debt                                                                  3,402,778             - - 
  ESOP liability                                                                  3,547,448       3,840,566 
  Other liabilities                                                               3,362,831       3,662,423 

       Total liabilities                                                        110,152,983      96,095,217 

Minority Interest                                                                   703,220         649,125 

Shareholders' Equity: 

  Preferred stock (5,000,000 shares authorized;
     none issued and outstanding)                                                       - -            - - 
  Common stock (15,000,000 shares authorized; 4,248,417 and 4,204,910 shares
     issued; 3,933,401 and 4,084,370 shares outstanding, no par)                 38,776,603      38,317,908 
  Additional paid-in capital                                                      4,370,606       4,787,703 
  Deferred compensation                                                          (5,330,718)     (6,277,553)
  Retained earnings                                                              40,175,219      40,259,736 
  Net unrealized investment gains, net deferred income taxes                      4,997,299       3,856,612 
  Treasury stock, at cost (315,016 and 120,540 shares)                           (5,213,272)     (2,290,033)

       Total shareholders' equity                                                77,775,737      78,654,373

       Total liabilities and shareholders' equity                              $188,631,940    $175,398,715 
</TABLE>

The accompanying notes are an integral part of the consolidated
financial statements. 

  PAGE 41
<PAGE>
<TABLE>
<CAPTION>
                                                  OLD GUARD GROUP, INC. AND SUBSIDIARIES
                                                  Consolidated Statements of Income and Comprehensive Income
                                                  For the years ended December 31, 1998, 1997 and 1996

                                                      1998           1997           1996
<S>                                                <C>            <C>            <C>
Revenue:
  Net premiums written                             $83,925,644    $66,063,881    $47,692,036 
  Change in  net unearned premiums                  (8,579,680)    (3,635,287)     5,899,678 
                                                               
  Net premiums earned                               75,345,964     62,428,594     53,591,714 

  Investment income, net of expenses                 6,179,394      5,876,708      4,494,818 
  Net realized investment gains                      1,289,541      2,326,221      1,384,957 
  Other revenue                                      2,149,885        413,636        321,770 

    Total revenue                                   84,964,784     71,045,159     59,793,259 

Expenses: 
  Losses and loss adjustment 
     expenses incurred                              48,395,431     38,514,060     44,358,790 
  Amortization of deferred policy                              
    acquisition costs                               20,857,284     16,398,006     12,076,183 
  Operating expenses                                14,966,532      8,038,028      6,320,550 
  Stock option compensation                                  -      2,016,931              - 
  Interest expense                                     502,734        591,452        384,529 

     Total expenses                                 84,721,981     65,558,477     63,140,052 

Income (loss) before income tax (benefit)
  and minority interest                                242,803      5,486,682     (3,346,793)
                                                               
Income tax expense (benefit)                           (90,570)     2,009,403     (1,427,080)

Income (loss) before minority interest                 333,373      3,477,279     (1,919,713)

Minority interest in income (loss) of consolidated 
  subsidiary                                            54,095         (7,287)           - - 

Net income (loss)                                     $279,278     $3,484,566    $(1,919,713)

Other comprehensive income, before tax:
  Unrealized holding gains                           3,310,993      5,089,184      1,430,975 
  Less:  Reclassification adjustment for gains                                
     included in net income                          1,600,259      2,326,221      1,384,957 

Other comprehensive income, before tax               1,710,734      2,762,963         46,018 
Income tax expense related to items of other
  comprehensive income                                 570,047        931,855         12,700 

Other comprehensive income, net of tax               1,140,687      1,831,108         33,318 


Comprehensive income (loss)                         $1,419,965     $5,315,674    $(1,886,395)
Earnings (loss) per share: 
  Basic                                                   0.08           0.92          (0.49)
  Diluted                                                 0.07           0.91          (0.49)
</TABLE>

The accompanying notes are an integral part of the consolidated
financial statements. 

  PAGE 42
<PAGE>
<TABLE>
<CAPTION>
OLD GUARD GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
                                                For the years ended December 31, 1998, 1997 and 1996
                                                                                                  Net
                                                                                              Unrealized
                                                                                              Investment
                                                          Additional                          Gains, Net
                                     Common Stock        Paid-In    Deferred     Retained  of Deferred  Treasury 
                                   Shares     Amount     Capital  Compensation   Earnings  Income Taxes   Stock       Total
<S>                                <C>        <C>         <C>        <C>          <C>         <C>        <C>         <C> 
Balance, January 1, 1996            -     $      -     $     -     $      -     $38,905,128  $1,992,186    $  -        $40,897,314

Comprehensive income:
  Net loss                          -            -           -            -      (1,919,713)       -          -         (1,919,713)
  Unrealized gains on
    investments, net of
    reclassification
    adjustment                      -            -           -            -            -         33,318        -            33,318
Comprehensive income                -            -           -            -            -           -           -        (1,886,395)

Balance, December 31, 1996          -            -           -            -      36,985,415   2,025,504        -        39,010,919

Comprehensive income:
  Net income                        -            -           -            -       3,484,566        -           -         3,484,566
  Unrealized gains on
   investments, net of
   reclassification
   adjustment                       -            -           -            -            -      1,831,108        -         1,831,108
Comprehensive income                                                                                                     5,315,674

Issuance of common stock, 
  net of issuance costs        4,204,910   38,317,908        -            -            -           -                    38,317,908

Dividends ($.05 per share)                                                         (210,245)                              (210,245)

Purchase of treasury stock      (120,540)        -           -            -            -           -      (2,290,033)   (2,290,033)

Deferral of stock-based
  compensation                      -            -      2,633,864   (6,688,774)        -           -                    (4,054,910)

Stock-based compensation            -            -      2,153,839      411,221         -           -                     2,565,060

Balance December 31, 1997      4,084,370   38,317,908   4,787,703   (6,277,553)  40,259,736   3,856,612   (2,290,033)   78,654,373 

Comprehensive income:
 Net income                         -            -           -            -         279,278        -            -          279,278
  Unrealized gains on
   investments, net of
   reclassification
   adjustment                       -            -           -            -            -      1,140,687         -        1,140,687
Comprehensive income                                                                                                     1,419,965
                                                                                   
Dividends ($.05 per share)          -            -           -            -        (363,795)       -            -         (363,795)

Purchase of treasury stock      (200,000)        -           -            -            -           -      (3,025,325)   (3,025,325)

Reissuance of treasury stock       3,104         -            828         -            -           -          46,948        47,776

Exercise of common stock
  options                         41,257      412,570           0         -            -           -            -          412,570

Stock-based compensation           4,670       46,125    (417,925)     946,835                                55,138       630,173

Balance, December 31, 1998    $3,933,401  $38,776,603  $4,370,606  $(5,330,718) $40,175,219  $4,997,299  $(5,213,272)  $77,775,737
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statement.   <PAGE 43>
  PAGE 44
<PAGE>
<TABLE>
<CAPTION>              OLD GUARD GROUP, INC. AND SUBSIDIARIES
                       Consolidated Statements of Cash Flows
                       For the years ended December 31, 1998, 1997 and 1996 

                                                                 1998           1997           1996
<S>                                                         <C>            <C>            <C>
Cash flows from operating activities:
   Net income (loss)                                           $279,278     $3,484,566    $(1,919,713)
    Adjustments to reconcile net income (loss) to net
     cash provided by operating activities:
   Depreciation and amortization                              1,329,678      1,388,677        960,515 
   Net realized investment gains                             (1,289,541)    (2,326,221)    (1,384,957)
   Deferred income tax expense (benefit)                        150,904        958,542       (910,615)
   Non-cash compensation expense                              1,046,297      2,565,061              - 
   Other                                                        (25,394)       (16,694)        (5,195)
   (Increase) decrease in assets:
     Receivables                                             (3,563,949)     3,063,473     (5,463,532)
     Prepaid reinsurance  premiums                            5,505,730      2,945,331     (6,948,184)
     Deferred policy acquisition costs                       (2,104,357)    (1,519,308)     1,577,436 
     Other assets                                            (2,519,408)     1,116,626       (757,012)
   Increase (decrease) in liabilities: 
     Losses and loss adjustment expenses                      1,205,943     (8,847,039)     3,279,580 
     Unearned premiums                                        3,073,961        689,956      1,048,506 
     Accrued expenses                                         1,497,577       (298,154)      (408,945)
     Other liabilities                                          514,653        849,542        214,401 

   Net cash provided (used) by operating activities           5,101,372      4,054,358    (10,717,715)

Cash flows from investing activities: 
    Cost of purchases of fixed income securities:
   Held to maturity                                         (11,858,011)    (2,777,906)             - 
   Available for sale                                       (28,122,059)   (51,038,191)   (23,847,070)
    Proceeds from sales of fixed income securities:
   Available for sale                                        24,538,026     18,322,894     24,135,158 
    Proceeds from maturities of fixed income securities:
   Held to maturity                                          13,570,526      2,463,699              - 
   Available for sale                                         5,825,742     10,100,750      7,827,777 
    Cost of equity securities purchased                      (8,396,523)    (8,981,660)    (4,015,036)
    Proceeds from sales of equity securities                  6,134,648      7,662,191      7,122,598 
    Change in receivable/payable for securities                 317,722        (87,932)      (423,768)
    Cost of purchases of other invested assets               (1,325,000)    (4,420,001)    (1,885,000)
    Proceeds from sales of other invested assets                 56,846        588,582              - 
   Acquisition of subsidiary, net of cash acquired              427,269       (626,175)             - 
    Cost of purchases of property and equipment              (8,015,341)    (4,740,860)    (1,535,465)
    Proceeds from sales of property and equipment                 3,000         20,700               - 

   Net cash provided (used) by investing activities          (6,843,155)   (33,513,909)     7,379,194 

Cash flows from financing activities: 
    Proceeds from sale of stock, net of issuance costs                -     33,721,482       (958,484)
    Exercise of common stock options                            412,570              -              - 
    Purchase of treasury stock                               (4,760,795)      (970,688)             - 
    Proceeds from reissuance of treasury stock                   47,776 
    Payment of dividends                                       (363,795)      (210,245)             - 
    Repayment of subordinated debt                                    -              -       (750,000)
    Proceeds from bank loans                                  3,500,000      5,054,770      1,550,000 
    Proceeds from capital lease funding                               -              -      1,499,028 
    Payment on principal of capital lease or bank loan       (1,186,898)    (3,589,229)      (486,779)
   Net cash provided (used) by financing activities          (2,351,142)    34,006,090        853,765 

   Net increase (decrease) in cash and cash equivalents      (4,092,925)     4,546,539     (2,484,756)
                                                                      - 
Cash and cash equivalents at beginning of period             10,214,908      5,668,369      8,153,125 

Cash and cash equivalents at end of period                   $6,121,983    $10,214,908     $5,668,369 

Cash paid (received) during the year for:
   Interest                                                  $  503,364    $   591,452     $  381,896 
   Income taxes                                              $1,485,004    $    85,241     $ (160,453)
</TABLE>  <PAGE 45>
The accompanying notes are an integral part of the consolidated financial
statements. 

