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

                                    FORM 10-Q

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

For Quarter Ended:  JUNE 30, 1997             Commission file number:  0-16332


                            NATIONAL INSURANCE GROUP
             (Exact name of registrant as specified in its charter)

              CALIFORNIA                                94-3031790
       (State of Incorporation)               (IRS Employer Identification No.)

 395 OYSTER POINT BOULEVARD, SUITE 500
        SOUTH SAN FRANCISCO, CA                              94080
(Address of principal executive office)                   (Zip Code)

                                 (415) 872-6772
                         (Registrant's telephone number)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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      XX                No
        ----                 ---- 

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 3,916,103 shares as
of August 12, 1997.

<PAGE>   2
                            NATIONAL INSURANCE GROUP
                               INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION                                                    Page
<S>      <C>                                                                        <C>
Item 1 - Financial Statements:

         Consolidated Balance Sheets as of June 30, 1997 and
         December 31, 1996                                                           1

         Consolidated Statements of Earnings for the periods
         ended June 30, 1997 and 1996                                                2

         Consolidated Statements of Shareholders' Equity
         for the six months ended June 30, 1997 and 1996                             3

         Consolidated Statements of Cash Flows for the
         six months ended June 30, 1997 and 1996.                                    4

         Notes to Consolidated Financial Statements                                  5

Item 2 - Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                               6-12

PART II - OTHER INFORMATION

Item 1 - Legal Proceedings                                                          13

Item 2 - Changes in Securities                                                      13

Item 3 - Defaults Upon Senior Securities                                            13

Item 4 - Submission of Matters to a Vote of Security Holders                        13

Item 5 - Other Information                                                          13

Item 6 - Exhibits and Reports on Form 8-K                                           13

SIGNATURES                                                                          14

Exhibit 10.1 - Employment Agreement dated May 7, 1997 by and between
                  National and Douglas H. Helm

Exhibit 11.1 - Computation of Weighted Average Shares Outstanding
                  and Earnings per Share                                            

Exhibit 27.1 - Financial Data Schedule

</TABLE>



<PAGE>   3
                    NATIONAL INSURANCE GROUP AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                    As of June 30, 1997 and December 31, 1996
                 (in thousands of dollars, except share amounts)
<TABLE>
<CAPTION>
                                           June 30,    December 31,
                                            1997         1996
                                         ----------    -----------
                                         (unaudited)
<S>                                        <C>         <C>    
ASSETS:

 Fixed maturities                          $13,972     $18,538
 Equity securities                           2,159       2,051
 Short-term investments                      9,034      10,005
                                           -------     -------

  Total investments                         25,165      30,594
                                           -------     -------

Cash and cash equivalents                    4,955       3,183
Net premiums and
  accounts receivable                        8,616       5,181
Accrued interest receivable                    362         377
Property and equipment, net                  4,128       3,484
Deferred acquisition costs                   2,492       2,186
Deferred federal income taxes receivable       636         421
Other assets                                 1,622       1,686
                                           -------     -------

  Total assets                             $47,976     $47,112
                                           =======     =======

LIABILITIES:

Reserve for losses and LAE                 $ 2,446     $ 2,198
Unearned premiums                            5,819       4,753
Commissions payable                          1,403       1,113
Accrued expenses and other
  liabilities                                4,263       3,718
Drafts payable                                 594         295
Notes payable                                  833       1,333
Reserve for return premiums                  3,825       2,382
Unclaimed property-proposition 103           2,261       2,268
Deferred revenue                               500         500
                                           -------     -------

  Total liabilities                         21,944      18,560
                                           -------     -------

SHAREHOLDERS' EQUITY:

Common stock, no par value;
  authorized, 15,000,000 shares;
  issued and outstanding 3,916,103
  in 1997 and 3,896,937 in 1996             17,693      17,592
Retained earnings                            8,339      10,960
                                           -------     -------

  Total shareholders' equity                26,032      28,552
                                           -------     -------
  Total liabilities and
    shareholders' equity                   $47,976     $47,112
                                           =======     =======

</TABLE>

   The accompanying notes are an integral part of these financial statements.




