<PAGE>

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

                                     FORM 10-K

(Mark One)      Annual Report Pursuant to Section 13 or 15(d) of the
                          Securities Exchange Act of 1934

     |X|             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  ______________

                             Commission file number 0-27146

                                  AMERIN CORPORATION
                 (Exact name of registrant as specified in its charter)


                   Delaware                                      11-3085148
        (State or other jurisdiction of                       (I.R.S. Employer
        incorporation or organization)                       Identification No.)

         200 E. Randolph Drive, 49th Floor, Chicago, IL           60601-7125
         (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code:  (312) 540-0078

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

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

                                                        Name of Each Exchange
                Title of Each Class                      on Which Registered
                -------------------                     ---------------------

            Common Stock, $.01 par value                Nasdaq National Market

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. [ ]

Aggregate market value of the Registrant's voting stock held by 
non-affiliates on March 15, 1999, based on the closing price of said stock on 
the Nasdaq National Market on such date $22.00.

As of March 15, 1999, 25,766,078 shares of the Common Stock, $.01 par value, 
and 752,547 shares of the Nonvoting Common Stock, $.01 par value, of the 
Registrant were outstanding.

                                       1

<PAGE>


                                    PART I

ITEM 1.  BUSINESS.

GENERAL

Amerin Corporation (the "Company" or "Amerin") is a holding company which, 
through Amerin Guaranty Corporation ("Amerin Guaranty"), is a provider of 
private mortgage insurance coverage in the United States to mortgage bankers, 
savings institutions, commercial banks and other lenders. Primary mortgage 
insurance provides mortgage default protection on individual loans. Amerin 
Guaranty issues primary insurance for first mortgage loans on owner occupied, 
one-to-four unit residential properties, including condominiums. Home 
purchasers who make down payments of less than 20% of the value of their home 
are usually required by the mortgage lender to qualify and pay for primary 
mortgage insurance on their mortgage loans. If the homeowner defaults on the 
mortgage loan, mortgage insurance reduces and, in some instances, eliminates 
any loss to the insured lender. Mortgage insurance does not cover losses that 
result from damage to the property. Private mortgage insurance is used by 
mortgage lenders to reduce their credit risk in mortgage loans with high loan 
to value ratios ("LTV") as well as to enhance their ability to sell the loans 
into the secondary mortgage market, principally to the Federal National 
Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage 
Corporation ("Freddie Mac").

Amerin Guaranty's claims-paying ability is rated "Aa3" by Moody's Investors 
Service, Inc. ("Moody's"), "AA" by Standard & Poor's Corporation ("S&P"), and 
"AA" by Fitch Investors Services, L.P. ("Fitch").  Amerin Guaranty commenced 
writing insurance in April 1993.

The Company is a Delaware corporation. Its office is located at 200 East 
Randolph Drive, 49th Floor, Chicago, Illinois 60601-7125 (telephone number 
(312) 540-0078).

PENDING MERGER

On November 23, 1998, the Company announced a proposed merger (the "Merger") 
with CMAC Investment Corporation ("CIC"), a holding company which, through 
Commonwealth Mortgage Assurance Company ("CMAC"), competes with the Company 
as a provider of private mortgage insurance coverage in the United States. As 
proposed, upon consummation of the Merger, Amerin shareholders will receive, 
in a tax free exchange, .5333 shares of CIC common stock for each share of 
Amerin stock. The Merger is expected to be accounted for on a pooling of 
interests basis. Consummation of the Merger is subject to customary 
conditions, including the approval of the stockholders of each of Amerin and 
CIC.

The combined company is expected to be the second largest mortgage insurance 
company in the U. S. based on new insurance written in 1998. Following the 
Merger, Frank P. Filipps, president and chief executive officer of CIC, will 
be chairman and chief executive officer of the combined company. Roy J. 
Kasmar, president and chief operating officer of Amerin, will hold the same 
positions with the combined company. Gerald L. Friedman, chairman and chief 
executive officer of Amerin, will become chairman emeritus of the combined 
company, and Herbert Wender, chairman of CIC, will become chairman of the 
executive committee of the board of directors of the combined company. The 
new board will initially be made up of members from Amerin's and CIC's boards.

                                       2

<PAGE>

It is currently anticipated that, following completion of the Merger, the 
mortgage insurance operations of Amerin Guaranty and CMAC will be 
consolidated, and Amerin Guaranty will not continue to operate as a 
stand-alone mortgage insurance company. Therefore, the information set forth 
herein should be read as historical in nature, and should not be viewed as an 
indication of the future financial condition or business prospects of the 
company resulting from the merger of Amerin and CIC. Please refer to the 
Merger Proxy for information with respect to all matters relating to the 
Merger. Copies of the Merger Proxy are available upon request from the 
Company.

PRODUCTS

Primary mortgage insurance provides mortgage default protection on individual 
loans and covers unpaid loan principal, delinquent interest and certain 
expenses associated with the default and subsequent foreclosure 
(collectively, the "claim amount"). The insurer generally pays the coverage 
percentage of the claim amount specified in the primary policy, but has the 
option to pay 100% of the claim amount and acquire title to the property. The 
claim amount averages approximately 115% of the unpaid principal balance of 
the loan. Primary insurance generally applies to owner-occupied, first 
mortgage loans on one-to-four family homes, including condominiums. Primary 
coverage can be used on any type of residential mortgage loan instrument 
approved by the mortgage insurer. References in this document to amounts of 
insurance written or in force, risk written or in force and other historical 
data related to Amerin's insurance refer only to direct (before giving effect 
to reinsurance) primary insurance, unless otherwise indicated.

Amerin Guaranty offers two kinds of primary insurance. The majority of Amerin 
Guaranty's primary insurance is written in the form of borrower paid mortgage 
insurance ("BPMI"), whereby mortgage insurance premiums are charged to the 
borrower by the mortgage lender or loan servicer, which in turn remits the 
premiums to the mortgage insurer. Amerin Guaranty offers comparable mortgage 
insurance coverage in the form of lender paid mortgage insurance ("LPMI"), 
whereby mortgage insurance premiums are charged to the mortgage lender or 
loan servicer, which pays the premiums to the mortgage insurer. See "Certain 
Legal Matters Relating to Lender Paid Mortgage Insurance." Amerin Guaranty 
offers a program known as the Award Plus Plan to lenders utilizing LPMI. 
Under the Award Plus Plan, the lender is charged lower premium rates for 
loans insured and, based on performance of such loans over an extended period 
of time, is entitled to receive cash awards from, or required to pay cash 
surcharges to, Amerin Guaranty with respect to such loans.

The following table shows Amerin Guaranty's direct insurance in force and 
direct primary risk in force as of the dates indicated:

<TABLE>
<CAPTION>

                                                                PRIMARY INSURANCE AND RISK IN FORCE
                                                                       Years ended December 31,
                                                        -----------------------------------------------------
                                                              1998                     1997             1996
                                                        ------------------ ----------------- ----------------
                                                                       (in millions of dollars)
<S>                                                      <C>                   <C>             <C>
Direct Primary
Insurance In Force.............................           $28,147               $20,394         $14,777

Direct Primary
Risk In Force..................................             7,032                 5,149           3,671
</TABLE>

                                       3

<PAGE>

Amerin Guaranty may not terminate coverage except for non-payment of premium, 
and such coverage is renewable at the option of the insured lender at the 
renewal rate in effect at the time the loan was originally insured. Lenders 
may cancel insurance at any time at their option or because of loan 
repayment, which may be accelerated in times of increased refinancing 
activity. Mortgage insurance on loans insured on and after July 29, 1999 will 
also be subject to mandatory cancellation pursuant to recently enacted 
federal legislation. See "Regulation -- Homeowners Protection Act of 1997."

Because maintenance of coverage is linked to LTV, coverage tends to be 
canceled earlier in areas which are experiencing housing price appreciation 
and to continue in force longer in areas experiencing housing price 
depreciation. These two factors, which may be exacerbated during periods of 
heavy mortgage refinancing, may result in an increase in the percentage of an 
insurer's portfolio comprised of loans in economically weak areas. The 
following table shows the percentage of new insurance written in the last two 
years:

                PERCENTAGES OF NEW INSURANCE WRITTEN

<TABLE>
<CAPTION>

                                          1998              1997
                                          ----              ----
<S>                                      <C>               <C>
Purchase Loans                            63.2%             83.8%
Refinance Loans                           36.8%             16.2%
</TABLE>

Amerin Guaranty's premium rates are based upon the expected risk of a claim 
on the insured loan and take into account the LTV, loan type, mortgage term, 
occupancy status and coverage percentage. Premium rates cannot be changed 
after the issuance of coverage. The Company generally employs a national 
premium rate policy, rather than a regional or local policy, because it 
believes that each region of the United States is subject to similar factors 
affecting the risk of loss on insurance written.