  PAGE 46
<PAGE>

                    Old Guard Group, Inc. and Subsidiaries

                  Notes to Consolidated Financial Statements

1.    Summary of Significant Accounting Policies:

            Basis of Consolidation

      The consolidated financial statements include the accounts
of Old Guard Group, Inc. and its wholly-owned subsidiaries
(OGGI), Old Guard Insurance Company (Old Guard), Old Guard Fire
Insurance Company (Old Guard Fire), First Patriot Insurance
Company (First Patriot), New Castle Insurance Company of
Delaware, Old Guard Insurance Management Co. (OGIM), 2929 Service
Corporation and OGGI's 80% owned subsidiary, First Delaware
Insurance Company (First Delaware). 

      OGGI is a regional insurance holding company that, on
February 11, 1997, completed a subscription offering in which it
raised $38.3 million, net of issuance costs of $3.7 million, in
exchange for 4.2 million shares of no par common stock. 
Concurrent with the subscription offering and in accordance with
a plan of demutualization, Old Guard, Old Guard Fire and First
Patriot were converted from mutual to stock insurance companies
and issued shares of common stock to OGGI in exchange for $16.0
million. 

      Effective October 1, 1998, New Castle Mutual Insurance
Company converted from mutual to stock form and changed its name
to New Castle Insurance Company of Delaware (New Castle).  New
Castle's conversion was pursuant to a plan of conversion approved
by the Delaware Insurance Department and New Castle's
policyholders.  Along with the conversion, OGGI's $2.5 million
surplus note investment in New Castle was converted to 1,500
shares of common stock and OGGI became the sole shareholder of
New Castle.  Accordingly, New Castle's results of operations for
the three months ended December 31, 1998 are consolidated with
those of OGGI in the financial statements presented herein.  Pro
forma results for 1998 and 1997, including New Castle as if it
had been fully owned for each of those years are as follows: 

      (Unaudited)                            1998              1997

      Total revenue                       $85,244,243       $73,639,526
      Income before income tax                839,290         4,163,329
      Net income                              672,960         2,611,153
      Earnings per share                        $0.17             $0.68

      Effective January 1, 1997, OGGI acquired 80% of the
outstanding common stock of First Delaware for $3.3 million,
which included a capital infusion of $1.5 million.  Pro forma
results for 1996, including First Delaware as if it had been 80% 
<PAGE 47> owned during that period and as if OGGI had converted
to stock form, are as follows: 

      Total revenue                                         $61,476,000
      Loss before provision for income tax                   (3,200,000)
      Net loss                                               (1,814,000)
      Loss per share                                             $(0.46)

      The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles.  All significant intercompany transactions have been
eliminated in consolidation.  Certain amounts in the 1997 and
1996 financial statements have been reclassified to conform to
the current year presentation.

            Description of Business

      OGGI is a property and casualty insurer of farms, small and
medium size businesses and residences in rural and suburban
communities in Pennsylvania, Delaware and Maryland, with
Pennsylvania comprising in excess of 83% of total direct premiums
written.  The principal lines of business are homeowners,
farmowners, personal automobile and commercial multi-peril which
represent approximately 25%, 21%, 24% and 15%, respectively, of
direct premiums written.

            Cash and Cash Equivalents

      Cash and cash equivalents are carried at cost, which
approximates fair value.  OGGI considers all highly liquid
investments with a maturity of three months or less when
purchased to be cash equivalents.

            Investments

      OGGI classifies fixed income and marketable equity
securities as trading or available for sale.  In addition, fixed
income securities may be classified as held to maturity.  Each
security are evaluated at the time of purchase and periodically
reevaluated. Held to maturity securities are carried at amortized
cost.  Available for sale securities are carried at fair value,
with the unrealized gains and losses, net of deferred income tax,
reported as a separate component of shareholders' equity. 
Currently, no securities are classified as trading.

      The fair value of all investments is subject to various
market fluctuations which include changes in equity markets,
interest rate environment and general economic conditions. 
Interest on fixed maturities and short-term investments is
credited to income as it accrues on the principal amounts
outstanding, adjusted for amortization of premiums and accretion
of discounts computed utilizing the effective interest rate
method.  Realized gains and losses on investments sold are
calculated on the specific identification basis.  <PAGE 48>

      During the third quarter of 1997, OGGI transferred $38.1
million of fixed income securities from available for sale to
held to maturity reflecting management's intention and ability to
hold these securities until maturity.  The change in
classification from available to sale to held to maturity did not
have a material effect on OGGI's financial position or results of
operations.

            Deferred Policy Acquisition Costs

      Acquisition costs such as commissions, premium taxes and
certain other expenses which vary with and are directly related
to the production of business, are deferred and amortized over
the effective period of the related insurance policies.  The
method followed in computing deferred policy acquisition costs
limits the amount of such deferred costs to their estimated
realizable value, which gives effect to premiums to be earned,
related investment income, loss and loss adjustment expenses and
certain other maintenance costs expected to be incurred as the
premiums are earned.  To the extent that deferred policy
acquisition costs are not realizable, the deficiency is charged
to income currently.

            Property and Equipment

      Property and equipment are carried at cost less accumulated
depreciation.  Property is depreciated on a straight-line basis
over the useful lives ranging from five to fifty years. Equipment
is depreciated on a straight-line basis with useful lives of five
to ten years.  Computer software is amortized on a straight-line
basis over a useful life of five years.

            Premiums

      Premiums written are earned on a pro rata basis over the
terms of the respective policies.  Unearned premiums represent
the unexpired portion of the policies in-force.

            Losses and Loss Adjustment Expenses

      The liability for losses and loss adjustment expenses
include amounts determined on the basis of claims adjusters'
evaluations, estimates of losses incurred but not reported
calculated using historical experience and other estimates.  Any
adjustments resulting from changes in estimates are reflected in
current operating results.  Estimated amounts of salvage and
subrogation recoverable on paid and unpaid losses are reflected
as a reduction of the liability for losses and loss adjustment
expenses.

            Stock-Based Compensation  <PAGE 49>

      Stock-based compensation plans are accounted for under the
provisions of Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related
interpretations.  As such, compensation expense would be recorded
on the date of a stock option grant only if the current market
price of the underlying stock exceeded the exercise price. 
Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," permits entities to
recognize as expense, over the vesting period, the fair value of
all stock-based awards on the date of grant.  Alternately, SFAS
No. 123 allows entities to apply the provision of APB Opinion No.
25 and provide pro forma net income and earnings per share
disclosures for employee stock option grants as if the fair value 
method defined in SFAS No. 123 had been applied.  OGGI has
elected to apply the provisions of APB Opinion No. 25 and provide
pro forma disclosures under SFAS No. 123.

            Income Taxes

      Deferred income taxes are accounted for using the liability
method wherein deferred tax assets or liabilities are calculated
on the differences between the bases of assets and liabilities
for financial statement purposes versus tax purposes (temporary
differences) using enacted tax rates in effect for the year in
which the differences are expected to reverse.  Tax expense in
the consolidated statements of income is equal to the sum of
taxes currently payable, including the effect of the alternative
minimum tax, if any, plus an amount necessary to adjust deferred
tax assets and liabilities to an amount equal to period-end
temporary differences at prevailing tax rates.

      Effective for the 1997 tax year, OGGI and its subsidiaries
file a consolidated federal income tax return.

            Reinsurance

      In the normal course of business, OGGI's insurance
subsidiaries reinsure a portion of their exposure and pay to
reinsurers a portion of premiums received on all policies
reinsured.  Insurance is ceded primarily to reduce net liability
on individual risks, to mitigate the effect of individual loss
occurrences (including catastrophe losses), to stabilize
underwriting results and to increase underwriting capacity.

      Assets and liabilities related to insurance contracts are
reported before the effects of reinsurance.  Reinsurance
receivables and prepaid reinsurance premiums are reported as
separate assets.        

      Certain reinsurance contracts provide for retrospective rate
adjustments based on experience.  Management estimates the
ultimate ceded premium based upon historical experience.  Any
adjustments resulting from changes in estimates are reflected in
current operating results.  <PAGE 50>

            Assessments

      OGGI's insurance subsidiaries are subject to assessments in
the states in which each company is licensed.  Assessments
consist primarily of charges from the residual markets and
guaranty fund associations.  Expense for guaranty fund
assessments is recognized when an insolvency has taken place, the
amount of the related assessment is reasonably estimable and the
event obligating OGGI to pay (the writing of premiums) has taken
place. 

            Concentration of Credit Risk

      Financial instruments which potentially expose OGGI to
concentrations of credit risk consist primarily of cash and
short-term investments, premiums in course of collection,
investments and balances recoverable from reinsurers.  Insureds
primarily consist of individuals and commercial and agricultural
businesses.

      No one insured accounted for a significant amount of
premiums earned or premiums in course of collection in 1998, 1997
or 1996.

            Use of Estimates

      The preparation of the accompanying consolidated financial
statements requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities and
disclosure of contingent assets and liabilities at the date of
the consolidated financial statements and the results of their
operations during the period.  The consolidated financial
statements include estimates the most significant of which are
the net deferred tax asset, liability for losses and loss
adjustment expenses, deferred policy acquisition costs and
reinsurance recoverables.  Actual results may differ from those
estimates.