                                       1
<PAGE>   4
                    NATIONAL INSURANCE GROUP AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                  For the periods ended June 30, 1997 and 1996
          (in thousands of dollars, except share and per share amounts)
                                   (unaudited)
<TABLE>
<CAPTION>
                                         Second Quarter                  Six Months
                                    --------------------------    --------------------------
                                       1997           1996            1997          1996
                                    -----------    -----------    -----------    -----------
<S>                                 <C>            <C>            <C>            <C>        
Net premiums written                $     5,067    $     3,235    $     9,714    $     6,005
Change in unearned premiums                (596)          (180)        (1,066)           836
                                    -----------    -----------    -----------    -----------

Net premiums earned                       4,471          3,055          8,648          6,841
Flood inquiry fees                        5,673          5,160          9,979          9,591
Tracking fees                             1,834          1,305          3,594          2,522
Net commission income                       171            122            388            599
Net investment income                       444            490            899          1,002
                                    -----------    -----------    -----------    -----------

   TOTAL REVENUES                        12,593         10,132         23,508         20,555
                                    -----------    -----------    -----------    -----------


Loss and LAE incurred                     1,673          1,565          2,886          2,672
Commissions to
  non-affiliates                            686            568          1,101          1,260
Personnel expenses                        5,621          5,018         10,572         10,160
All other expenses                        3,278          4,331          6,434          7,579
                                    -----------    -----------    -----------    -----------

   TOTAL EXPENSES                        11,258         11,482         20,993         21,671
                                    -----------    -----------    -----------    -----------

Income (loss) before provision
  for (benefit from) income taxes         1,335         (1,350)         2,515         (1,116)

Provision for (benefit from)
  income taxes                              497           (493)           875           (408)
                                    -----------    -----------    -----------    -----------

   NET INCOME (LOSS)                $       838    $      (857)   $     1,640    $      (708)
                                    ===========    ===========    ===========    ===========

Weighted average common and
  common equivalent shares
  outstanding                         3,989,724      4,679,942      3,989,660      4,691,008
                                    -----------    -----------    -----------    -----------


Per share results:

Net income (loss) per share         $      0.21    $     (0.18)   $      0.41    $     (0.15)
                                    ===========    ===========    ===========    ===========

</TABLE>

   The accompanying notes are an integral part of these financial statements.



                                       2
<PAGE>   5
                    NATIONAL INSURANCE GROUP AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                 For the six months ended June 30, 1997 and 1996
                 (in thousands of dollars, except share amounts)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                              Total
                            Common Stock                      Share-
                       --------------------     Retained      holders' 
                        Shares       Amount     Earnings      Equity
                       ---------   ---------   ---------    ---------
<S>                   <C>         <C>         <C>          <C>      
Balance at
Dec. 31, 1995          4,679,697   $  23,071   $   9,810    $  32,881

Options exercised         22,500         149           -          149

Accelerated vesting:           -          39           -           39

Net loss                       -           -        (710)        (710)

Unrealized loss, net
of deferred tax                -           -         (54)         (54)
                       ---------   ---------   ---------    ---------

Balance at
June 30, 1996          4,702,197   $  23,259   $   9,046    $  32,305
                       =========   =========   =========    =========


Balance at
Dec. 31, 1996          3,896,937   $  17,592   $  10,960    $  28,552

Net income                     -           -       1,640        1,640

Options exercised         19,166         101           -          101

Dividends paid                 -           -      (4,229)      (4,229)

Unrealized (loss),
net of deferred tax            -           -         (32)         (32)
                       ---------   ---------   ---------    ---------

Balance at
June 30, 1997          3,916,103   $  17,693   $   8,339    $  26,032
                       =========   =========   =========    =========