Amerin Guaranty has three basic types of premium payment plans. The most 
popular is a monthly premium plan under which only one or two months premium 
is paid at the mortgage loan closing, and thereafter premiums are remitted on 
a monthly basis to Amerin Guaranty. Based on the rapid market acceptance of 
monthly premium plans, the Company expects that such percentage will remain 
at this level or continue to increase slightly. The second type of premium 
payment plan is an annual premium plan in which a first-year premium is paid 
at the mortgage loan closing and annual renewal payments are paid thereafter. 
Renewal payments generally are (i) collected monthly from the borrower along 
with the mortgage payment and held in escrow by the loan servicer or (ii) 
reserved by the loan servicer for annual remittance to Amerin Guaranty in 
advance of each renewal year. The third type of premium payment plan is a 
single premium plan that involves a lump-sum payment at the loan closing. The 
single premium can be financed by the borrower by adding it to the principal 
amount of the mortgage. Premiums written under any of these plans may be 
either non-refundable or refundable if the coverage is canceled by the 
insured lender (which generally occurs when the loan is repaid or the LTV is 
less than 80% as a result of loan amortization and/or property appreciation).

                                       4

<PAGE>


The following table sets forth the dollar amounts and percentages of new 
insurance written represented by each of the three premium plans in 1998 and 
1997:

<TABLE>
<CAPTION>

                          NEW PRIMARY INSURANCE WRITTEN

                                                          1998                                      1997
                                                          ----                                      ----

                                                                        (in millions of dollars)
<S>                                              <C>                <C>                      <C>                 <C>
Monthly premium plan                              $13,546             89.3%                   $6,879               87.7%
Annual premium plan                                 1,588             10.5                       856               10.9
Single premium plan                                    30              0.2                       107                1.4
                                                  -------            -----                    ------              -----
         Total                                    $15,164            100.0%                   $7,842              100.0%
                                                  -------            -----                    ------              -----
</TABLE>

In addition to primary insurance, Amerin Guaranty also provides a limited 
amount of "pool" insurance. Amerin Guaranty offers pool insurance on a 
selective basis to address the needs of certain customers under specific 
circumstances. Pool insurance is generally used as an additional credit 
enhancement for certain secondary market mortgage transactions. Pool 
insurance generally covers a designated pool of mortgage loans rather than 
individual loans, and provides for the payment of the loss on any defaulted 
mortgage loan in the pool which exceeds the sum of the net proceeds of the 
ultimate disposition of the underlying property and the claim payment under 
any applicable primary insurance policy, up to a stated aggregate loss limit. 
At December 31, 1998, Amerin Guaranty's pool insurance in force was 
$5.2 billion, representing $85.9 million of risk in force. See "Regulation -- 
New York Circular Letter No. 2."

Amerin Guaranty provided contract underwriting services to certain lenders on 
a limited basis during 1997. Amerin Guaranty significantly expanded the level 
of contract underwriting services in 1998 and has established 5 regional 
underwriting facilities pursuant to a short term lease. The net cost of 
contract underwriting in 1998 was $14.9 million compared to $1.5 million in 
1997. The Company expects future contract underwriting expenditures will 
fluctuate based on the overall level of new mortgage originations in the 
industry. The total industry mortgage production of $1.4 trillion in 1998 was 
a new annual record and 40 percent above the previous record set in 1993.

CUSTOMERS

Amerin Guaranty's customers are mortgage originators. Mortgage originators 
include mortgage bankers, savings institutions, commercial banks and other 
mortgage lenders. Amerin Guaranty is dependent on a small number of lenders 
for a substantial majority of its business. Amerin Guaranty's largest 10 
customers were responsible for 85.1%, 85.2% and 84.2% of the Company's net 
premiums written for 1998, 1997 and 1996, respectively. Amerin Guaranty's 
three largest customers (including branches and affiliates of such customers) 
in 1998 were Norwest Mortgage, Inc., Countrywide Home Loans, Inc. and Chase 
Manhattan Mortgage Corporation which accounted for 38.7%, 17.7% and 8.6%, 
respectively, of the Company's net premiums written for 1998. Amerin 
Guaranty's three largest customers (including branches and affiliates of such 
customers) in 1997 were Norwest Mortgage, Inc., Countrywide Home Loans and 
Bank of America which accounted for 42.0%, 18.9% and 7.9%, respectively, of 
the Company's net premiums written for 1997.

                                       5

<PAGE>


To obtain primary insurance from Amerin Guaranty, a mortgage lender must 
first apply for and receive a master policy from Amerin Guaranty. Through 
December 31, 1998 Amerin Guaranty had done business with 125 master 
policyholders, of which it considered 72 to be active master policyholders 
(lenders which had submitted applications for insurance within the preceding 
90 days, excluding branches, affiliates and companies acquired or merged into 
other lenders).

SALES AND MARKETING AND COMPETITION

         SALES AND MARKETING

Amerin Guaranty sells its insurance products through its own employees, located
throughout the United States. At December 31, 1998, Amerin Guaranty had a total
of 49 sales and marketing employees, 22 of which work in Amerin Guaranty's
office in Chicago, Illinois.

         COMPETITION

THE FOLLOWING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE POSSIBLE EFFECTS ON 
COMPETITION OF THE PENDING MERGER BETWEEN THE COMPANY AND CMAC INVESTMENT 
CORPORATION. SEE "BUSINESS - PENDING MERGER."

The U.S. private mortgage insurance industry consists of nine active mortgage 
insurers. Amerin Guaranty is the seventh largest private mortgage insurer in 
the United States, based on new primary insurance written in 1998. General 
Electric Mortgage Insurance Corporation ("GEMICO"), an affiliate of General 
Electric Capital Corporation, and United Guaranty Residential Insurance 
Company ("UGC"), an affiliate of American International Group, Inc., have 
higher claims-paying ability ratings from Moody's, Fitch, and S&P than Amerin 
Guaranty, principally based on having definitive capital support agreements 
from affiliated companies and, as a result, they may have greater access to 
capital resources than Amerin Guaranty.

The Company believes that Amerin Guaranty competes with other private 
mortgage insurers principally on the basis of its innovative approaches to 
sales, products, underwriting and claims processing. The Company believes 
that these innovations provide a lower cost product and greater efficiency 
and ease of interaction for mortgage lenders. The Company believes that these 
benefits are particularly attractive to larger mortgage lenders.

Amerin Guaranty and other private mortgage insurers also compete directly 
with federal and state governmental and quasi-governmental agencies, 
principally the Federal Housing Administration ("FHA") and, to a lesser 
degree, the Veterans Administration ("VA"). These agencies sponsor 
government-backed mortgage insurance programs which, according to data from 
HUD, VA and Inside Mortgage Finance, accounted for 41.5%, 43.1% and 42.8% of 
all loans insured by the FHA, VA or by private mortgage insurers in 1998, 
1997 and 1996, respectively. Management believes that the market share of 
private mortgage insurers relative to the FHA and VA is influenced by factors 
including: (i) the percentage of loans exceeding the FHA and VA limits, which 
has generally increased over time but may be reduced by increases in the FHA 
and VA limits; (ii) the percentage of high-LTV borrowers making down payments 
of 5% or more, at which levels private mortgage insurance has generally been 
more cost-effective than FHA borrowing;

                                       6

<PAGE>


iii) the number of borrowers eligible for VA insurance, which has recently 
been increased to include members of the National Guard and Reserves with at 
least six years' service; (iv) the level of refinancing activity (beginning 
in 1992, the FHA ceased charging renewal premiums on FHA refinancings of FHA 
loans, which made such refinancings relatively attractive) and (v) the 
relative attractiveness of FHA and privately insured mortgage products in 
various market conditions.

Management believes that the introduction of the monthly premium product and 
lender paid mortgage insurance has increased the competitiveness of the 
private mortgage insurers versus the FHA and VA by spreading the initial 
premium over a 12-month period and thereby lowering the borrower's closing 
costs.