2.    Statutory Information:

      OGGI's insurance subsidiaries prepare their statutory
financial statements in accordance with accounting principles and
practices prescribed or permitted by the Insurance Department of
the respective company's state of domicile.  Prescribed statutory
accounting practices include state laws, regulations, and general
administrative rules, as well as a variety of publications of the
National Association of Insurance Commissioners (NAIC). 
Permitted statutory accounting practices encompass all accounting
practices that are not prescribed; such practices differ from
state to state, may differ from company to company within a
state, and may change in the future.  

      In 1998, the NAIC adopted the Codification of Statutory
Accounting Principles guidance, which will replace the current 
<PAGE 51> Accounting Practices and Procedures manual as the
NAIC's primary guidance on statutory accounting.  The NAIC is now
considering amendments to the Codification guidance that would
also be effective upon implementation.  The Codification provides
guidance for areas where statutory accounting has been silent and
changes current statutory accounting in some areas, e.g. deferred
income taxes are recorded.  The Pennsylvania Insurance Department
has adopted the Codification guidance, effective January 1, 2001. 
OGGI has not yet estimated the potential effect of the
Codification guidance, however, it will not likely affect
financial statements prepared in accordance with generally
accepted accounting principles. 

      Risk based capital is designed to measure the acceptable
amount of capital an insurer should have based on the inherent
risks of the insurer's business.  Insurers failing to meet
adequate capital levels may be subject to insurance department
scrutiny and ultimately rehabilitation or liquidation.  Based on
established standards, OGGI's insurance subsidiaries maintain
surplus in excess of prescribed risk based capital requirements.

      Statutory surplus and net income (loss), determined in
accordance with accounting practices prescribed or permitted by
insurance regulatory authorities are as follows:

<TABLE>
<CAPTION>
                            Statutory Surplus        Statutory Net Income (Loss) 
                      1998           1997         1998          1997           1996
<S>              <C>             <C>            <C>         <C>            <C>
Old Guard         $30,460,772    $29,176,267    $(183,599)   $2,789,155      $(658,740)
Old Guard Fire     13,573,448     14,274,141     (179,784)      675,225       (534,143)
First Patriot       4,868,651      5,254,516     (110,523)      504,258       (207,441)
First Delaware      3,055,027      2,986,233      217,325        26,457              - 
New Castle          2,365,024              -      467,926             -              - 
                  $54,322,922    $51,691,157     $211,345    $3,995,095    $(1,400,324)
                  ===========    ===========     ========    ==========    ===========
</TABLE>

      A reconciliation of OGGI's statutory net income and surplus
to OGGI's net income and shareholders' equity, under generally
accepted accounting principles (GAAP), is as follows:

<TABLE>
<CAPTION>
                                                            Year Ended December 31,

                                                    1998           1997           1996
<S>                                            <C>            <C>             <C>
Net Income: 

    Statutory net income                          $211,345     $3,995,095     $(1,400,324)
    GAAP adjustments:
        Increase (decrease) in deferred policy
            acquisition costs                    2,104,357      1,519,308      (1,577,436)
        Deferred income tax (expense) benefit      233,028     (1,716,425)        910,615 
        Accrual of guaranty fund assessment     (1,015,100)             -              - 
        New Castle pre-acquisition earnings       (634,035)             -              - 
        Other                                     (620,317)      (313,412)        147,432 

    GAAP net income (loss)                        $279,278     $3,484,566     $(1,919,713)
                                                ==========     ==========     ===========  <PAGE 52>
<CAPTION>

                                                               As of December 31,  

Shareholders' Equity:                               1998           1997
<S>                                            <C>           <C>
    Statutory surplus                           $54,322,922    $51,691,157 
    GAAP adjustments: 
         Deferred policy acquisition costs        9,423,124      7,318,767 
         Deferred income taxes                     (803,736)      (436,396)
         Restoration of non-admitted assets         686,811        686,604 
         Unrealized gains on investments, 
              available for sale                  2,054,306      1,401,835 
         Elimination of excess of statutory
             over statement reserves              3,157,510      3,395,713 
         Equity of holding company, net of
              eliminations                        8,380,414     12,775,263 
         Goodwill                                   716,879        772,023 
         Accrual of guaranty fund assessment     (1,015,100)          -
         Other                                      852,607      1,049,407 

    Shareholders' equity                        $77,775,737    $78,654,373
                                                ===========    ===========
</TABLE> 

3.    Investments:

      Net investment income, net realized investment gains and
change in unrealized investment gains on investments are as
follows for each of the three years ended December 31:

Net investment income and net realized investment gains 

<TABLE>
<CAPTION>
                                      1998          1997           1996
<S>                               <C>           <C>            <C>
Investment Income:
    Fixed income securities       $5,660,870    $5,391,156     $4,337,217 
    Preferred stocks                 299,920       285,712        437,633 
    Common stocks                    274,104       252,638         99,763 
    Cash and cash equivalents        649,579     1,039,826        418,695 
    Other                            514,375       395,576        244,514 

        Gross investment income    7,398,848     7,364,908      5,537,822 

Less investment expenses           1,219,453     1,488,200      1,043,004 

Net investment income             $6,179,395    $5,876,708     $4,494,818 

Realized gains (losses):
    Fixed income securities        1,279,666     1,054,387      1,079,958 
    Preferred stocks                 425,875       391,640        413,326 
    Common stocks                    408,169       868,704        141,673 
    Other                           (824,169)       11,490       (250,000)

Net realized investment gains     $1,289,541    $2,326,221     $1,384,957
</TABLE>
   <PAGE 53>

Change in net unrealized gains on investments:

<TABLE>
<CAPTION>

                               1998          1997          1996
<S>                        <C>          <C>            <C>
Fixed income securities      $230,342    $1,189,419    $(1,309,607)
Preferred stocks             (177,861)       19,257        (62,807)
Common stocks               1,691,769     1,578,982      1,434,746 
Other invested assets         (33,516)      (24,695)       (16,314)
                            1,710,734     2,762,963         46,018 
Tax effect                   (570,047)     (931,855)       (12,700)

                           $1,140,687    $1,831,108        $33,318 
</TABLE>

      The cost and estimated fair value of investments at
December 31, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
                                                                          Gross         Gross
      1998                                                             Unrealized    Unrealized      Estimated
Held to Maturity                                         Cost (1)         Gains        Losses        Fair Value
<S>                                                    <C>             <C>           <C>            <C>
Fixed income securities
   U.S. Treasury securities and obligations of U.S.
           Government corporations and agencies         $9,345,372       $246,328        $5,915      $9,585,785 
   Obligations of states and political subdivisions      7,244,349        230,745         7,038       7,468,056 
   Corporate obligations                                 5,923,405        170,103        18,576       6,074,932 
   Collateralized mortgage obligations                  14,102,779        316,883        35,901      14,383,761 

           Total held to maturity                      $36,615,905       $964,059       $67,430     $37,512,534 

      1998
Available for Sale

Fixed income securities:
   U.S. Treasury securities and obligations of U.S.
           Government corporations and agencies         $9,609,215       $162,062      $    970      $9,770,307 
   Obligations of states and political subdivisions      9,589,498        270,455            26       9,859,927 
   Corporate obligations                                25,307,133      1,717,579       615,577      26,409,135 
   Collaterized mortgage obligations                    13,134,849        117,714        42,814      13,209,749 
           Total fixed income securities
                available for sale                      57,640,695      2,267,810       659,387      59,249,118 

Equity securities:
   Preferred stock                                       5,962,437        328,375       311,369       5,979,443 
   Common stock                                          9,605,659      6,404,413       389,413      15,620,659 

           Total available for sale                    $73,208,791     $9,000,598    $1,360,169     $80,849,220 
                                                       ===========     ==========    ==========     ===========

<CAPTION>
                                                                             Gross         Gross
      1997                                                              Unrealized    Unrealized       Estimated
Held to Maturity                                           Cost (1)          Gains        Losses      Fair Value
<S>                                                    <C>             <C>            <C>           <C>  
Fixed income securities:
   U.S. Treasury securities and obligations of U.S.
           Government corporations and agencies        $18,542,131       $141,455      $100,752     $18,582,834 
   Obligations of states and political subdivisions      8,344,543         65,375        11,027       8,398,891 
   Corporate obligations                                 5,051,926         99,797        20,300       5,131,423 
   Collateralized mortgage obligations                   6,444,122        172,351        10,274       6,606,199 

                    Total held to maturity              38,382,722        478,978       142,353      38,719,347   <PAGE 54>
      1997
Available for Sale

Fixed income securities:
   U.S. Treasury securities and obligations of U.S.
           Government corporations and agencies        $14,722,507       $146,230       $16,308     $14,852,429 
   Obligations of states and political subdivisions      8,188,884        167,823             -       8,356,707 
   Corporate obligations                                23,424,907      1,311,703       273,040      24,463,570 
   Collateralized mortgage obligations                   9,523,457         49,128         7,455       9,565,130 

                    Total fixed income securities       55,859,755      1,674,884       296,803      57,237,836 

Equity securities:
   Preferred stock                                       4,431,698        371,736       176,869       4,626,565 
   Common stock                                          7,885,087      4,587,650       264,419      12,208,318 

                    Total available for sale           $68,176,540     $6,634,270      $738,091     $74,072,719
                                                       ===========     ==========      ========     ===========
</TABLE>
  PAGE 55
<PAGE>
(1)   Original cost of equity securities; original cost of fixed
      income securities adjusted for amortization of premium and
      accretion of discount.