</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>   6

                    NATIONAL INSURANCE GROUP AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the six months ended June 30, 1997 and 1996
                 (in thousands of dollars, except share amounts)
                                   (unaudited)
<TABLE>
<CAPTION>
                                                                    June 30,    June 30,
                                                                     1997         1996
                                                                   --------    --------
<S>                                                                <C>         <C>      
CASH FLOWS FROM OPERATING ACTIVITIES
         Net income (loss)                                         $  1,640    $   (708)
         Adjustments to reconcile net income to net cash
           provided by operating activities:
           Depreciation and amortization                                610         994
           Change in assets and liabilities:
              Increase in net premiums and accounts
                receivable and accrued interest receivable           (3,420)       (405)
              (Increase) decrease in deferred acquisition costs        (306)        385
              Increase in insurance liabilities                       3,346         214
              Decrease in unclaimed property-proposition 103             (7)     (1,898)
              (Increase) decrease in tax assets                        (215)        127
              Other, net                                                609         607
                                                                   --------    --------
                Net cash provided (used) by operating activities      2,257        (684)
                                                                   --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES
              Purchase of investments                               (25,434)    (54,861)
              Maturity of investments                                30,832      58,250
              Purchase of equipment                                  (1,254)       (286)
                                                                   --------    --------
                Net cash provided by investing activities             4,144       3,103
                                                                   --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES
              Stock options exercised                                   100         188
              Dividends to shareholders                              (4,229)          -
              Principal payments on notes payable                      (500)          -
                                                                   --------    --------
                Net cash provided by financing activities            (4,629)        188
                                                                   --------    --------

         Net increase in cash and cash equivalents                    1,772       2,607
         Cash and cash equivalents at beginning of period             3,183       3,235
                                                                   --------    --------
         Cash and cash equivalents at end of period                $  4,955    $  5,842
                                                                   ========    ========

</TABLE>

   The accompanying notes are an integral part of these financial statements.



                                       4
<PAGE>   7

                    NATIONAL INSURANCE GROUP AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Financial Information

           In the opinion of management, the financial information reflects all
       adjustments (consisting only of normal recurring adjustments) which are
       necessary to a fair presentation of financial position and results of
       operations for the interim periods. The results for the six month period
       ended June 30, 1997 and June 30, 1996 are not necessarily indicative of
       the results to be expected in the future.

2.  Reclassification

           For comparative purposes, certain prior year amounts have been
       reclassified to conform to the current year presentation. Such
       reclassifications had no impact on the net income or shareholders'
       equity.

3.  Earnings per share

          In February 1997, the Financial Accounting Standards Board (FASB)
       issued Statement of Financial Accounting Standards (SFAS) No. 128. SFAS
       No. 128 is designed to improve the earnings per share (EPS) information
       provided in the financial statements by simplifying the existing
       computational guidelines, revising the disclosure requirements, and
       increasing the comparability of EPS data on an international basis. SFAS
       No. 128 is required to be adopted on December 31, 1997. The Company has 
       not yet determined the impact that SFAS No. 128 may have on its
       financial statements.

4.  Comprehensive income

          In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
       Income. SFAS No. 130 establishes standards for the reporting and
       display of comprehensive income and its components in a full set of
       general purpose financial statements. Comprehensive income is defined
       as the change in equity of a business enterprise during a period from
       transactions and other events and circumstances from non-owner
       sources. SFAS No. 130 is effective for fiscal years beginning after
       December 15, 1997. The Company does not believe that SFAS No. 130 will
       have a material impact on its financial statements.

5.  Segment reporting

           In June 1997, the FASB issued SFAS No. 131, Disclosures about
       Segments of an Enterprise and Related Information. SFAS No. 131 requires
       publicly-held companies to report financial and other information about
       key revenue-producing segments of the entity for which such information
       is available and utilized by the chief operation decision maker.
       Specific information to be reported for individual segments includes
       profit or loss, certain revenue and expense items and total assets. A
       reconciliation of segment financial information to amounts reported in
       the financial statements would be provided. SFAS No. 131 is effective for
       fiscal years beginning after December 15, 1997. The Company does not
       believe that SFAS No. 131 will have a material impact on its financial
       statements.

6.  Subsequent events

           On July 24, 1997, the Company's Board of Directors declared a
       dividend of $0.11 per share. The dividend was paid on August 8, 1997 to
       shareholders of record on August 4, 1997. The aggregate amount of the
       dividend was $430,771.