In addition to competition from federal agencies, Amerin Guaranty and other 
private mortgage insurers face competition from state-supported mortgage 
insurance funds. As of December 31, 1998, several states (including 
California, Connecticut, Maryland, Massachusetts, New York and Vermont) have 
state housing insurance funds which are either independent agencies or 
affiliated with state housing agencies.

Management believes the share of newly-originated mortgages carrying mortgage 
insurance is influenced by several factors. The share of high-LTV loans 
carrying mortgage insurance has been increased by higher regulatory capital 
requirements for depository institutions holding uninsured high-LTV loans. 
The high-LTV share of mortgage originations is influenced by the level of 
refinancing activity (the share of high-LTV loans among refinancings is lower 
than among purchase money mortgages), and may be increased by affordable 
housing and central-city housing initiatives.

Fannie Mae recently announced that it would require less coverage on certain 
loans written through its Desktop Underwriter (DU) program. This reduction of 
coverage will result in a reduction in the amount of premium Amerin Guaranty 
earns in connection with such DU loans. Freddie Mac may announce a similar 
reduction in coverage requirements. Furthermore, Fannie Mae and Freddie Mac 
may further reduce coverage requirements, but only to the extent consistent 
with their charters which specifically require mortgage insurance. In the 
event of such reductions, Amerin Guaranty could lose additional premium 
revenue.

The following table indicates the relative share of the mortgage insurance 
market based on new insurance written by FHA/VA and private mortgage insurers 
for the periods shown.

      FEDERAL GOVERNMENT AND PRIVATE MORTGAGE INSURANCE MARKET SHARE

<TABLE>
<CAPTION>

                                                                     Years ended December 31,
                                                          ------------------------------------------------
                                                                1998              1997           1996
                                                          ------------------   ------------   ------------
<S>                                                       <C>                  <C>            <C>
FHA/VA.................................................               41.5%          43.1%          42.8%
Private mortgage insurance.............................               58.5           56.9           57.2
                                                          ------------------   ------------   ------------
                                                                     100.0%         100.0%         100.0%
                                                          ------------------   ------------   ------------
                                                          ------------------   ------------   ------------
</TABLE>
----------------
Sources: INSIDE MORTGAGE FINANCE and the Mortgage Insurance Companies of 
America.

                                       7

<PAGE>



Various proposals are being discussed by Congress and certain federal 
agencies to reform or modify the FHA. The Company is unable at this time to 
predict the scope and content of such proposals, or whether any such 
proposals will be enacted into law, and, if enacted, the effect on the 
Company.

Amerin Guaranty and other private mortgage insurers also compete indirectly 
with mortgage lenders that elect to retain the risk of loss from defaults on 
all or a portion of their high LTV mortgage loans rather than obtain 
insurance for such risk. Any change in legislation which affects the 
risk-based capital rules imposed on savings institutions, like the Financial 
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), may 
affect the desirability of foregoing insurance for savings institutions and, 
therefore, Amerin Guaranty's opportunity to insure more high LTV mortgage 
loans from such institutions.

OVERVIEW OF DIRECT RISK IN FORCE

The Company believes that the risk of a claim on a low down payment mortgage 
loan is principally a function of the following factors: (i) economic 
conditions in the geographic market in which the property is located; (ii) 
the credit quality of the borrower; (iii) the LTV; (iv) the type of loan 
instrument (for example, whether the loan is a fixed rate mortgage or is an 
adjustable rate mortgage -"ARM"); (v) the purpose for which the loan is made 
(for example, a primary residence or a vacation home) and (vi) the 
underwriting practices of the lender originating the loan.

The Company believes that the claim incidence for loans with LTV of 95% 
("95s")is substantially higher than for loans with LTV ratios of 90% or less. 
In addition, the claim incidence for mortgages in which the original loan 
amount exceeds the maximum loan amount eligible for purchase by Fannie Mae 
and Freddie Mac is higher than for mortgages in which the original amount is 
at or below such amount. Finally, the claim incidence for ARMs during a 
prolonged period of rising interest rates would be higher than for fixed rate 
loans. While there is no meaningful data on claim incidence for loans with 
LTVs of 97% ("97s") because this product has only been recently offered by 
the industry, the Company anticipates that claim incidence on 97s will be 
higher than on 95s. Amerin Guaranty's premium rates take certain risk 
factors, such as higher LTVs or ARMs, into account. However, the premiums 
earned on mortgage insurance covering such types of loans, and the associated 
investment income, may ultimately prove to be inadequate to compensate for 
related future losses.

The following table reflects certain characteristics of Amerin Guaranty's 
primary risk in force (as determined on the basis of information available on 
the date of mortgage insurance) by the categories and as of the dates 
indicated:

                                       8

<PAGE>

                     CHARACTERISTICS OF PRIMARY RISK IN FORCE

<TABLE>
<CAPTION>
                                                                      December 31,
                                               ------------------------------------------------------------
                                                      1998                 1997                1996
                                               -------------------   ------------------  ------------------
                                                       (in millions of dollars except percentages)
<S>                                                     <C>                  <C>                 <C>
 DIRECT PRIMARY RISK IN FORCE:                           $7,032.0             $5,148.9            $3,671.0
 LENDER CONCENTRATION:
   Top 3 lenders(1)............................              61.1%                69.3%               70.5%
   Top 10 lenders(1)...........................              84.7%                85.6%               87.4%
 LTV:
   97s.........................................               2.4%                 0.7%                0.2%
   95s.........................................              38.9%                49.1%               48.8%
   90s(2)......................................              46.7%                45.8%               46.7%
   85s and below...............................              12.0%                 4.4%                4.3%

 AVERAGE COVERAGE PERCENTAGE:                                25.0%                25.2%               24.8%

 LOAN TYPE:
   Fixed(3)....................................              88.1%                80.1%               77.7%
   ARMs........................................               4.9%                 8.6%               11.4%
   ARMs with potential negative amortization...
                                                               .2%                 0.4%                0.6%
   Fixed/Adjustable(4).........................               4.6%                 6.4%                5.4%
   Balloon.....................................               2.2%                 3.9%                4.6%
   Other.......................................                --%                 0.6%                0.3%
 MORTGAGE TERM:
   15 years and under..........................               4.9%                 2.5%                2.5%
   Over 15 years...............................              95.1%                97.5%               97.5%
 PROPERTY TYPE:
   Single family detached......................              87.8%                94.4%               94.5%
   Condominium.................................               5.0%                 4.7%                4.5%
   Other(5)....................................               7.2%                 0.9%                1.0%
 OCCUPANCY STATUS:
   Primary residence...........................              97.9%                98.9%               99.2%
   Second home.................................               1.4%                 1.1%                0.8%
   Non-owner occupied..........................                .7%                  --%                 --%

 LOAN AMOUNT:
   $100,000 or less............................              21.3%                21.5%               22.7%
   Over $100,000 to $197,000(6)................              59.2%                58.6%               58.1%
   Over $197,000 to $227,150(6)(7).............
                                                              9.3%                 8.5%                8.0%
   Over $227,150...............................              10.2%                11.4%               11.2%
</TABLE>
----------------------

(1) Based on original application volume.
(2) For the purposes of applying underwriting standards and
    determining premiums, Amerin Guaranty considers loans under which
    the borrower makes a down payment of at least 10% and finances the
    mortgage insurance premium as part of the loan (resulting in a
    final LTV over 90%) to be 90s. Such loans are classified as 95s in
    the above table, and are so classified by Fannie Mae. At December
    31, 1998, less than 1% of Amerin Guaranty's risk in force
    consisted of these types of loans.

                                       9

<PAGE>


(3) Fixed rate loans with temporary buydowns are included as fixed loans.
(4) Loans with fixed interest rates for the first five years or more (and
    adjustable rates thereafter). 
(5) Includes two-to-four unit dwellings. 
(6) The maximum individual loan amount that the FHA could insure in 1998 was
    $197,000. 
(7) The maximum individual loan amount for single unit properties
    eligible for purchase by Fannie Mae
    and Freddie Mac was $214,600 for 1997 and  $227,150 for 1998. This limit
    has been increased to $240,000 for 1999.