      The amortized cost and estimated fair value of fixed income
securities at December 31, 1998 by contractual maturity are shown
below:

<TABLE>
<CAPTION>
                                            Amortized      Estimated
                                               Cost        Fair Value
<S>                                         <C>            <C>
Held to Maturity
  Due in one year or less                   $3,068,185     $3,106,033 
  Due after one year through five years      4,915,524      4,981,973 
  Due after five years through ten years     4,304,608      4,464,599 
  Due after ten years                       10,224,809     10,576,168
  Collateralized mortgage obligations       14,102,779     14,383,761 

                                           $36,615,905    $37,512,534
                                           ===========    ===========  
Available for Sale
  Due in one year or less                   $1,278,282     $1,418,811 
  Due after one year through five years      8,825,279      9,064,240 
  Due after five years through ten years    16,133,008     16,348,128 
  Due after ten years                       18,269,277     19,208,190 
  Collateralized mortgage obligations       13,134,849     13,209,749 

                                           $57,640,695    $59,249,118
                                           ===========    =========== 
 </TABLE>

      Actual maturities may differ from contractual and
anticipated maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment
penalties.

      Collateralized mortgage obligations consist of mortgage
pass-through holdings and securities backed by credit card
receivables, auto loans and home equity loans.  These securities
follow a structured principal repayment schedule and are of high
credit quality rated "AA" or better by Standard & Poor's.  These
securities are presented separately in the maturity schedule due
to the inherent risk associated with prepayment on early
authorization.  The average duration of this portfolio is
2.4 years.

      The gross realized gains and losses on investment securities
in 1998, 1997 and 1996, are as follows:

<TABLE>
<CAPTION>
                              1998              1997              1996
<S>                           <C>               <C>               <C>
Gross realized gains          $2,783,095        $2,720,560        $1,804,668
Gross realized losses         (1,493,554)         (394,339)         (419,711)
Net realized gains            $1,289,541        $3,326,221        $1,384,957
</TABLE>
  <PAGE 56>
      Insurance laws require that certain amounts be deposited
with various state insurance departments for the benefit and
protection of policyholders.  The amortized cost of fixed income
securities on deposit with governmental authorities was $924,399
and $820,402 at December 31, 1998 and 1997, respectively.

4.    Losses and Loss Adjustment Expenses:

      Activity in the liability for losses and loss adjustment
expenses is summarized as follows:

<TABLE>
<CAPTION>
                                        1998           1997           1996
<S>                                 <C>            <C>            <C>
Balance as of January 1             $48,718,666    $55,371,077    $52,091,497 
Less reinsurance recoverables        17,001,279     20,855,702     16,000,653

      Net balance at January 1       31,717,387     34,515,375     36,090,844 

Acquisitions                            746,938        667,929              - 

Incurred related to: 
    Current year                     50,652,000     42,857,000     43,801,765 
    Prior years                      (2,256,569)    (4,342,940)       557,025 

      Total incurred                 48,395,431     38,514,060     44,358,790 

Paid related to: 
    Current year                     34,264,000     27,276,000     29,648,916 
    Prior years                      14,914,454     14,703,977     16,285,343

      Total paid                     49,178,454     41,979,977     45,934,259 

Net balance as of December 31        31,681,302     31,717,387     34,515,375 
Plus reinsurance recoverables        21,026,649     17,001,279     20,855,702 

Balance at December 31              $52,707,951    $48,718,666    $55,371,077 
                                    ===========    ===========    ===========
</TABLE>
 
      Changes in estimates for prior years are attributable to
favorable loss development across all lines in 1998 and primarily
in workers' compensation reserves in 1997.  The changes in
estimates for 1996 are primarily attributable to incurred loss
development experience across all lines of business.

      The liability for losses and loss adjustment expenses
reflects management's best estimate of future amounts needed to
pay claims and related settlement costs with respect to insured
events which have occurred, including events that have not been
reported. In many cases, significant periods of time, ranging up
to several years, may elapse between the occurrence of an insured
loss, the reporting of the loss, and the payment of that loss. 
As part of the process in determining these amounts, historical
data is reviewed and consideration is given to the impact of
various factors, such as legal developments, changes in social
attitudes, and economic conditions.
  <PAGE 57>
      OGGI's insurance subsidiaries have geographic exposure to
catastrophic losses in certain Mid Atlantic states.  Catastrophes
can be caused by various events including hurricanes, windstorms,
earthquakes, hail, explosions, severe weather and fires, and the
incidence and severity of catastrophes are inherently
unpredictable.  The extent of losses from a catastrophe is a
function of both the total amount of insured exposure in the area
affected by the event and the severity of the event.  Most
catastrophes are restricted to small geographic areas; however,
hurricanes and earthquakes may produce significant damage in
large, heavily populated areas.  OGGI's insurance subsidiaries
generally seek to reduce their exposure to catastrophe through
individual risk selection and the purchase of catastrophe
reinsurance.

      Management believes that its liability for losses and loss
adjustment expenses are fairly stated, in accordance with
generally accepted actuarial principles and practices.  However,
estimating the ultimate claims liability is a complex and
judgmental process inasmuch as the amounts are based on
management's informed estimates and judgments using data
currently available.  As additional experience and data become
available regarding claim payments and reporting patterns,
legislative developments, and economic conditions, the estimates
are revised accordingly and the impact is reflected currently in
the consolidated financial statements.

5.    Property and Equipment

      Property and equipment consisted of the following at
December 31, 1998 and 1997:

                                              1998             1997

Land                                      $   767,407       $  767,407
Buildings and improvements                 10,230,801        4,992,202
Furniture, fixtures, 
 equipment and software                    11,730,183        7,599,114
 
 Property and equipment, cost              22,728,391       13,358,723

Less accumulated depreciation              (6,563,363)      (5,458,521)
                                                                  
                                           16,165,028        7,900,202
Software in development                       776,101        1,771,969
Construction in progress                            -          440,041  

      Property and equipment              $16,941,129      $10,112,212

6.    Reinsurance:

      OGGI's insurance subsidiaries maintain reinsurance
agreements which provide coverage for individual property and
liability claims, as well as, catastrophic events.  These 
<PAGE 58> reinsurance programs mitigate loss exposure from
individually large losses and an aggregation of losses arising
from a single loss event.  OGGI is contingently liable for
reinsured claims if the assuming reinsurers cannot meet their
obligations under the reinsurance agreements.

      The following amounts represent OGGI's reinsurance activity
with unrelated insurers in 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                                       1998           1997           1996
<S>                                <C>            <C>            <C>
Ceded:
     Premiums earned               $18,360,030    $24,817,610    $27,468,375 
     Unearned premiums             $   983,630    $ 6,285,844    $ 8,417,500 
     Losses and loss adjustment
           expenses incurred       $11,361,729    $ 8,816,887    $30,508,137 

Assumed:
     Premiums earned               $   359,173    $   300,536    $   142,423 
     Unearned premiums             $    35,524    $    76,602    $    27,545 
     Losses and loss adjustment
        expenses incurred          $  (761,028)   $   314,913    $   180,604 

</TABLE>

      During 1997 and 1996, Old Guard, Old Guard Fire and First
Patriot maintained a 15% (20% in 1996) quota share reinsurance
agreement with their primary reinsurer, American Re-Insurance
Company.  The agreement provided for a 30% (35% in 1996) ceding
commission on net business written.   Effective January 1, 1998,
the agreement was cancelled on a run-off basis.  This agreement
was intended to provide protection from high frequency and low
severity type losses.  The following summarizes activity under
this treaty in 1998, 1997 and 1996: 

<TABLE>
<CAPTION>
                                       1998           1997           1996
<S>                                 <C>           <C>            <C>
Earned premiums                     $5,198,631    $10,732,903    $13,647,111 
Unearned premiums                   $        -    $ 5,198,631    $ 4,867,616 
Losses and loss adjustment
  expenses incurred                 $2,926,217    $ 6,943,898    $ 7,779,576 
</TABLE>


      Reinsurance recoverable, under this agreement, on paid and
unpaid losses was $2,641,973 and $5,565,726 at December 31, 1998
and 1997, respectively.
      
      OGGI performs credit reviews of its reinsurers, focusing on
financial stability and commitment to the reinsurance business. 
At December 31, 1998, OGGI's insurance subsidiaries had
reinsurance balances of approximately $11,723,000, net of
applicable ceded reinsurance payable, due from American Re. 
American Re's A.M. Best rating is A++.
  <PAGE 59>
7.    Long-Term Debt:

      Long-term debt is as follows at December 31, 1998:

            Mortgage, due 2013            
                  7.70% fixed             $1,944,444
                  LIBOR plus 1.50%         1,458,334
                                          $3,402,778

      The mortgage is secured by property located in Lancaster,
PA. and requires annual principal payments of $233,328.  The
fixed rate portion of the mortgage was converted from a variable
rate through an interest rate swap.  The fair value of the swap
at December 31, 1998 was $101,682.

8.    Lines of Credit:

      Subsidiaries of OGGI jointly maintain cash management
programs with a local financial institution.  The programs
provide for draws by any member of OGGI against a line of credit
in the event of overdrafts.  The line of credit is subject to a
maximum of $1,500,000 and bears interest at prime.  OGGI must
maintain zero balances on the lines for one thirty-day period
each year and must meet certain demand deposit requirements.  No
borrowings were outstanding under these arrangements at
December 31, 1998 and 1997.  OGGI also maintains a $15,000,000
acquisition line of credit which is subject to certain approvals
by the granting institution before funds can be drawn.

9.    Income Taxes:

      The tax effect of significant temporary differences that
give rise to OGGI's net deferred tax asset as of December 31, is
as follows:

<TABLE>
<CAPTION>
                                               1998           1997
<S>                                         <C>            <C>
Unearned premiums                           $2,640,369     $2,056,951 
Losses and loss adjustment expenses          1,289,391      1,435,173 
Stock compensation costs                       666,843        752,695 
Tax credits                                    321,064        336,315 
Net operating loss carryforward                480,930        504,533 
Other                                          557,157        154,551 

     Deferred tax asset                     $5,955,754     $5,240,218 

Deferred policy acquisition costs           $3,203,833     $2,488,352 
Unrealized gain on investments               2,557,508      1,987,461 
Depreciation and other                         615,067        501,655 

     Deferred tax liability                 $6,376,408     $4,977,468 

     Net deferred tax asset (liability)      $(420,654)      $262,750
</TABLE>
  <PAGE 60>
      The net deferred tax asset has not been reduced by a
valuation allowance because management believes that, while it is
not assured, it is more likely than not that it will generate
sufficient future taxable income to utilize these net excess tax
deductions.  The amount of the deferred tax asset considered
realizable, however, could be materially reduced in the near term
if estimates of future taxable income in the years in which the
differences are expected to reverse are decreased.