           These quarterly interim financial statements are unaudited.



                                       5
<PAGE>   8

ITEM 2: Management's Discussion and Analysis of Financial Condition and Results 
        of Operations

     The following discussion should be read in conjunction with the interim
financial statements and the notes thereto, which are set forth elsewhere in
this Report.

RESULTS OF OPERATIONS
SECOND QUARTER OF 1997 COMPARED WITH SECOND QUARTER OF 1996:

   Revenue

     Total revenue of National Insurance Group (the "Company" or "National") for
the second quarter increased from $10.1 million in 1996 to $12.6 million in
1997, an increase of $2.5 million, or 24.8%.

     Net premiums written by the Company's wholly owned subsidiary, Great
Pacific Insurance Company (the "Insurance Subsidiary"), for the second quarter
increased from $3.2 million in 1996 to $5.1 million in 1997, an increase of $1.9
million, or 59.4%. The increase in net premiums written was primarily due to an
increase in the volume of business from existing mortgage tracking customers.

     Net premiums earned by the Insurance Subsidiary for the second quarter
increased from $3.1 million in 1996 to $4.5 million in 1997, an increase of $1.4
million, or 45.2%. Premium revenue is generally earned ratably over a twelve
month period and is affected by policies written over the prior twelve months
and by policies canceled during the quarter. Such cancellations would be
applicable to premiums written in all prior periods. The combined effect of
changes in premiums written, earned and canceled within any period is measured
in terms of the change in unearned premiums. For the three months ended June 30,
1997, unearned premiums increased by $596,000, compared to an increase in
unearned premiums of $180,000 for the same quarter of 1996.

     Flood inquiry fees for the second quarter increased from $5.2 million in
1996 to $5.7 million in 1997, an increase of $500,000, or 9.6%. This increase is
primarily a result of higher volume of inquires from existing customers.

     Tracking fees for the second quarter increased from $1.3 million in 1996 to
$1.8 million in 1997, an increase of $500,000, or 38.5%. The increase was due
primarily to the addition of new customers.

   Expenses

    Loss and loss adjustment expenses (LAE) incurred for the second quarter
increased from $1.6 million (51.6% of net premiums earned) in 1996 to $1.7
million (37.8% of net premiums earned) in 1997, an increase of $100,000, or
6.3%. The average loss and loss adjustment expense per new claim reported in the
second quarter of 1997 was approximately $9,100, compared to $8,400 for the same
period in 1996. The number of losses decreased from 187 in 1996 to 183 in 1997.

     Commissions to non-affiliates in the second quarter increased from $568,000
(18.6% of net premiums earned) in 1996 to $686,000 (15.3% of net premiums
earned) in 1997, an increase of $118,000, or 20.8%. The increase in the amount
of commission expense is due to the volume increase in net premiums written. The
percentage of commissions paid to net premiums earned varies depending


                                       6
<PAGE>   9
upon customer mix. The decrease as a percentage of net premiums is due primarily
to the fact that a larger percentage of the Insurance Subsidiary's business has
transferred to customers who earn lower commission rates.

     Personnel expenses in the second quarter increased from $5.0 million in
1996 to $5.6 million in 1997, an increase of $600,000, or 12.0%. This increase
was in response to volume increases in the flood zone determination and motor
vehicle tracking businesses. Personnel expenses as a percent of total revenue
decreased from 49.5% in 1996 to 44.6% in 1997. The reduction was primarily due
to continued productivity improvements in the motor vehicle and mortgage
insurance tracking business.

     All other expenses in the second quarter decreased from $4.3 million in
1996 to $3.3 million in 1997, a decrease of $1.0 million, or 23.3%. The decrease
was primarily due to $1.4 million of expense incurred by the Company in the
second quarter of 1996 as a result of retention agreements entered into with
certain executives of the prior management team, who departed from the Company
in July, 1996.