GEOGRAPHIC DISPERSION

Amerin Guaranty's long-term strategy is to diversify the geographic mix of 
its portfolio to approximate the national distribution of high LTV loans. 
Amerin Guaranty seeks to implement this strategy by focusing its marketing 
efforts on high quality national and selected regional lenders to balance the 
geographic mix of its new business. In 1994, Amerin developed a high 
concentration of business in California, with 45.9% of that year's new 
insurance written in the state. This concentration resulted from greater 
early market penetration by Amerin Guaranty of lenders active in California 
relative to other regions. Amerin achieved greater market share in other 
regions in subsequent years and the percentages of new insurance written in 
California in 1996, 1997 and 1998 were reduced to 20.5%, 19.4% and 19.1%, 
respectively. As a result, management expects that the proportion of Amerin 
Guaranty's risk in force in California will continue to decline.

The following table reflects the percentages of primary risk in force at the 
dates indicated for each of Amerin Guaranty's top 10 states and top 10 
Metropolitan Statistical Areas ("MSAs"):

<TABLE>
<CAPTION>

                                                  Primary Risk in Force
                                      -----------------------------------------------

                                                       December 31,
                                      -----------------------------------------------
<S>                                   <C>               <C>            <C>
                                                 1998            1997           1996
                                      ----------------   -------------  -------------
TOP 10 STATES
California............................          19.5%           22.8%          25.4%
Texas.................................           6.3%            6.1%           5.4%
Florida...............................           6.0%            5.4%           5.0%
Illinois..............................           5.2%            4.4%           4.0%
Colorado..............................           4.0%            3.4%           3.3%
New York..............................           3.9%            3.7%           3.5%
Virginia..............................           3.2%               *              *
Pennsylvania..........................           3.2%            3.3%           2.9%
Minnesota.............................           3.1%            3.4%           3.4%
New Jersey............................           3.0%            3.1%              *
Massachusetts.........................              *            3.2%           3.5%
Arizona...............................              *               *           2.5%
  Top 10 total........................          57.4%           58.8%          58.9%
</TABLE>

                                       10

<PAGE>

<TABLE>
<CAPTION>

<S>                                   <C>               <C>            <C>

TOP 10 MSAS
Los Angeles...........................           5.3%            6.2%           7.0%
Chicago...............................           4.3%            3.5%           3.2%
Washington, D.C.......................           2.9%            2.6%           2.3%
Riverside-San Bernardino.                        2.2%            1.8%              *
Minneapolis...........................           2.2%            2.3%           2.3%
Orange County.........................           2.0%            2.9%           3.2%
Phoenix...............................           1.9%            2.0%           2.1%
Atlanta...............................           1.9%               *              *
Denver................................           1.9%               *              *
New York..............................           1.8%               *              *
Oakland...............................              *            2.2%           2.6%
San Diego.............................              *            1.9%           2.0%
Boston................................              *            1.9%           2.1%
San Francisco.........................              *               *           1.8%
                                      ----------------   -------------  -------------
  Top 10 total........................          26.4%           27.3%          28.6%
</TABLE>

* Not a top 10 location for the date indicated.

INSURANCE IN FORCE BY POLICY YEAR

The following table sets forth the dispersion of Amerin Guaranty's primary 
insurance in force as of December 31, 1998, by year of policy origination 
since Amerin Guaranty began operations in April 1993:

                        PRIMARY INSURANCE IN FORCE BY POLICY YEAR

<TABLE>
<CAPTION>
                                                             Primary Insurance
                                                                  in Force                                   Percent of
         Policy Year                                              --------                                      Total
         -----------                                          (in millions of                                   -----
                                                                  dollars)
        <S>                                                       <C>                                          <C>
         1993                                                      $   143                                         .5
         1994                                                          887                                        3.2
         1995                                                        2,894                                       10.3
         1996                                                        4,262                                       15.1
         1997                                                        5,890                                       20.9
         1998                                                       14,071                                       50.0
                                                                   -------                                      -----

            Total                                                  $28,147                                      100.0
                                                                   -------                                      -----
</TABLE>

UNDERWRITING PRACTICES

The Company writes substantially all of its insurance on a delegated 
underwriting approval authority basis. Under delegated underwriting, 
participating lenders are permitted to commit a mortgage insurer to insure a 
loan based on mutually agreed criteria. Management believes that, when taken 
together, the various underwriting and risk management features discussed 
below provide acceptable protection to the Company against the possible risks 
associated with writing substantially all business on a delegated 
underwriting approval basis.

                                       11

<PAGE>


Amerin Guaranty does not cancel coverage on loans that it insures under 
delegated underwriting, but may seek reimbursement from lenders in respect to 
claims on loans so insured which violate specific, pre-stated loan 
eligibility standards. The performance of loans insured through programs of 
delegated underwriting, including Amerin Guaranty's program of delegated 
underwriting, has not been tested over an extended period of time or over 
portfolios almost exclusively written based on delegated underwriting, nor 
has the performance of such loans been tested in a period of adverse economic 
conditions.

The Company publishes underwriting guidelines which are employed by lenders 
in determining if loans qualify for insurance under Amerin Guaranty's 
delegated underwriting, and are also employed by the Company's underwriters 
in evaluating loans submitted for insurance under non-delegated underwriting 
situations. The Company believes that its underwriting standards are 
generally consistent with the industry. Amerin Guaranty regularly reviews its 
underwriting guidelines to address changes in the mortgage market, industry 
practices and economic conditions.

Mortgage insurance coverage cannot be canceled by Amerin Guaranty, except for 
nonpayment of premiums or certain material violations of Amerin Guaranty's 
master policy, and remains renewable at the option of the insured for the 
life of the loan at a rate fixed when the insurance on the loan was initially 
issued. As a result, the impact of increased claims and incurred losses from 
policies originated in a particular year generally cannot be offset by 
renewal premium increases on policies in force or mitigated by non-renewal of 
insurance coverage. If a lender should commit Amerin Guaranty to insure a 
loan that does not comply with the applicable underwriting guidelines, Amerin 
Guaranty is generally obligated to insure such a loan.

The Company's risk management objective is to build a portfolio of insured 
loans whose claims incidence is equal to or less than the long-term average 
expected claims rates on which its premium rates are based. In order to meet 
this objective, the Company's risk management efforts are concentrated in the 
following principal areas: lender approval; market analysis; loan and 
portfolio monitoring that includes lender audits.

         LENDER APPROVAL

Because Amerin Guaranty writes substantially all of its insurance on a 
delegated underwriting basis, the Company has utilized prudent lender 
approval criteria. The Company assigns delegated underwriting authority only 
to lenders with adequate financial resources, acceptable management and 
operations, and established records of originating good quality loans over a 
period of time. The Company's Risk Management Department conducts a thorough 
review of each candidate lender. Depending on the lender, such review may 
include analysis of the lender's financial statements, the historical 
performance of loans originated by the lender, on-site interviews with the 
lender's executive and line management, and review of the lender's policies, 
procedures and loan programs. Special attention is paid to the quality of a 
lender's underwriting, on-site quality control and servicing, and to its 
compliance with stated underwriting guidelines.

                                       12

<PAGE>


By incorporating the use of borrower credit scoring and Amerin Guaranty's 
proprietary mortgage scoring system, Amerin Guaranty has been able to 
streamline both its lender approval process and its lender audit process 
(discussed below). Amerin Guaranty uses consumer credit scores to provide a 
timely, objective evaluation of borrower creditworthiness. These scoring 
systems also permit Amerin Guaranty to review the overall credit quality of 
the portfolio and determine performance expectations for the business insured.

         MARKET ANALYSIS

Amerin Guaranty regularly reviews economic and real estate market conditions 
across the country, concentrating efforts on those areas and regions 
identified as undesirable, declining and potentially declining. The Company 
reviews the composition of its overall portfolio and its business by lender 
and within geographic markets to identify concentrations of risk. Specific 
elements of risk which are reviewed by Amerin Guaranty include LTV, loan 
type, loan amount, property type, occupancy status and borrower employment. 
The Company may take appropriate corrective actions with a lender or adjust 
its underwriting guidelines on a regional or national basis to correct 
concentrations of risk at these levels and/or within these markets.

         LOAN AND PORTFOLIO MONITORING

Amerin Guaranty's systems generate reports on all loans committed for 
insurance. Specific reports highlight those lenders and loans that possess 
certain high-risk criteria, including high debt ratios, self-employed 
borrowers and attached housing. Risk management personnel review the data 
received by Amerin Guaranty in respect to all such loans on a daily basis, 
and contact the lender as necessary to effectively manage the level of risk 
on these loans and within the portfolio. If it is determined that a lender is 
approving loans with excessive risk for Amerin insurance, Amerin Guaranty's 
senior risk management personnel will promptly contact the lender's 
management and take appropriate corrective action with the lender, up to and 
including restrictions on or termination of the lender's delegated 
underwriting authority.