      Actual income tax expense (benefit) differed from expected
income tax expense (benefit), computed by applying the federal
corporate tax rate of 34% to income (loss) before income tax and
minority interest, for each of the three years ended December 31
as follows:

<TABLE>
<CAPTION>
                                             1998          1997          1996
<S>                                        <C>         <C>          <C>   
Expected income tax expense (benefit)      $82,553     $1,865,472   $(1,137,910)
Tax-exempt interest                       (100,837)        (8,041)       (9,380)
Dividends received reduction               (81,414)       (95,595)     (144,871)
ESOP compensation                           73,430         46,549            - 
Goodwill                                    18,749         18,749            - 
Research and experimentation
   credit                                       -              -       (127,823)
Other                                      (83,051)       182,269        (7,096)

   Income tax expense (benefit)           $(90,570)    $2,009,403   $(1,427,080)
                                          ========     ==========   ===========    
</TABLE>

The components of income tax expense (benefit) for each of the
three years ended December 31 are as follows: 
<TABLE>
<CAPTION>

                                            1998          1997         1996
<S>                                      <C>          <C>          <C>
Current income tax expense
          (benefit)                      $(241,474)   $1,050,862   $  (516,465)
Deferred tax expense
          (benefit)                        150,904       958,541      (910,615)

   Income tax expense (benefit)           $(90,570)   $2,009,403   $(1,427,080)
                                         =========    ==========   ===========
</TABLE>

      First Patriot has a net operating loss carryforward at
December 31, 1998 of approximately $1,415,000.  First Patriots'
net operating loss carryforward expires $58,000 in 2007, $261,000
in 2009, $780,000 in 2010 and $316,000 in 2011.  The NOL's can be
utilized to offset future taxable income of First Patriot.

      As of December 31, 1998, Old Guard and Old Guard Fire had
alternative minimum tax credit carryforwards of approximately
$71,000 and $139,000, respectively, available to offset future
regular income tax. 
  <PAGE 61>
10.   Employee Benefit Plans

      OGGI and it subsidiaries maintain certain stock compensation
and retirement plans as follows:

      Stock Compensation Plan

      The Stock Compensation Plan was adopted by the Board of
Directors of OGGI on December 20, 1996 and approved by
shareholders at the first Annual Meeting on August 19, 1997.  The
purpose of the plan is to provide additional incentive to
directors and employees by facilitating their purchase of stock
of OGGI.  Awards under the plan may be made in the form of
options, stock appreciation rights or grants of restricted stock. 
Awards up to 420,491 shares may be made under the Stock
Compensation Plan.  The Compensation Committee of the Board of
Directors of OGGI may, at their discretion, select employees to
whom awards will be granted, the number of shares to be subject
to such awards, the terms and conditions of such awards and other
restrictions they deem appropriate.  No awards of stock
appreciation rights or restricted stock have been made as of
December 31, 1998.

      OGGI applies the APB Opinion No. 25 expense recognition
criteria of SFAS No. 123 and related interpretations in
accounting for its stock compensation plan.  Accordingly, no
compensation cost has been recognized, except for the one-time
charge of $2,016,931 described later herein, in the accompanying
financial statements for the difference between the fair value of
stock-based compensation plans and the intrinsic value.  Had
compensation cost for stock-based compensation plans been
determined using fair value, OGGI's net income and earnings per
share would have been as follows:

                                            1998             1997 
Net income:
      As reported                         $279,278          $3,484,566
      Pro forma                           $253,951          $3,074,985

Basic earnings per share:
      As reported                             $.08               $ .92
      Pro forma                               $.07               $ .79

      The per share weighted-average fair value of options granted
during 1998 and 1997 was $5.05 and $ 10.75, respectively.  The
fair value of each option grant is estimated on the date of grant
using an option-pricing model and the following weighted-average
assumptions:

                                     1998               1997

Dividend Yield                        .50%              .50%
Expected Volatility                 21.90%            20.00%
Risk Free Interest Rate              4.95%             6.33%  <PAGE 62>
Expected Life                         5.4 years        5.4 years

      Information regarding activity in OGGI's stock options plan
is presented below:

<TABLE>
<CAPTION>
                                                           Weighted -Average
                                                           Exercise Prices
                                       Number of Shares       Per Share   
<S>                                    <C>                 <C>
Outstanding at January 1, 1997                       -                 N/A
Granted in 1997                                245,286             $10.34 
Exercised in 1997                                    -                 N/A
Forfeited in 1997                                    -                 N/A
Outstanding at December 31, 1997               245,286             $10.34 

Granted in 1998                                 10,905             $17.01 
Exercised in 1998                               41,257              10.00 
Forfeited in 1998                                  320              13.81 
Outstanding at December 31, 1998               214,614             $10.74 
</TABLE>

      The following table summarizes information about OGGI's
stock option plan at December 31, 1998:

<TABLE>
<CAPTION>
<S>                                       <C>           <C>          <C>         <C>         <C>
Exercise Prices                            $10.00       $19.00       $22.00      $19.63      $13.81 
Outstanding at December 31, 1998          196,029        4,000        4,000       6,000       4,585 
Weighted-average remaining
   contractual life (in years)                8.1          8.6          8.6         9.5         9.8
Options exercisable 
   at December 31, 1998                   196,029        4,000        4,000       6,000           - 

</TABLE>

      On February 11, 1997, in connection with OGGI's subscription
offering, 237,286 stock options were granted to directors and
officers.  These options have an exercise price of $10 per share
and are exercisable by the grantee for a period of ten years. 
The granting of these options was approved by shareholders at
OGGI's first Annual Meeting on August 19, 1997. At that time, the
price of OGGI's stock was $18.50 per share.  The difference
between the price of the stock at the measurement date and the
exercise price of the options was charged to earnings in 1997. 
Since these options were granted as non-qualified incentive stock
options, OGGI has recognized a deferred tax asset on the
difference between the exercise price and the value of the
options at the measurement date.

      Management Recognition Plan

      On December 20, 1996, the Board of Directors of OGGI also
adopted a Management Recognition Plan (MRP) which is designed to
reward and retain key employees of OGGI.  A total of 168,196
shares were authorized for possible award.

      The following summarizes MRP activity in 1998 and 1997: 
<PAGE 63>

                                                Shares

Total granted at January 1, 1997                      -
      Granted in 1997                           142,373
      Forfeited in 1997                               -
Total granted at December 31, 1997              142,373

      Granted in 1998                             5,000
      Forfeited in 1998                         (14,095)
Total granted at December 31, 1998              133,278

      Awards under the MRP vest over a period of five years
following the award date.  OGGI is recognizing compensation cost
over the vesting period equal to the value of the shares granted
at the award date.  In 1998 and 1997, $491,083 and $196,878 of
compensation cost was recognized under the MRP, respectively.                 

      Employee Stock Ownership Plan

      The Board of Directors has also adopted an Employee Stock
Ownership Plan (ESOP) for the exclusive benefit of participating
and eligible employees.  Employees are eligible after having
attained the age of 21 and completing one year of service with
OGGI or its subsidiaries.  In connection with the subscription
offering, the ESOP borrowed $4,054,910 in order to purchase 10%
of the total shares issued by OGGI. The loan bears interest at
8.45% and requires monthly payments of principal and interest of
$50,417 for a term of 10 years.  Because OGGI has guaranteed
repayment of the ESOP debt, the debt and related unearned
compensation are recorded in the accompanying consolidated
balance sheets as of December 31, 1998 and 1997.

      Dividends on shares held by the ESOP are paid to the ESOP
trust.  Dividends on the unallocated ESOP shares together with
OGGI's contributions, are used by the ESOP to repay principal and
interest on the outstanding debt.  Shares are released for
allocation to participants as the debt is retired.  Interest
incurred on the ESOP notes amounted to $309,671 and $282,079 in
1998 and 1997, respectively.  OGGI paid dividends on the stock
held by the ESOP of $40,518 and $20,275 in 1998 and 1997,
respectively.

      Retirement Plans

      OGGI has a discretionary noncontributory profit sharing plan
covering eligible employees.  OGGI's contribution to the plan
amounted to $73,050, $58,224 and $268,043 in 1998, 1997 and 1996,
respectively.

      OGGI also maintains a voluntary defined contribution savings
plan covering substantially all full-time employees.  OGGI 
<PAGE 64> matches employee contributions up to 3% of
compensation.  OGGI's contribution to this plan amounted to
$216,237, $168,064 and $158,784 in 1998, 1997 and 1996,
respectively.

11.   Earnings Per Share

      The following table reconciles the numerator and denominator
used in basic earnings per share to diluted earnings per share. 

<TABLE>
<CAPTION>
                                                1998               1997             1996
<S>                                         <C>               <C>              <C>
Net income (loss) for basic
      and diluted earnings per share          $279,278         $3,484,566      $(1,919,713)
                                            ==========         ==========      ===========

Common shares outstanding                    3,694,538          3,803,141        3,957,610 
Dilutive shares
     Treasury shares in MRP trust              121,365              5,231                - 
     Outstanding stock options                  83,401             40,483                - 

Total common and dilutive shares             3,899,304          3,848,855        3,957,610
                                            ==========          =========        ========= 
</TABLE>

      Options totaling 18,585 and 8,000 at December 31, 1998 and
1997, respectively, were not included in the computation of
diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares. 
Earnings per share for 1996 are computed on a pro forma basis
assuming the subscription offering took place on January 1, 1996.