     As a result of the above factors, income before provision for income taxes
for the second quarter increased from a loss of $1.4 million in 1996 to a gain
of $1.3 million in 1997, an increase of $2.7 million. Net loss for the second
quarter of 1996 was $857,000, or $0.18 per share compared with net income of
$838,000, or $0.21 per share in 1997. The weighted average number of shares
outstanding for the second quarter of 1996 and 1997 were 4,679,942 and
3,989,724, respectively.

SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 1996:

   Revenue

     Total revenue of the Company for the six month period increased from $20.6
million in 1996 to $23.6 million in 1997, an increase of $3.0 million, or 14.6%.

     Net premiums written for the period increased from $6.0 million in 1996 to
$9.7 million in 1997, an increase of $3.7 million, or 61.7%. The increase in net
premiums written was primarily due to an increase in the volume of business from
existing mortgage tracking customers.

     Net premiums earned by the Insurance Subsidiary for the period increased
from $6.8 million in 1996 to $8.6 million in 1997, an increase of $1.8 million,
or 26.5%. Premium revenue is generally earned ratably over a twelve month period
and is affected by policies written over the prior twelve months and by policies
canceled during the quarter. Such cancellations would be applicable to premiums
written in all prior periods. The combined effect of changes in premiums
written, earned and canceled within any period is measured in terms of the
change in unearned premiums. For the six months ended June 30, 1997, unearned
premiums increased by $1.1 million, compared to a decrease in unearned premiums
of $836,000 for the same six months of 1996.

     Flood inquiry fees for the period increased from $9.6 million in 1996 to
$10.0 million in 1997, an increase of $400,000, or 4.2%. This increase is
primarily a result of higher volume of inquiries from existing customers.

     Tracking fees for the period increased from $2.5 million in 1996 to $3.6
million in 1997, an increase of $1.1 million, or 44%. The increase was due
primarily to the addition of new customers.


                                       7
<PAGE>   10
   EXPENSES

    Loss and loss adjustment expenses (LAE) incurred for the six month period
increased from $2.7 million (39.1% of net premiums earned) in 1996 to $2.9
million (33.4% of net premiums earned) in 1997, an increase of $200,000, or
7.4%. The average loss and loss adjustment expense per new claim reported in the
six month period ended June 30, 1997 was approximately $8,000, compared to
$6,300 for the same period in 1996. The number of losses decreased from 421 in
1996 to 359 in 1997.

     Commissions to non-affiliates for the period decreased from $1.3 million
(18.4% of net premiums earned) in 1996 to $1.1 million (12.7% of net premiums
earned) in 1997, a decrease of $200,000, or 15.4%. The percentage of commissions
paid to net premiums earned varies depending upon customer mix. The decrease is
due primarily to the fact that a larger percentage of the Insurance Subsidiary's
business has transferred to customers who earn lower commission rates.

     Personnel expenses for the period increased from $10.2 million in 1996 to
$10.6 million in 1997, an increase of $400,000, or 3.9%. This increase was in
response to volume increases in the flood zone determination and motor vehicle
tracking businesses. Personnel expenses as a percent of total revenue decreased
from 49.4% in 1996 to 45.0% in 1997. The reduction was primarily due to
continued productivity improvements in the motor vehicle and mortgage insurance
tracking business.

     All other expenses in the six month period decreased from $7.6 million in
1996 to $6.4 million in 1997, a decrease of $1.2 million, or 15.8%. The decrease
was primarily due to $1.4 million of expense incurred by the Company in the
second quarter of 1996 as a result of retention agreements entered into with
certain executives of the prior management team, who departed from the Company
in July, 1996.

     As a result of the above factors, income before provision for income taxes
for the six month period increased from a loss of $1.1 million in 1996 to a gain
of $2.5 million in 1997, an increase of $3.6 million. Net loss for the six
months of 1996 was $708,000, or $0.15 per share compared with net income of $1.6
million, or $0.41 per share in 1997. The weighted average number of shares
outstanding for the six months ended June 30, 1996 and 1997 were 4,691,008 and
3,989,660, respectively.