The majority of its lenders include the credit score assigned to each loan as 
part of the data transmitted to Amerin Guaranty for generation of the 
insurance certificate. As well, Amerin Guaranty obtains credit scores from a 
third-party vendor for all loans committed for insurance on a daily basis. 
The Company uses these scores to provide a timely, objective evaluation of 
borrower credit-worthiness. The Company reviews the scores of each lender's 
borrowers, the number of borrowers with scores below certain thresholds, and 
the percentage of borrowers with insufficient credit histories to score, then 
trends these scores and averages over time and relates this information 
historically to loan performance. Accurate and timely analysis of this 
information and its patterns is integral to successfully managing the risk 
within the portfolio. Management believes that borrower creditworthiness is 
the most significant manageable source of risk to the Company in current 
market conditions. Amerin Guaranty uses credit scores to evaluate the quality 
of a lender's business, and may take appropriate corrective action with a 
lender if credit scores indicate that the lender's business presents an undue 
level of risk to Amerin Guaranty.

                                       13

<PAGE>


         LENDER AUDITS

As noted above, through the use of borrower credit scoring and its own 
proprietary mortgage scoring system, Amerin Guaranty is able to monitor the 
credit quality of loans submitted for insurance on a daily, real-time basis. 
The Company also conducts a periodic on-site review of a lender's 
Amerin-insured business. Lenders with significant risk concerns as identified 
through The Company's daily and weekly risk reporting and analysis of the 
business and related negative trends may be reviewed more frequently. Due to 
the real-time picture of credit quality obtained through the use of credit 
scoring and mortgage scoring, Amerin Guaranty has been able to streamline the 
lender audit process to focus primarily on those higher risk loans originated 
by the lender in the specified period. The sample of loans to be 
re-underwritten during the audit may be augmented by loans with certain risk 
factors or insured under waivers to Amerin Guaranty's underwriting guidelines 
granted to the lender, but is most frequently targeted toward specific risk 
factors or trends identified through the daily, weekly, monthly reporting and 
analysis processes. The intent of the loan review is to identify errors in 
the loan data transmitted to Amerin Guaranty, to determine compliance with 
Amerin Guaranty's underwriting guidelines and eligible loan criteria, to 
assess the quality of a lender's underwriting decisions and to rate the risk 
of the individual loans. Audits are graded based on the risk ratings of the 
loans reviewed, lender compliance and data integrity. The results of each 
audit are set forth in a report to the lender that requires the lender to 
address any deficiencies identified in the review. If issues raised by the 
report are not resolved in a manner and within a time period acceptable to 
Amerin Guaranty, the lender's delegated underwriting approval authority may 
be restricted or terminated.

DEFAULTS AND CLAIMS

         DEFAULTS

The claim process begins with the insurer's receipt of notification of a 
default from the insured on an insured loan. Default is defined in the 
primary master policy as the failure by the borrower to pay when due an 
amount at least equal to the scheduled monthly mortgage payment under the 
terms of the mortgage. The master policy requires insureds to notify Amerin 
Guaranty of defaults, generally within 120 days after the initial default. 
Generally, defaults are reported sooner, and the average time for default 
reporting by Amerin Guaranty insureds is approximately 60 days after initial 
default. In certain cases, Amerin Guaranty uses this earlier notification to 
facilitate workout analysis and loss mitigation efforts. The incidence of 
default is affected by a variety of factors, including the reduction of the 
borrower's income, unemployment, divorce, illness, the inability to manage 
credit and, in the case of ARMs, the level of interest rates. Borrowers may 
cure defaults by making all delinquent loan payments or by selling the 
property in full satisfaction of all amounts due under the mortgage. Defaults 
that are not cured result in a claim to Amerin Guaranty.

                                       14

<PAGE>


The following table shows the number of loans insured by Amerin Guaranty, the 
related number of loans in default and the percentage of loans in default 
(default rate) as of the dates indicated:

<TABLE>
<CAPTION>

                                                                                  December 31,
                                                             -------------------------------------------------------
                                                                          1998               1997              1996

                                                             ------------------ ------------------ -----------------
<S>                                                                  <C>                 <C>               <C>
Insured loans in force...................................              226,953            164,314           120,685

Loans in default.........................................                3,203              2,352             1,439

Percentage of loans in default (default rate)............                 1.41%              1.43%             1.20%
</TABLE>

Default rates differ from region to region in the United States depending upon
economic conditions and cyclical growth patterns. The table below sets forth the
default rates in Amerin Guaranty's 10 largest states by primary risk in force as
of December 31, 1998, 1997 and 1996. Amerin Guaranty's default rate on
California loans improved significantly in 1998 due to improving economic and
housing market conditions in the state. Claim sizes on California policies tend
to be larger than the average claim size due to high loan balances relative to
other states.

               DEFAULT RATES BY TOTAL PRIMARY RISK IN FORCE(1)

<TABLE>
<CAPTION>

                                        Percent of                            Default Rate as of
                                      Amerin Guaranty's           ------------------------------------------
                                       Primary Risk in                           December 31,
                                         Force as of              ------------------------------------------
                                         December 31,
                                             1998                     1998           1997          1996
                                    ------------------------      --------------  ------------  ------------
<S>                                                <C>             <C>              <C>          <C>
California..........................                  19.5%               1.81%         2.27%         2.06%
Texas...............................                   6.3%               1.10%         1.07%         0.86%
Florida.............................                   6.0%               1.75%         1.75%         1.50%
Illinois............................                   5.2%               1.75%         1.87%         1.08%
Colorado............................                   4.0%               0.87%         0.73%         0.70%
New York............................                   3.9%               2.04%         2.23%         2.03%
Virginia............................                   3.2%               0.87%          .72%          .40%
Pennsylvania........................                   3.2%               1.53%         1.38%         1.27%
Minnesota...........................                   3.1%                .80%          .68%          .69%
New Jersey..........................                   3.0%               1.54%         1.46%         1.06%
Total Portfolio.....................                 100.0%               1.41%         1.43%         1.20%
</TABLE>
---------------------
(1)      Top 10 states as determined by total primary risk in force as of
         December 31, 1998. Default rates are shown by state based on location
         of the underlying property.

                                       15

<PAGE>


         CLAIMS

Claims result from defaults that are not cured. The frequency of claims does 
not directly correlate to the frequency of defaults due primarily to 
borrowers' ability to overcome temporary financial setbacks. Whether an 
uncured default leads to a claim principally depends on the borrower's equity 
at the time of default and the borrower's (or the insured's) ability to sell 
the home for an amount sufficient to satisfy all amounts due under the 
mortgage loan. In some cases, during the default period, Amerin Guaranty 
works with the insured for possible early disposal of the underlying property 
when the chance of the loan reinstating is minimal. Such dispositions 
typically result in a savings to Amerin Guaranty over the percentage coverage 
amount payable under the master policy.

Under the terms of Amerin Guaranty's master policy, the lender is required to 
file a claim with Amerin Guaranty no later than approximately 60 days after 
it has acquired title to the underlying property, usually through foreclosure.

Generally, private mortgage insurers calculate claims payments by applying a 
stated coverage percentage to an aggregate amount consisting of (i) the 
outstanding principal loan balance at the date of default, (ii) accrued 
interest from the date of default to the date a claim is filed, (iii) 
advances made by the insured or the servicer with respect to normal and 
customary real estate property taxes, hazard insurance premiums, foreclosure 
costs, reasonable attorney's fees not exceeding 3% of the sum of such 
principal amount plus such accrued interest, and (iv) reasonable expenses 
(generally requiring prior approval by the insurer) necessary for the 
protection and preservation of the property.

Through December 31, 1996, Amerin Guaranty offered a claim payment 
calculation whereby the original principal amount of an insured loan was 
multiplied by the percentage of coverage applicable to that loan. All 
policies issued after December 31, 1996 have offered coverage under industry 
standard practice, and all claims paid to Fannie Mae and Freddie Mac after 
that date have been calculated pursuant to industry standard practice 
regardless of the date the policy was issued. Amerin Guaranty continues to 
pay claims based on its original claim calculation method for policies issued 
on or prior to December 31, 1996 to beneficiaries other than Fannie Mae and 
Freddie Mac. 41.3% of total claims paid in 1998 were paid under Amerin's 
original claim calculation method. Management expects this percentage to 
decline over time.