12.   Commitments and Contingencies:

      In the event a property and casualty insurer becomes or is
declared insolvent, state insurance regulations provide for the
assessment of other insurers operating in that jurisdiction to
fund any capital deficiency of the insolvent insurer.  Generally,
this assessment is based upon the ratio of an insurer's voluntary
written premiums to total written premiums for all insurers in
that particular state.  OGGI charges these assessments to expense
when the following criteria have been met:

      (a)   the insolvency has taken place

      (b)   the amount of the assessment is reasonably estimable
            and 

      (c)   the event obligating the Group to pay has taken place
            (usually the writing of premiums).

      Because of the insolvencies of two large medical malpractice
insurance companies, OGGI expects to be assessed the maximum
allowable under Pennsylvania law (2% of subject premium writings)
for the next two to three years.  Based upon OGGI's current 
<PAGE 65> premium volume this amounts to approximately $1,000,000
each year. 

13.   Fair Values of Financial Instruments:

      The carrying amounts of cash and cash equivalents, short-
term investments and long-term debt approximate their fair value.

      Fixed income securities, preferred stocks and common stocks
are reported at fair value as established by quoted market prices
on secondary markets as of the balance sheet dates.

14.  Related Party Transactions:

      Neffsville Mutual Fire Insurance Company (Neffsville) is
affiliated with OGGI through common management and reinsurance
programs.

      Neffsville is provided management services by OGIM for a fee
as determined under a management agreement.  Management fees
recognized by OGIM under the aforementioned management agreements
are as follows: 

                              1998              1997              1996

Neffsville                    $462,061          $110,220          $55,600

      Neffsville maintains a quota share reinsurance agreement
with Old Guard Fire whereby 90% of Neffsville's business is
assumed by Old Guard Fire.  The following summarizes the business
ceded under the reinsurance agreement as of and for each of the
years ended December 31:

<TABLE>
<CAPTION>

                                           1998          1997          1996
<S>                                    <C>           <C>           <C>
Premiums written                       $2,328,492    $2,371,963    $2,577,252 

Premiums earned                         2,319,231     2,371,561     2,577,252 

Losses and loss adjustment expenses      (744,444)   (1,192,792)   (1,424,207)
Commissions                              (502,714)     (728,032)     (902,038)

                                       $1,072,073      $450,737      $251,007
                                       ==========    ==========    ==========  
Liability for losses and loss
    adjustment expenses                  $138,373      $351,750      $305,440 
Receivable from Neffsville               $355,773      $755,497      $258,430 
</TABLE>

      Effective January 1, 1998 Old Guard reinsured 100% of New
Castle's premiums losses and loss adjustment expenses in return
for a commission of 35% of ceded premiums written.  During 1997,
Old Guard participated in a portion of New Castle's reinsurance
program.  The following summarizes the business assumed from New
Castle for the year ended December 31, 1997 and for the nine 
<PAGE 66> months ended September 30, 1998, the date New Castle
became a subsidiary of OGGI (See note 1). 

                                         1998          1997 

Premiums written                       $7,462,598    $582,580

Premiums earned                         4,640,003     582,580 

Losses and loss adjustment expenses    (2,831,782)   (373,214) 
Commissions                            (2,611,910)   (170,631
                                       $ (803,689)   $ 38,735

15.   Subsequent Event
      
      On March 5, 1999, OGGI completed the acquisition of
Investors Southern Corporation and its principal operating
subsidiary, Southern Title Insurance Corporation (collectively
referred to as Southern).  Southern provides title insurance and
related services through a network of agencies in Virginia, North
Carolina, the District of Columbia, Ohio and Pennsylvania. 
Pursuant to the stock purchase agreement, OGGI paid $6,750,000 in
cash for 100% of Southern's capital stock.  In addition, OGGI
will make additional payments equal to 25% of Southern's pretax
profits in 1999, 2000 and 2001.

      The acquisition will be accounted for under the purchase
method of accounting.  The purchase price will be allocated to
the assets acquired and liabilities assumed based upon their
estimated fair values.  The purchase price allocation will be
determined in 1999 when additional information becomes available.

      Summary financial information for Southern as of and for the
year ended December 31, 1998 is as follows: 

      (Unaudited)

      Total assets                  $11,700,000
      Total revenues                 14,400,000
      Pre-tax income                    444,000

16.   Litigation

      On February 10, 1997, OGGI, Old Guard, Old Guard Fire, First
Patriot (the Insurance Companies) and each of their respective
directors were served with an eleven count combination class
action and derivative lawsuit, filed in the United States
District Court for the Eastern District of Pennsylvania by four
policyholders.  By filing the class action portion of the
lawsuit, these four policyholders purport to represent all
141,000 policyholders of the Insurance Companies.  Seven of the
eleven counts challenge the constitutionality of the Pennsylvania
Insurance Company Mutual to Stock Conversion Act (Act), which
permitted the Insurance Companies plan of demutualization (Plan) 
<PAGE 67> in 1997.  The plaintiffs are contending that the Plan
violated the rights of the plaintiffs and members of the class
under the United States and Pennsylvania Constitutions and that
the Act is unconstitutional as applied by the Plan.  The
remainder of the class action claims assert theories regarding
purported violations of the Act, principally relating to the
description of the Plan in the proxy statement approved by the
Insurance Department of the Commonwealth of Pennsylvania
(Department) and mailed to policyholders.  The derivative claim
was brought against the directors of the Insurance Companies,
purportedly on behalf of the Insurance Companies, alleging breach
of the fiduciary duty of care in approving and implementing the
Plan and the fiduciary duty of loyalty, presumably in approving
the stock-based compensation plans which were contemplated by the
Plan.  The stock-based compensation plans are expressly permitted
by the Act, were approved by the Department and have subsequently
been approved by shareholders.  The suit seeks such compensatory
damages as may be allowed by law, a declaration that the Plan
violates the Act and the United States and Pennsylvania
Constitutions and the rights of the plaintiffs thereunder, and
such other relief as the court deems appropriate.

      OGGI, the Insurance Companies and the individual defendants
filed a motion to dismiss the complaint in May 1997.  In December
1997, the Court granted the motion with respect to two of the
constitutional counts and denied the motion with respect to the
remaining nine counts, including five of the constitutional
claims.  

      On January 15, 1998, the plaintiffs filed a motion for class
certification. On September 30, 1998, the Court granted the
motion, appointing plaintiffs as class representatives and
certifying the class as all policyholders of the Insurance
Companies as of February 7, 1997.

      OGGI, the Insurance Companies and the individual defendants
filed a motion for summary judgment with respect to the remaining
constitutional claims on July 13, 1998.  On March 5, 1999, the
Court granted the motion with respect to the two remaining counts
under the U.S. Constitution and retained supplemental
jurisdiction over the remaining state law claims.

      If the plaintiffs prevail in the above litigation, the
remedy a court would grant or the amount of damages it might
award is uncertain.  A court has broad discretion to fashion a
fair and equitable remedy in light of the nature of the
constitutional or other violation, the relative harm to the
parties, and the public interest.  In some cases, relief is
applied on a prospective basis only; in other cases, relief is
applied on a retroactive basis.  No prediction can be made
concerning the remedy a court would fashion or the amount of
damages it might award.  However, two of the more far-reaching
possibilities include: 
  <PAGE 68>
      -     A requirement that OGGI pay all purchasers of common
            stock, either on a mandatory basis or at the election
            of the purchaser, as damages or otherwise, (i) the
            purchase price paid per share of common stock acquired
            in the subscription offering, plus interest, (ii) the
            market value per share of common stock acquired, or
            (iii) the greater of (i) or (ii), less, in each case,
            any proceeds received by such purchaser from the sale
            of the common stock.  No assurance can be given that
            OGGI would have sufficient funds at that time to honor
            any such obligation; or

      -     OGGI could be required to pay or distribute to all or
            some policyholders of the Insurance Companies, either
            on a mandatory basis or at the election of the
            policyholders, an amount equal to the surplus of the
            Insurance Companies as of the date of the subscription
            offering (approximately $38 million), as damages or
            otherwise.  Such distribution could be required to be
            made in cash common stock or other debt or equity
            securities.  No assurance can be given that OGGI would
            have sufficient funds, or the capacity to borrow
            sufficient funds, at that time to honor any such
            obligation.  Any required distribution of common stock
            or other equity securities would materially dilute the
            interests of existing shareholders. 

      In the event that OGGI could not honor its obligations under
any remedy imposed by the Court, OGGI could be forced to seek the
protection of the bankruptcy laws and the Insurance Companies
could be deemed insolvent and seized by the Department.

17.   Unaudited Quarterly Information (in thousands except per
share data):

<TABLE>
<CAPTION>

                                                            1998
                                              Fourth     Third      Second    First
                                              Quarter    Quarter    Quarter   Quarter
<S>                                           <C>        <C>        <C>       <C>
Net premiums earned                           $19,330    $19,839    $18,448   $17,729

Total revenues                                $21,486    $21,297    $21,543   $20,639

After-tax operating income (loss), net of
   realized investment gains                  $   (18)   $  (331)   $(1,268)  $ 1,045

Net income loss                               $   (13)   $  (636)   $  (650)  $ 1,578

Earnings (loss) per share
  Basic                                         (0.00)     (0.17)     (0.17)     0.43
  Diluted                                       (0.00)     (0.17)     (0.17)     0.41
<CAPTION>  <PAGE 69>
                                                            1997
                                              Fourth     Third      Second    First
                                              Quarter    Quarter    Quarter   Quarter
<S>                                           <C>        <C>        <C>       <C>
Net premiums earned                           $16,544    $15,377    $15,801   $14,707

Total revenues                                $18,392    $18,097    $17,920   $16,636
After-tax operating income (loss), net 
  of realized investment gains                $   915    $  (436)   $   650   $   820

Net income (loss)                             $ 1,174    $   258    $   924   $ 1,129

Earnings per share 
  Basic                                          0.31       0.07       0.24     0 .30
  Diluted                                        0.30       0.07       0.24     0.30
</TABLE>
  PAGE 70
<PAGE>
                       Report of Independent Accountants

To the Board of Directors and Shareholders
Of Old Guard Group, Inc.

      Our report on the consolidated financial statements of Old
Guard Group, Inc. and Subsidiaries is included in Item 8 of this
Form 10-K.  In connection with our audits of such financial
statements, we have also audited the related financial statement
schedules included in Item 8 of this Form 10-K.