LIQUIDITY AND CAPITAL RESOURCES

     National is a holding company with no operations and no sources of income
itself except interest or investment income. The principal assets of National
are the stock of its subsidiaries. National is, and for the foreseeable future
will continue to be, dependent on the dividends from its subsidiaries to meet
its liquidity requirements, including debt service obligations. Dividends
payable to National by the Insurance Subsidiary are subject to certain
regulatory restrictions described below.

     The Insurance Subsidiary collects and invests premiums written in advance
of the payments for associated claims. In the absence of a catastrophic loss,
this timing difference between premium collection and claims payment, combined
with investment income, normally provides short-term funds in excess of normal
operating demands for cash. As of June 30, 1997, the Company had cash and
short-term investments aggregating $14.0 million compared to $13.2 million at
December 31, 1996.

     Of the Company's cash and short-term investments as of June 30, 1997, $11.0
million is held by the Insurance Subsidiary compared to $8.3 million at December
31, 1996. Insurance companies, including


                                       8
<PAGE>   11
the Insurance Subsidiary, are subject to laws and regulations which restrict
their ability to pay dividends to parent companies or other shareholders. Under
California law, the maximum amount of dividends that the Insurance Subsidiary
may pay the Company in any twelve (12) month period without prior regulatory
approval is the greater of (i) net income for the preceding calendar year, or
(ii) 10% of policyholders' surplus (shareholders' equity adjusted to a statutory
basis) as of the previous December 31. For the year ended December 31, 1996, the
Insurance Subsidiary had net income of approximately $2.8 million and as of
December 31, 1996, statutory policyholders' surplus of $26.8 million. For the
year ended December 31, 1996, the maximum dividend permitted to be paid by the
Insurance Subsidiary to National was approximately $2.8 million. In addition,
insurers are required to report dividends within five (5) days of declaration
and at least ten (10) days prior to payment. The interim period will allow the
Commissioner to issue an order stopping payment of the dividend if, in the
Commissioner's opinion, the payment would in any way violate the California
Insurance Code or be hazardous to the insurer's policyholders, creditors or the
public.

     On April 10, 1997, the Insurance Subsidiary made a dividend payment to
National in the amount of $2.5 million.

     In April, 1997, the Company concluded an agreement for a $5 million bank
line of credit. As of June 30, 1997 there were no advances made on the credit
line. As of June 30, 1997, the Company was in compliance with all financial
ratio and minimum net worth requirements per the terms of the agreement.

     Consolidated stockholders' equity at June 30, 1997 totaled $26.0 million,
or $6.65 per share, compared to $28.6 million, or $7.33 per share, at December
31, 1996.

     Industry and regulatory guidelines suggest that a property and casualty
insurers' annual statutory net written premium should not exceed approximately
three times its policyholder's surplus. The Company's surplus ratio is
significantly lower than such guidelines. For the year ended December 31, 1996,
the Company's net written premium to policyholder surplus ratio was .50 to 1.
Management believes that as of June 30, 1997, that ratio has not materially
changed.

     The Company is not aware of any trends, requirements, commitments, or
events that will or are reasonably likely to have a negative impact on the
Company's liquidity during 1997. This report contains forward-looking statements
reflecting the Company's current expectations. There can be no assurance that
the Company's actual future performance will meet the Company's current
expectations. Investors should review the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Factors
Affecting Future Financial Condition and Operating Results" for a discussion of
factors that could affect future performance.

     Inflation generally affects the rate of investment return in the securities
and financial markets, and increases and decreases in such investment return
rates have a corresponding effect on the Company's investment income.

FACTORS AFFECTING FUTURE FINANCIAL CONDITION AND OPERATING RESULTS

     These factors, together with statements regarding certain risks and
uncertainties contained in other parts of this Report, may affect the Company's
operating results. Investors should read this section in


                                       9
<PAGE>   12
connection with any forward-looking statement made in this Report, including
statements preceded or followed by the words "believes", "anticipates",
"expects", "aware" or similar expressions as they relate to the Company or its
management.