Depending on the applicable state foreclosure law, an average of 
approximately 12 months elapses from the date of default to payment of a 
claim on an uncured default. To ensure continued coverage should the loan 
reinstate, the insured frequently continues to pay premiums after notice of 
default until the insured acquires title to the underlying property. Amerin 
Guaranty's current master policy excludes coverage on loans secured by 
property with physical damage, whether caused by fire, earthquake or other 
hazard, unless the property is restored to its condition at the time the 
policy was originated. Amerin Guaranty must pay each claim within 60 days 
after a claim has been filed. Before a claim is filed, Amerin Guaranty may 
also agree with a lender on a settlement amount based on a prearranged sale 
of the property, which settlement amount may be less than an amount equal to 
the claim payment calculated under Amerin's master policy.

                                       16

<PAGE>


Claim activity is not spread evenly throughout the coverage period of a 
primary book of business. Based on historical overall mortgage insurance 
industry experience, the majority of claims occur in the third through sixth 
years after loan origination, and substantially fewer claims are paid during 
the first two years after loan origination. Insurance written by Amerin 
Guaranty since January 1, 1996 represented 86% of Amerin Guaranty's insurance 
in force as of December 31, 1998. This means that only 14% of Amerin 
Guaranty's insurance in force has reached the beginning of its expected peak 
claims period. Because of the Company's limited operating history and 
historical industry claim experience, the Company's loss experience is 
expected to significantly increase as its policies continue to age.

LOSS RESERVES

A significant period of time may elapse between the occurrence of the 
borrower's default on mortgage payments (the event triggering a potential 
future claims payment), the reporting of such default to Amerin Guaranty and 
the eventual payment of the claim related to such uncured default. To 
recognize the liability for unpaid losses related to the default inventory, 
in accordance with industry practice and generally accepted accounting 
principles ("GAAP"), Amerin Guaranty establishes loss reserves in respect of 
defaults included in such inventory, based upon the estimated claim rate and 
estimated average claim amount. Included in loss reserves are loss adjustment 
expenses ("LAE"), if any, and estimates for incurred but not reported 
("IBNR") defaults. These reserves are estimates and there can be no assurance 
that Amerin Guaranty's reserves will prove to be adequate to cover ultimate 
loss developments on reported defaults. The Company's profitability and 
financial condition would be adversely affected to the extent that the 
Company's loss reserves are insufficient to cover the actual related claims 
paid and expenses incurred. Consistent with industry practices and GAAP, 
Amerin Guaranty does not establish loss reserves in respect of estimated 
potential defaults that may occur in the future.

Amerin Guaranty establishes reserves for defaulted loans based on its 
estimates of (a) the probability of a given default resulting in a claim and 
(b) the severity of the claim, or the amount of the claim which would result 
if the default becomes a claim. Amerin Guaranty's estimates of the 
probabilities of defaults becoming claims take into account the number of 
months the loan is past due, its foreclosure status and the geographic region 
of the mortgaged property. Amerin Guaranty's estimates of the severity of a 
claim take into account the type of insurance (primary or pool), the claim 
payment method (whether industry standard or the original Amerin method) and 
the level of coverage on the loan. Such probability and severity estimates 
are primarily derived from Amerin Guaranty's own default experience.

For a further description of loss reserves, see Note 2 to the consolidated 
financial statements of the Company, set forth on page F-7.

REINSURANCE

Amerin Guaranty currently uses reinsurance from Amerin Re Corporation, a 
wholly-owned subsidiary of the Company ("Amerin Re"), to remain in compliance 
with the insurance regulations of certain states requiring that a mortgage 
insurer limit its coverage percentage of any single risk to 25%. Amerin 
Guaranty currently intends to use reinsurance provided by Amerin Re solely 
for purposes of such compliance. Amerin Guaranty began ceding reinsurance to 
Amerin Re in the fourth quarter of 1994. Amerin Re does not currently intend 
to provide reinsurance to other mortgage guaranty insurance companies.

                                       17

<PAGE>


Amerin Guaranty is party to an agreement (the "Centre Re Agreement") with the 
Centre Reinsurance Group ("Centre Re") pursuant to which Centre Re is 
obligated to repay, up to an aggregate amount of $100 million, all losses and 
allocated loss adjustment expenses paid by Amerin Guaranty during periods in 
which (i) the ratio of Amerin Guaranty's risk in force divided by the sum of 
policyholders' surplus plus the contingency reserve calculated in accordance 
with statutory accounting practices exceeds 24:9 to 1 and (ii) the sum of 
Amerin Guaranty's expense ratio and loss ratio exceed 100%. The claims-paying 
ability of Centre Re is rated "AA" by S&P.

Amerin Guaranty has developed a program that permits mortgage lenders to 
participate on a limited basis in the risks and rewards of insuring loans 
originated by such lenders. To date, under this program, Amerin Guaranty has 
entered into reinsurance arrangements ("Captive Arrangements") with mortgage 
reinsurance affiliates of 9 of its major mortgage lending customers. 
Management believes that the existence of Captive Arrangements enhances the 
Company's long-term relationships with these lenders. See "Certain Legal 
Matters Relating to Captive Mortgage Reinsurance Arrangements." "New York 
Circular Letter No. 2"

By letter dated January 20, 1999, Freddie Mac has advised Amerin Guaranty 
that all Freddie Mac-approved mortgage insurers must present all captive 
reinsurance transactions in which the captive reinsurer participates in more 
than 25 percent of the risk sharing to Freddie Mac for its approval. Freddie 
Mac also advised Amerin Guaranty that it is conducting an analysis of the 
potential effects that captive reinsurance transactions could have on 
mortgage insurers, and that it expected to complete this analysis and 
communicate a decision on Freddie Mac's position on these transactions by 
June 30, 1999. The Company cannot predict what conclusions, if any, will be 
reached by Freddie Mac, or what effect such conclusions might have on 
existing Captive Arrangements or Amerin Guaranty's ability to enter into 
additional Captive Arrangements.

In the future Amerin Guaranty may elect to use reinsurance involving the 
proportional sharing of risks, commonly known as quota share reinsurance, or 
may elect to use excess loss reinsurance. Arrangements that provide capital 
support (such as the Centre Re Agreement) also can be used to help support 
the claims-paying ability rating of the insurer.

Reinsurance does not discharge Amerin Guaranty, as the primary insurer, from 
liability to a policyholder. The reinsurer agrees to indemnify Amerin 
Guaranty for the reinsurer's share of losses incurred under a reinsurance 
agreement, unlike an assumption arrangement, where the assuming reinsurer's 
liability to the policyholder is substituted for that of Amerin Guaranty.

CLAIMS-PAYING ABILITY RATINGS

Certain national mortgage lenders and a large segment of the mortgage 
securitization market, including Fannie Mae and Freddie Mac, generally will 
not purchase mortgages or mortgage-backed securities unless the private 
mortgage insurance on the mortgages has been issued by an insurer with a 
claims-paying ability rating of at least "Aa3" from Moody's or "AA-" from 
S&P, Duff & Phelps Credit Rating Co. or Fitch Investors Service, Inc.

                                       18

<PAGE>


The Company and Amerin Guaranty are parties to agreements (the "Rating Agency 
Agreements") required by Moody's and S&P as a condition of the issuance to 
Amerin Guaranty and maintenance of their respective claims-paying ratings of 
"Aa3" and "AA." Failure to comply with the provisions of either of the Rating 
Agency Agreements could result in the withdrawal or reduction of Amerin 
Guaranty's claims-paying rating by one or both of the rating agencies, which 
would have a material adverse effect on the Company.

The Rating Agency Agreements each contain certain limitations on the ability 
of the Company and Amerin Guaranty to declare or pay dividends or other 
distributions on their capital stock or to redeem or repurchase capital 
stock, to issue additional stock, to enter into certain transactions which 
might result in a change of control (as defined) of Amerin Guaranty, or to 
incur indebtedness (subject to certain exceptions). The Rating Agency 
Agreements also contain certain risk to capital requirements which prohibit 
Amerin Guaranty from writing additional insurance if minimum ratios are not 
met. Upon an initial failure to observe certain of such limitations, the 
Company is obligated to take corrective action, which could include making 
adjustments to Amerin Guaranty's investment portfolio, entering into quota 
share reinsurance arrangements and limiting underwriting of further risks. 
Management believes that the limitations set forth in the Rating Agency 
Agreements are not materially more restrictive than those that would be 
otherwise imposed on the Company and Amerin Guaranty by the rating agencies 
as a condition of maintenance of Amerin Guaranty's claims-paying ratings, 
absent such agreements.