      In our opinion, the financial statement schedules referred
to above, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all
material respects, the information required to included therein.

/s/ PricewaterhouseCoopers LLP

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 24, 1999, except for Notes 15
and 16, for which the date is March 5, 1999

  PAGE 71
<PAGE>
OLD GUARD INSURANCE GROUP
SCHEDULE I - SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN
RELATED PARTIES
AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>

COLUMN A                                                 COLUMN B     COLUMN C     COLUMN D
                                                                       Fair         Balance
Type of Investment                                        Cost         Value        Sheet
<S>                                                  <C>           <C>           <C>
Fixed Maturities:
  Bonds:
    United States Government and Government
      Agencies and Authorities                       $ 18,954,587  $ 19,356,092  $ 19,115,679
    States, Municipalities and Political
      Subdivisions                                     16,833,847    17,327,983    17,104,276
    Convertibles and Bonds with Warrants Attached      10,604,409    10,962,447    10,962,447
    All Other Corporate Bonds                          47,863,755    49,115,510    48,682,621

  Redeemable Preferred Stock                            3,732,189     3,661,576     3,661,576
      Total Fixed Maturities                         $ 97,988,787  $100,423,228  $ 99,526,599


Equity Securities:
  Common Stocks:
    Public Utilities                                      170,087       206,288       206,288
    Banks, Trust and Insurance Companies                1,221,091     2,205,852     2,205,852
    Industrial, Miscellaneous and All Other             8,214,481    13,208,519    13,208,519

  Non-redeemable Pref(CONV)                             2,230,248     2,317,867     2,317,867
      Total Equity Securities                          11,835,907    17,938,526    17,938,526

Other Long-Term Investments                             4,498,000     4,412,378     4,412,378

      Total Investments                              $114,322,694  $122,774,132  $121,877,503

</TABLE>

  PAGE 72
<PAGE>
Old Guard Group, Inc.
Schedule II.     Condensed Financial Information of Registrant -
Balance Sheet (Parent Company)
As of December 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                     1998          1997
<S>                                              <C>           <C>
ASSETS
Investments: 
  Fixed income securities, available for sale    $ 2,059,455   $ 8,513,120
  Other invested assets                            2,184,509     1,068,376
  Investment in subsidiaries, at equity           69,616,981    70,560,377
    Total investments                             73,860,945    80,141,873

Cash and cash equivalents                            387,471     2,729,671
Deferred income taxes                                534,456       702,051
Property and equipment                             9,973,709          -
Other assets                                         928,549       196,524

    TOTAL ASSETS                                 $85,685,130   $83,770,119

LIABILITIES & SHAREHOLDERS' EQUITY
Liabilities:
  Long-term debt                                 $ 3,402,778   $      -
  ESOP liability                                   3,547,448     3,740,426
  Other liabilities                                  959,167     1,375,320

    Total liabilities                              7,909,393     5,115,746

Shareholders' Equity:
  Preferred stock (5,000,000 shares authorized;
    None issued and outstanding)
  Common stock (15,000,000 shares
    authorized; 4,248,417 and 4,204,910
    shares issued; 3,933,401 and 4,084,370
    shares outstanding, no par)                    38,776,603    38,317,908
  Additional paid-in capital                        4,370,606     4,787,703
  Deferred compensation                            (5,330,718)   (6,277,553)
  Retained earnings                                40,175,219    40,259,736
  Net unrealized investment gains, net deferred
    income taxes                                    4,997,299     3,856,612
  Treasury stock, at cost (315,016
    and 120,540 shares)                            (5,213,272)   (2,290,033)

    Total shareholders' equity                     77,775,737    78,654,373

  Total liabilities and shareholders' equity      $85,685,130   $83,770,119
</TABLE>
  PAGE 73
<PAGE>
Old Guard Group, Inc.
Schedule II.     Condensed Financial Information of Registrant -
Statement of Income (Parent Company)
For the Years Ended December 31, 1998 and 1997

<TABLE>
<CAPTION>

                                                1998        1997
<S>                                         <C>          <C>
Revenue:
  Dividends from subsidiaries               $  900,000   $1,675,000
  Investment income                            368,929      828,502

    Total revenue                            1,268,929    2,503,502

Expense:
  Stock option compensation                       -       2,016,931
  Other expense                                982,136    1,050,453
  Interest expense                             111,817      282,079

    Total expense                            1,093,953    3,349,463

Income (loss) before income tax and
  equity in earnings of subsidiaries           174,976     (845,961)

  Income tax benefit                          (303,556)    (810,595)

Income (loss) before equity in earnings
  of subsidiaries                              478,532      (35,366)

  Equity in undistributed earnings (loss) 
    of subsidiaries                           (199,254)   3,519,932

  Net income                                $  279,278   $3,484,566
</TABLE>
  PAGE 74
<PAGE>
Old Guard Group, Inc. 
Schedule II.     Condensed Financial Information of Registrant -
Statement of Cash Flow (Parent Company)
For the Years Ended December 31, 1998 and 1997 

<TABLE>
<CAPTION>
                                                      1998            1997
<S>                                               <C>             <C>
Cash flows from operating activities:
  Net income                                      $   279,278     $ 3,484,566

  Adjustments to reconcile net income to net
    cash provided by operating activities:
    Equity in undistributed earnings of
      subsidiaries                                    199,254      (3,519,932)
    Deferred income tax benefit                       192,159        (752,695)
    Non-cash compensation expense                   1,046,297       2,565,061
    Other                                              (1,432)       (143,646)

    Net cash provided by operating activities       1,715,556       1,633,354


Cash flows from investing activities:
  Cost of purchases of fixed income securities     (2,581,418)     (8,895,373)
  Proceeds from sales and maturities of fixed
    income securities                               8,550,750         465,926
  Cost of equity securities acquired                     -        (26,296,727)
  Cost of purchases of other invested assets       (1,000,000)     (1,000,000)
  Proceeds from sales of other invested assets           -          1,500,000
  Capital contribution to subsidiary                 (625,584)          -
  Cost of purchases of property and equipment      (6,114,806)          -    

    Net cash used by investing activities          (1,771,038)    (34,226,174)

Cash flows from financing activities
  Proceeds from sale of stock, net of issuance
    costs                                             412,570     32,762,998
  Cost of treasury stock                           (4,760,795)      (970,688)
  Proceeds from reissuance of treasury stock           47,776           -
  Payment of dividends                               (363,795)      (210,245)
  Proceeds from bank loans                          3,500,000      3,954,770
  Payments on principal of capital lease or
    bank loan                                      (1,122,474)      (214,344)

    Net cash (used) provided by financing
      activities      (2,286,718)    35,322,491

    Net increase in cash and cash equivalents      (2,342,000)     2,729,671

Cash and cash equivalents at beginning of period    2,729,671           -   

Cash and cash equivalents at end of period.       $   387,471    $ 2,729,671
</TABLE>

  PAGE 75
<PAGE>
OLD GUARD INSURANCE GROUP
SCHEDULE IV - REINSURANCE
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>

COLUMN A                                 COLUMN B    COLUMN C    COLUMN D     COLUMN E    COLUMN F
                                                                                          Percentage
                                                     Ceded to    Assumed from             of Amount
                                         Gross       Other       Other        Net         Assumed to
                                         Amount      Companies   Companies    Amount      Net
<S>                                      <C>         <C>         <C>          <C>         <C>      
FOR THE YEAR ENDED DECEMBER 31, 1998     $91,027,590 $18,360,030   $2,678,404 $75,345,964       3.55%


FOR THE YEAR ENDED DECEMBER 31, 1997     $83,991,527 $24,817,610   $3,254,677 $62,428,594       5.20%


FOR THE YEAR ENDED DECEMBER 31, 1996     $78,340,414 $27,468,375   $2,719,675 $53,591,714       5.10%

</TABLE>
  PAGE 76
<PAGE>
OLD GUARD INSURANCE GROUP
SCHEDULE VI - SUPPLEMENTAL INFORMATION CONCERNING PROPERTY &
CASUALTY INSURANCE OPERATIONS
AS OF AND FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996

<TABLE>
<CAPTION>

COLUMN A                                   COLUMN B        COLUMN C      COLUMN D      COLUMN E     COLUMN F     COLUMN G

                                           DEFERRED        RESERVE FOR   DISCOUNT IF
                                           POLICY          LOSSES AND    ANY                        NET          NET
                                           ACQUISITION     LOSS ADJ      DEDUCTED IN   UNEARNED     EARNED       INVESTMENT
AFFILIATION WITH REGISTRANT                COSTS           EXPENSES      COLUMN C      PREMIUMS     PREMIUMS     INCOME    

<S>                                        <C>             <C>           <C>           <C>          <C>          <C>
CONSOLIDATED PROPERTY & CASUALTY ENTITIES


   12/31/98                                   $9,423,124    $52,707,951            $0  $42,460,383  $75,345,964   $6,179,394


   12/31/97                                   $7,318,767    $48,718,666            $0  $36,535,108  $62,428,594   $5,876,708


   12/31/96                                   $5,603,343    $55,371,077            $0  $34,377,756  $53,591,714   $4,494,818


<CAPTION>

                                           COLUMN H                      COLUMN I      COLUMN J     COLUMN K

                                           LOSSES AND LAE                              PAID LOSSES
                                           INCURRED                                    AND LOSS     NET
                                           CURRENT         PRIOR         AMOUNT        ADJUSTMENT   WRITTEN
                                           YEAR            YEAR          OF DPAC       EXPENSES     PREMIUMS
<S>                                        <C>             <C>           <C>           <C>          <C>
   12/31/98                                  $50,652,000    ($2,256,569)  $20,857,284  $49,178,454  $83,925,644


   12/31/97                                  $42,857,000    ($4,342,940)  $16,398,006  $41,979,977  $66,063,881


   12/31/96                                  $43,801,765       $557,025   $12,076,183  $45,934,259  $47,692,036
</TABLE>
  PAGE 77
<PAGE>
Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.

      None.