   Flood Zone Determinations

     The Company derives a substantial portion of its total revenues from fees
for Flood Zone Determination Services. These services are primarily provided to
assist lenders in complying with federal laws which in many instances require
lenders to determine whether property being financed is located in a federally
designated Special Flood Hazard Area ("SFHA") and require borrowers to obtain
flood insurance. Any change in federal legislation or secondary market
requirements changing these requirements on lenders or borrowers, or the
development by competitors of enhanced service or delivery systems could have a
material adverse effect on the Company's business or operating results.

   Earnings Volatility

     The Company's financial results can be significantly affected by a number
of factors. Those factors include, but are not limited to, the volume of
force-placed insurance and the rate of cancellation of insurance policies, the
addition or loss of customers, changes in the number of loans or personal
property leases being tracked for major customers, increases or decreases in
interest rates, increased losses and loss adjustment expenses (LAE),
catastrophic loss or a series of loss events, and assessments from mandatory
insurance pools or associations. In addition, revenues from the Company's Flood
Zone Determination Services are directly related to the volume of mortgage loan
originations, both new and refinanced, and any change in the level of such
activity could have a material impact on the Company's performance.

   The Insurance Industry

     The Company derives a significant amount of its revenues from insurance
premiums and investment income. In the event that, for whatever reason, the
Insurance Subsidiary experiences abnormally high losses, purchases reinsurance
from reinsurers who will not or cannot pay losses submitted, or other adverse
developments occur, then any such event or combination of events could have a
material adverse impact on the Company. In addition, insurance companies and
others have often been sued under certain legal theories, such as bad faith
handling or settlement of claims, which could subject the Insurance Subsidiary
to liability in excess of policy limits. An adverse outcome of any such lawsuit
could have a material negative impact on the Company.

   Reserve Adequacy

     The Insurance Subsidiary is required to maintain reserves to cover its
estimated ultimate liability for loss and loss adjustment expenses with respect
to reported losses and incurred but not reported claims. These reserves are
estimates of what the Insurance Subsidiary expects the ultimate settlement and
administration of claims will cost, and are based on known facts and
circumstances, predictions of future events, estimates of future trends in
claims severity and other variable, subjective factors. No assurances can be
given that such estimates will be adequate to cover actual losses incurred by
the Insurance Subsidiary. Any significant changes in the Insurance Subsidiary's
estimate of ultimate losses on


                                       10
<PAGE>   13
reported claims may materially adversely affect the results of the Insurance
Subsidiary's operations in the period reported. The Insurance Subsidiary has at
times in the past experienced adverse developments in its loss reserves. The
Insurance Subsidiary's loss and loss adjustment expense reserves are reviewed on
an annual basis by unaffiliated actuaries. The Insurance Subsidiary's most
recent actuarial review of such reserves as of December 31, 1996 concluded that
the reserves (i) met the requirements of the insurance laws of California, (ii)
were computed in accordance with accepted loss reserving standards and
principles and (iii) make a reasonable provision for all unpaid loss and loss
expense obligations of the Insurance Subsidiary under the terms of its policies
and agreements.

     The Insurance Subsidiary also maintains a reserve for return premiums which
is based upon the Insurance Subsidiary's historical experience. As is prevalent
in the force-placed insurance industry, a substantial amount of the Insurance
Subsidiary's premiums written are refunded to policyholders. The amount of such
refunds can be affected by, among other things, inaccurate or untimely data
submitted by customers, which the Insurance Subsidiary uses as a basis for
recording written premiums or the loss of a significant customer. No assurance
can be given that the reserve for return premiums will be adequate to cover
actual refunded premiums paid by the Insurance Subsidiary in the future.

   Underwriting Risks

     Traditional insurance companies underwrite risks individually or by class,
following an in-depth analysis of such risks. Although the Insurance Subsidiary
applies underwriting techniques to a small portion of insured risks, the
immediate coverage required by purchasers of force-placed insurance generally
requires the Insurance Subsidiary to write specialized insurance within
pre-designated limits and geographic area, at a flat rate, without the
application of traditional underwriting criteria to individual risks.
Accordingly, the Insurance Subsidiary may be insuring individual risks that it
might not have insured had it applied traditional analysis to such risks. In
addition, the Insurance Subsidiary may not have adequate spread of risk in a
particular geographic area.