INVESTMENT PORTFOLIO

         POLICY AND STRATEGY

The income from the Company's investment portfolio is one of its primary 
sources of cash flow and earnings. All investments of the Company are managed 
by Scudder Insurance Asset Management pursuant to the terms of an agreement 
which provides for an annual management fee based on the average value of the 
portfolio under management. The agreement may be terminated earlier upon 90 
days' notice by either party.

Amerin Guaranty's investment strategy is the result of various interrelated 
investment considerations including protection of principal, appreciation 
potential, tax consequences and yield. The Company typically maintains its 
investment portfolio with a longer average duration than its anticipated 
claims development in order to achieve higher yields. The Company intends to 
meet any cash mismatch with cash generated from operations or sales of 
investments. The Company's investment policies in effect at December 31, 1998 
limited investments in the securities of a single issuer (other than the U.S. 
government and certain of its agencies).

At December 31, 1998, based on carrying value, 100% of the Company's 
investments were in fixed income securities, 89.3% of which were securities 
rated "A" or better, with 67.5% rated "AAA" and 14.7% rated "AA," in each 
case by at least one nationally recognized rating organization. The Company 
does not currently intend to invest in equity securities.

The Company's investment policies and strategies are subject to change 
depending upon regulatory, economic and market conditions and the existing or 
anticipated financial condition and operating requirements, including the tax 
position, of the Company.

                                       19

<PAGE>


         INVESTMENT OPERATIONS

At December 31, 1998, the carrying value of the Company's investment 
portfolio was $439.1 million and amortized cost was $422.3 million. At 
December 31, 1998, municipal securities represented 76.8% of carrying value 
of the total investment portfolio.

The effective duration of the investment portfolio is 6.32 years at December 
31, 1998. The following table indicates the aging of the investment portfolio:

<TABLE>
<CAPTION>

                Duration                    Percent
                --------                    -------
         <S>                                <C>
          0 - 1 years                           2.7
          1 - 3 years                          10.4
          3 - 5 years                          16.8
          5 - 7 years                          33.6
          7 - 10 years                         30.0
          After 10 years                        6.5
</TABLE>

For further information concerning investment operations, see "Management's 
Discussion and Analysis of Financial Condition and Results of Operations --
Financial Condition", set forth in Item 7, and Note 4 of Notes to 
Consolidated Statements of the Company, set forth on pages F-12 through 
F-13 herein.

REGULATION

         DIRECT REGULATION

The Company, Amerin Guaranty and Amerin Re are subject to comprehensive, 
detailed regulation for the protection of policyholders by the insurance 
departments of the various states in which they are licensed to transact 
business. Although their scope varies, state insurance laws in general grant 
broad powers to supervisory agencies or officials to examine companies and to 
enforce rules or exercise discretion touching almost every significant aspect 
of the insurance business. These include the licensing of companies to 
transact business and varying degrees of control over claims handling 
practices, reinsurance arrangements, premium rates, the forms and policies 
offered to customers, financial statements, periodic financial reporting, 
permissible investments and adherence to financial standards relating to 
statutory surplus, establishment and maintenance of required reserves, 
dividends and other criteria of solvency intended to assure the satisfaction 
of obligations to policyholders. Most states also regulate transactions 
between insurance companies and their parents or affiliates. For a 
description of limits on dividends payable, see Note 13 of Notes to 
Consolidated Financial Statements of the Company, set forth on page F-20 
herein.

Mortgage insurers are generally restricted by state insurance laws and 
regulations to writing residential mortgage insurance business only. This 
restriction prohibits Amerin Guaranty and Amerin Re from directly writing 
other types of insurance.

Mortgage insurance premium rates are subject to state regulation to protect 
policyholders against the adverse effects of excessive, inadequate or 
unfairly discriminatory rates and to encourage competition in the insurance 
marketplace. Changes in premium rates are subject to being justified, 
generally on the basis of the insurer's loss experience, expenses and future 
trend analysis. The general default experience in the mortgage insurance 
industry may also be considered. Premium rates are subject to review and 
challenge by state regulators.

                                       20

<PAGE>

A number of states generally limit the amount of insurance risk which may be 
written by a private mortgage insurer to 25 times the insurer's total 
policyholders' reserves, commonly known as the "risk-to-capital" requirement. 
Amerin Guaranty is required to contribute to a contingency loss reserve an 
amount equal to 50% of earned premiums. Such amounts cannot be withdrawn for 
a period of 10 years, except under certain circumstances.

Certain restrictions apply under the laws of several states to any licensed 
company ceding business to unlicensed reinsurers. Under such laws, if a 
reinsurer is not admitted or approved in such states, the company ceding 
business to the reinsurer cannot take credit in its statutory financial 
statements for the risk ceded to such reinsurer absent compliance with 
certain reinsurance security requirements. Amerin Re is admitted in Illinois, 
and therefore Amerin Guaranty receives credit on its statutory financials for 
business ceded to Amerin Re. In addition, several states also have special 
restrictions on mortgage guaranty reinsurance.

As the dominant purchasers and sellers of conventional mortgage loans and 
beneficiaries of private mortgage insurance, Fannie Mae and Freddie Mac 
impose eligibility requirements, which may change from time to time, on 
private mortgage insurers in order for such insurers to be eligible to insure 
loans sold to such agencies. To the extent that Fannie Mae or Freddie Mac 
implements new eligibility requirements, or alters or liberalizes 
underwriting guidelines on low down payment mortgages they purchase, private 
mortgage insurers, including Amerin Guaranty, are likely to respond to or 
comply with such actions in order to remain eligible with both agencies, and 
thereby maintain market share of new insurance written. Currently, Amerin 
Guaranty is an approved mortgage insurer for both Freddie Mac and Fannie Mae.

         INDIRECT REGULATION

Private mortgage insurers are indirectly, but significantly, impacted by 
regulations affecting purchasers of mortgage loans, such as Freddie Mac and 
Fannie Mae, and regulations affecting governmental insurers, such as the FHA 
and VA, and mortgage lenders. As a result, changes in federal housing 
legislation and other laws and regulations that affect the demand for private 
mortgage insurance may have a material effect on private mortgage insurers, 
including Amerin Guaranty. Various proposals are being discussed by Congress 
and certain federal agencies with respect to the reform or modification of 
the FHA, but the nature and extent of actual enacted legislation and possible 
effects of such legislation on Amerin Guaranty cannot be predicted.

The Real Estate Settlement and Procedures Act of 1974 ("RESPA") applies to 
most residential mortgages insured by Amerin Guaranty, and related 
regulations provide that mortgage insurance is a "settlement service" for 
purposes of loans subject to RESPA. Subject to limited exceptions, RESPA 
prohibits persons from accepting anything of value for referring real estate 
settlement services to any provider of such services. Although many states 
prohibit mortgage insurers from giving rebates, RESPA has been interpreted to 
cover many non-fee services as well.

Most originators of mortgage loans are required to collect and report data 
relating to a mortgage loan applicant's race, nationality, gender, marital 
status and census tract to HUD or the Federal Reserve under the Home Mortgage 
Disclosure Act of 1975 ("HMDA"). The purpose of HMDA is to detect possible 
discrimination in home lending and, through disclosure, to discourage such 
discrimination. Mortgage insurers are not required pursuant to any law or

                                       21

<PAGE>


regulation to report HMDA data, although under the laws of several states, 
mortgage insurers are currently prohibited from discriminating on the basis 
of certain classifications. The active mortgage insurers, through their trade 
association, MICA, have entered into an agreement with the Federal Financial 
Institutions Examinations Council ("FFIEC") to report the same data on loans 
submitted for insurance as is required for most mortgage lenders under HMDA.

Mortgage lenders are subject to various laws, including HMDA, the Community 
Reinvestment Act and the Fair Housing Act, and Fannie Mae and Freddie Mac are 
subject to various laws, including laws relating to government sponsored 
enterprises, which may impose obligations or create incentives for increased 
lending to low and moderate income persons or in targeted areas.