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

      The information required by this item is incorporated by
reference from the Company's proxy statement with respect to the
1999 annual meeting of shareholders.  

Item 11.  EXECUTIVE COMPENSATION.

      The information required by this item is incorporated by
reference from the Company's proxy statement with respect to the
1999 annual meeting of shareholders.  

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

      The information required by this item is incorporated by
reference from the Company's proxy statement with respect to the
1999 annual meeting of shareholders.  

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      The information required by this item is incorporated by
reference from the Company's proxy statement with respect to the
1999 annual meeting of shareholders.    PAGE 78
<PAGE>
                                    PART IV

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

      (a)   1.    Financial Statements.

      The following consolidated financial statements are included
by reference in Part II, Item 8 hereof:

                  Report of Independent Accountants

                  Consolidated Balance Sheets as of December 31,
                  1998 and 1997.

                  Consolidated Statements of Income and
                  Comprehensive Income for the years ended December
                  31, 1998, 1997 and 1996.

                  Consolidated Statements of Shareholders' Equity
                  for the years ended December 31, 1998, 1997 and
                  1996.

                  Consolidated Statements of Cash Flows for the
                  years ended December 31, 1998, 1997 and 1996.

                  Notes to Consolidated Financial Statements.

            2.    Financial Statement Schedules.

      The following financial statement schedules are included in
Part II, Item 8 hereof:

            Schedule I - Summary of Investments - Other than
            Investments in Related Parties

            Schedule II - Condensed Financial Information of
            Registrant

            Schedule IV - Reinsurance

            Schedule VI - Supplemental Information Concerning
            Property and Casualty Insurance Operations

            3.    Exhibits.

Number      Title

 2.1        Joint Plan of Conversion, dated as of May 31, 1996, as
            amended and restated July 19, 1996, of Old Guard Mutual
            Insurance Group, Old Guard Mutual Fire Insurance
            Company and Goschenhoppen-Home Mutual Insurance Company
            (Incorporated by reference to Exhibit 2.1 to the 
            <PAGE 79> Company's Registration Statement
            No. 333-12779 on Form S-1)

 3.1        Articles of Incorporation of Old Guard Group, Inc.
            (Incorporated by reference to Exhibit 3.1 to the
            Company's Registration Statement No. 333-12779 on
            Form S-1)

 3.2        Bylaws of Old Guard Group, Inc. (Incorporated by
            reference to Exhibit 3.2 to the Company's Registration
            Statement No. 333-12779 on Form S-1)

 4.1        Form of certificate evidencing shares of Old Guard
            Group, Inc. (Incorporated herein by reference to
            Exhibit 1 to the Registration Statement on Form 8-A
            (File No. 000-21611) of Old Guard Group, Inc.)

10.1        Old Guard Group, Inc. - Management Recognition Plan*
            (Incorporated by reference to Exhibit 10.1 to the
            Company's Registration Statement No. 333-12779 on
            Form S-1) 

10.2        Old Guard Group, Inc. - 1996 Stock Compensation Plan*
            (Incorporated by reference to Exhibit 10.2 to the
            Company's Registration Statement No. 333-12779 on
            Form S-1)

10.3        Old Guard Group, Inc. - Employee Stock Ownership Plan*
            (Incorporated by reference to Exhibit 10.3 to the
            Company's Registration Statement No. 333-12779 on
            Form S-1)

10.4        Employment Agreement, dated as of June 1, 1996, between
            Commonwealth Insurance Managers, Inc., Old Guard Group,
            Inc. and David E. Hosler* (Incorporated by reference to
            Exhibit 10.4 to the Company's Registration Statement
            No. 333-12779 on Form S-1)

10.5        Employment Agreement, dated as of June 1, 1996, between
            Commonwealth Insurance Managers, Inc., Old Guard Group,
            Inc. and Steven D. Dyer* (Incorporated by reference to
            Exhibit 10.6 to the Company's Registration Statement
            No. 333-12779 on Form S-1)

10.6        Employment Agreement, dated as of June 1, 1996, between
            Commonwealth Insurance Managers, Inc., Old Guard Group,
            Inc. and Scott A. Orndorff* (Incorporated by reference
            to Exhibit 10.7 to the Company's Registration Statement
            No. 333-12779 on Form S-1)

10.7        Employment Agreement, dated as of June 1, 1996, between
            Commonwealth Insurance Managers, Inc., Old Guard Group,
            Inc. and Donald W. Manley* (Incorporated by reference 
            <PAGE 80> to Exhibit 10.8 to the Company's Registration
            Statement No. 333-12779 on Form S-1)

10.8        Employment Agreement, dated as of January 1, 1999, 
            between Old Guard Group, Inc. and Henry J. Straub*
            (filed herewith)

10.9        Shareholder Rights Agreement dated February 9, 1999, 
            between Old Guard Group, Inc. and American Stock
            Transfer and Trust Company, as trustee. (filed
            herewith)

21          List of Subsidiaries of Old Guard Group, Inc.

23          Consent of PricewaterhouseCoopers L.L.P.

27          Financial Data Schedule

________
*Denotes a compensatory plan, contract or arrangement.

      (b)   Reports on Form 8-K.

            None.
  PAGE 81
<PAGE>
                                  SIGNATURES

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

                                    OLD GUARD GROUP, INC.
                                    (Registrant)

March 30, 1998                      By_________________________________
                                          David E. Hosler,
                                          Chairman, President and Chief
                                          Executive Officer


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

      Signature               Title

/s/ James W. Appel            Director             March 30, 1999
James W. Appel

/s/ John E. Barry             Director             March 30, 1999
John E. Barry

/s/ Luther R. Campbell, Jr.   Director             March 30, 1999
Luther R. Campbell, Jr.

/s/ M. Scott Clemens          Director             March 30, 1999
M. Scott Clemens

/s/ David E. Hosler           Chairman of Board,   March 30, 1999
David E. Hosler               Chief Executive
                              Officer, and
                              Director (Principal
                              Executive Officer)

/s/ Richard B. Neiley, Jr.    Director             March 30, 1999
Richard B. Neiley, Jr.       

/s/ G. Arthur Weaver          Director             March 30, 1999
G. Arthur Weaver
 
/s/ Robert L. Wechter         Director             March 30, 1999
Robert L. Wechter

/s/ Noah W. Kreider, Jr.      Director             March 30, 1999
Noah W. Kreider, Jr.

/s/ Karen M. Balaban          Director             March 30, 1999 
<PAGE 82>
Karen M. Balaban

/s/ Henry J. Straub           Chief Financial      March 30, 1999
Henry J. Straub               Officer and
                              Treasurer
                              (Principal
                              Financial and Accounting 
                              Officer)

  PAGE 83
<PAGE>
                                 EXHIBIT INDEX

Number      Title

 2.1        Joint Plan of Conversion, dated as of May 31, 1996, as
            amended and restated July 19, 1996, of Old Guard Mutual
            Insurance Group, Old Guard Mutual Fire Insurance
            Company and Goschenhoppen-Home Mutual Insurance Company
            (Incorporated by reference to Exhibit 2.1 to the
            Company's Registration Statement No. 333-12779 on
            Form S-1)

 3.1        Articles of Incorporation of Old Guard Group, Inc.
            (Incorporated by reference to Exhibit 3.1 to the
            Company's Registration Statement No. 333-12779 on
            Form S-1)

 3.2        Bylaws of Old Guard Group, Inc. (Incorporated by
            reference to Exhibit 3.2 to the Company's Registration
            Statement No. 333-12779 on Form S-1)

 4.1        Form of certificate evidencing shares of Old Guard
            Group, Inc. (Incorporated herein by reference to
            Exhibit 1 to the Registration Statement on Form 8-A
            (File No. 000-21611) of Old Guard Group, Inc.)

10.1        Old Guard Group, Inc. - Management Recognition Plan*
            (Incorporated by reference to Exhibit 10.1 to the
            Company's Registration Statement No. 333-12779 on
            Form S-1) 

10.2        Old Guard Group, Inc. - 1996 Stock Compensation Plan*
            (Incorporated by reference to Exhibit 10.2 to the
            Company's Registration Statement No. 333-12779 on
            Form S-1)

10.3        Old Guard Group, Inc. - Employee Stock Ownership Plan*
            (Incorporated by reference to Exhibit 10.3 to the
            Company's Registration Statement No. 333-12779 on
            Form S-1)

10.4        Employment Agreement, dated as of June 1, 1996, between
            Commonwealth Insurance Managers, Inc., Old Guard Group,
            Inc. and David E. Hosler* (Incorporated by reference to
            Exhibit 10.4 to the Company's Registration Statement
            No. 333-12779 on Form S-1)

10.5        Employment Agreement, dated as of June 1, 1996, between
            Commonwealth Insurance Managers, Inc., Old Guard Group,
            Inc. and Steven D. Dyer* (Incorporated by reference to
            Exhibit 10.6 to the Company's Registration Statement
            No. 333-12779 on Form S-1)

10.6        Employment Agreement, dated as of June 1, 1996, between
            Commonwealth Insurance Managers, Inc., Old Guard Group,
            Inc. and Scott A. Orndorff* (Incorporated by reference
            to Exhibit 10.7 to the Company's Registration Statement
            No. 333-12779 on Form S-1)

10.7        Employment Agreement, dated as of June 1, 1996, between
            Commonwealth Insurance Managers, Inc., Old Guard Group,
            Inc. and Donald W. Manley* (Incorporated by reference
            to Exhibit 10.8 to the Company's Registration Statement
            No. 333-12779 on Form S-1)

10.8        Employment Agreement, dated as of January 1, 1999,
            between Old Guard Group, Inc. and Henry W. Straub*
            (filed herewith)

10.9        Shareholder Rights Agreement dated February 9, 1999, 
            between Old Guard Group, Inc. and American Stock
            Transfer and Trust Company, as trustee. (filed
            herewith)

21          List of Subsidiaries of Old Guard Group, Inc.

23          Consent of PricewaterhouseCoopers L.L.P.

27          Financial Data Schedule

________
*Denotes a compensatory plan, contract or arrangement.