   Reinsurance Considerations

     The Insurance Subsidiary's business is partially dependent upon its ability
to cede to reinsurers risks insured by the Insurance Subsidiary. The amount,
availability and cost of reinsurance are subject to prevailing market
conditions, beyond the control of the Insurance Subsidiary, which can affect the
Insurance Subsidiary's level of business and profitability. The Insurance
Subsidiary is ultimately liable for the reinsured risk if for any reason the
reinsurers do not cover or will not pay the Insurance Subsidiary for the losses
of the insureds. As a result of the increased cost and more limited availability
of reinsurance, in the future, the Insurance Subsidiary may elect to retain a
higher portion of the risk historically ceded to reinsurers. If the Insurance
Subsidiary were to retain a higher proportion of insured risks, it would
increase its exposure to significant losses relating to properties insured by
the Insurance Subsidiary. This increased exposure could have a material adverse
effect on the Insurance Subsidiary's results of operation.

   Rapid Technological Change and New Products; Product Delays

     The markets for the Company's information services are highly competitive
and characterized by rapidly changing technology. The Company believes that its
future success will depend, in part, on its ability to identify, develop,
install and support new services in a timely fashion, and on market


                                       11
<PAGE>   14
acceptance of such services. No assurance can be given that the introduction of
new technologies will enable the Company to gain market share, realize cost
savings, increase revenues or retain customers.

   Shortage of Skilled Labor

     The Company's delivery and upgrade of products and services to its
customers is dependent upon, among other factors, the Company's ability to
attract and retain key analytical and management professionals, including
skilled computer programmers and systems analysts. Businesses located in San
Francisco, San Mateo, Contra Costa and Santa Clara counties of California are
experiencing a tightening of the local labor market for these professionals,
which may result in one or more of the following: an increase in personnel
costs, a delay in service installations, and a reduction in customer service.
The Company is unable to predict when the conditions in the local labor market
will change.






                                       12
<PAGE>   15
NATIONAL INSURANCE GROUP AND SUBSIDIARIES


PART II         OTHER INFORMATION


Item 1.  Legal Proceedings

       The Company is routinely a party to litigation incidental to its
business, as well as other litigation. While the ultimate results of such
litigation cannot presently be determined on the date of this Report, management
believes that no individual item of litigation or group of similar items of
litigation is likely to have a material adverse effect on the consolidated
financial position of the Company.

Item 2.  Changes in Securities

       None.

Item 3.  Defaults upon Senior Securities

       None.

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

       None.

Item 5.  Other Information

       None.

Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibit Index

         Exhibit 10.1 Employment Agreement dated May 7, 1997 by and between
                      National and Douglas H. Helm.

         Exhibit 11.1 Computation of weighted average shares outstanding and
                      earnings per share.

         Exhibit 27.1 Financial data schedule.

(b) Reports on Form 8-K

       None.



                                       13
<PAGE>   16
                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                       NATIONAL INSURANCE GROUP
                                             (REGISTRANT)



                                       /s/ MARK A. SPEIZER
---------------------                  ----------------------------------------
DATE: AUGUST 13, 1997                        (SIGNATURE)
                                       Mark A. Speizer, Chairman
                                       of the Board and Chief
                                       Executive Officer



                                       /s/ GREGORY S. SAUNDERS
---------------------                  ----------------------------------------
DATE: AUGUST 13, 1997                        (SIGNATURE)
                                       Gregory S. Saunders,
                                       Executive Vice President, Treasurer
                                       and Chief Financial Officer
                                       (Principal Financial Officer)





                                     14
<PAGE>   17


                               INDEX TO EXHIBITS
<TABLE>
<CAPTION>

    EXHIBIT
    NUMBER                         EXHIBITS
    ------                         --------
   <S>               <C>
   10.1              Employment Agreement dated May 7, 1997 by and between
                     National and Douglas H. Helm

   11.1              Computation of weighted average shares outstanding and
                     earnings per share

   27.1              Financial data schedule
</TABLE>