The Company and Amerin Guaranty are also indirectly, but significantly, 
impacted by laws and regulations affecting originators and purchasers of 
mortgage loans, particularly Fannie Mae and Freddie Mac, and regulations 
affecting governmental insurers such as the FHA. Private mortgage insurers, 
including Amerin Guaranty, are highly dependent upon federal housing 
legislation and other laws and regulations which affect the demand for 
private mortgage insurance and the housing market generally. For example, the 
President of the United States has recently proposed a significant increase 
in the maximum individual loan amount that the FHA may insure, which would in 
turn increase the number of persons eligible for FHA mortgages. Enactment of 
this proposal or any other legislation which increases the number of persons 
eligible for FHA or VA mortgages could have an adverse effect on the 
Company's ability to compete with the FHA or VA.

Pursuant to FIRREA, the Office of Thrift Supervision ("OTS") issued 
risk-based capital rules in 1990 for savings institutions. These rules 
establish a lower capital requirement for a low down payment loan that is 
insured with private mortgage insurance, as opposed to remaining uninsured. 
Furthermore, the guidelines for real estate lending policies applicable to 
savings institutions and commercial banks provide that such institutions 
should require appropriate credit enhancement in the form of either mortgage 
insurance or readily marketable collateral for any mortgage with an LTV that 
equals or exceeds 85% at origination. To the extent FIRREA's risk-based 
capital rules or the guidelines for real estate lending policies applicable 
to savings institutions and commercial banks are changed in the future, some 
of the anticipated benefits of FIRREA and the guidelines for real estate 
lending policies to the mortgage insurance industry, including Amerin 
Guaranty, may be curtailed or eliminated.

Proposals have been advanced which would allow Fannie Mae and Freddie Mac 
additional flexibility in determining the amount and nature of alternative 
recourse arrangements or other credit enhancements which they could utilize 
as substitutes for private mortgage insurance.

The Company cannot predict if or when any of the foregoing legislation or 
proposals will be adopted, but if adopted and depending upon the nature and 
extent of revisions made, demand for private mortgage insurance may be 
adversely affected. There can be no assurance that other federal laws 
affecting such institutions and entities will not change, or that new 
legislation or regulations will not be adopted. In addition, Fannie Mae and 
Freddie Mac have entered into, and may in the future seek to enter into, 
alternative recourse arrangements or other credit enhancements based on their 
existing legislative authority.

                                       22

<PAGE>


Political and monetary pressures to reduce the nation's budget deficit could, 
among other things, result in the partial or entire loss of the U.S. federal 
income tax deduction for mortgage loan interest, which could result in 
downward pressure on housing prices. Any reduction or loss of such deduction 
could reduce the volume of low down payment mortgages originated and private 
mortgage insurance written and adversely impact mortgage default patterns, 
and would materially adversely affect the Company's LPMI business.

There can be no assurance that the above-mentioned federal laws and 
regulations or other federal laws and regulations affecting lenders, private 
and governmental mortgage insurers, or purchasers of insured mortgage loans, 
will not be amended, or that new legislation or regulations will not be 
adopted, in either case in a manner which will adversely affect the demand 
for private mortgage insurance.

HOMEOWNERS PROTECTION ACT OF 1997

The Federal Homeowners Protection Act of 1997 (the "Act"), which was signed 
into law in July 1998, applies primarily to mortgage loans consummated on or 
after July 29, 1999, and provides for automatic cancellation of borrower-paid 
mortgage insurance after such loans amortize down to specified loan-to-value 
ratio (in most cases 78%). The mandatory cancellation provisions of the Act 
are not applicable to lender-paid mortgage insurance at specified levels. The 
Act also provides for voluntary cancellation pursuant to the borrower's 
written request if certain conditions are met; initial disclosure at or 
before consummation of the mortgage of the borrower's rights with respect to 
cancellation; subsequent annual disclosure of such rights; notification upon 
cancellation of mortgage insurance; and notification if a request for 
cancellation is denied. The Act further provides that eight states which 
already had laws not inconsistent with the Act as of January 2, 1998, were 
exempt from the Act, and allowed these states a period of two years from 
enactment of the Act to amend such laws in a manner consistent with the 
provisions of the Act. The Company believes that application of the 
provisions of the Act will not have a material effect on the operations or 
financial results of the Company.

NEW YORK CIRCULAR LETTER NO. 2

The New York Insurance Department ("NYID") recently issued Circular Letter 
No. 2, dated February 1, 1999 (the "Letter"), which concluded that captive 
mortgage reinsurance arrangements are permissible if they "constitute a 
legitimate transfer of risk..[and]...are fair and equitable to the 
parties..." The Letter further stated that the NYID is in the process of 
developing guidelines for determining which captive arrangements are 
permissible. The Letter also concluded that "supernotes/performance notes," 
"dollar pool" insurance, and "un-captive captives" violate New York law. The 
Company is in the process of seeking further guidance with regard to the 
Letter . The Company will review any guidelines issued by the NYID, and 
analyze its risk-sharing arrangements relative to such guidelines. If 
necessary, the Company will revise its risk-sharing arrangements to bring 
them into compliance with the requirements of the Letter and any NYID 
guidelines. However, issuance by the NYID of guidelines which require Amerin 
Guaranty to revise material terms of its existing Captive Arrangements could 
have a material adverse effect on Amerin's business and financial results. 
Furthermore, the Company cannot predict the nature or consequences of the 
guidance, if any, which will be provided by the NYID or what actions, if any, 
the NYID may take in connection with practices or transactions determined to 
be violative of New York law.

                                       23

<PAGE>


EMPLOYEES

At December 31, 1998, the Company had 178 full-time employees. Of its total 
work force, 144 were assigned to the Company's headquarters in Chicago, 
Illinois, and 34 operated out of their homes around the country. None of the 
Company's employees is a member of a labor union. The Company believes that 
it maintains good relations with its employees.

ITEM 2.  PROPERTIES

The Registrant leases its principal executive offices in Chicago, Illinois, 
which consists of approximately 30,000 square feet of office space and 
maintains a satellite office in Westchester, Illinois, which consists of 
approximately 6,000 square feet. The Company believes its existing property 
is adequate for its present operations.

ITEM 3.  LEGAL PROCEEDINGS.

From time to time, the Company and its subsidiaries are involved in certain 
routine legal proceedings arising in the normal course of their business, 
none of which is currently expected to have a material adverse effect on the 
Company's consolidated financial condition or results of operations.

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

None.

                                 PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY
         AND RELATED STOCKHOLDERS MATTERS.

On November 22, 1995, the Registrant's Common Stock began trading on the 
Nasdaq National Market under the symbol "AMRN". Prior to such date, no 
established public trading market for the Registrant's common equity existed. 
As of March 15, 1999, the approximate number of record holders of the 
Registrant's Common Stock was 78. The following table sets forth, for the 
period indicated, the high and low last sale prices of the Registrant's 
Common Stock as reported on the Nasdaq National Market.

<TABLE>
<CAPTION>

                                                                                        High               Low
                                                                                    ---------------  ----------------
<S>                                                                                   <C>               <C>
1998:
    First Quarter................................................................      $30-1/8           $26-1/4
    Second Quarter...............................................................      $33-11/16         $27-5/8
    Third Quarter................................................................      $31-3/8           $18-7/8
    Fourth Quarter...............................................................      $25-1/8           $13-13/16
1997:
    First Quarter................................................................      $26-1/8           $19-7/8
    Second Quarter...............................................................      $24-7/8           $17-3/4
    Third Quarter................................................................      $28-3/4           $22-5/8
    Fourth Quarter...............................................................      $32-5/8           $22-1/2
</TABLE>

The Registrant has never paid any cash dividends on its capital stock. The 
Registrant currently intends to retain its future earnings to finance the 
growth and development of its business and therefore does not anticipate 
paying cash dividends on its Common Stock for the foreseeable future. Amerin 
Corporation is a holding company whose principal source of cash flow is 
dividends and other

                                       24

<PAGE>


permitted payments from its subsidiaries, Amerin Guaranty and Amerin Re. For 
a description of restrictions on the payment of dividends applicable to the 
Registrant and Amerin Guaranty, see Note 13 of Notes to Consolidated 
Financial Statements of the Registrant set forth on page F-20 herein.

ITEM 6.  SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>

                                                                      YEARS ENDED DECEMBER 31,
                                                     -------------- -------------- --------------- --------------- -------------
                                                         1998           1997            1996            1995           1994
                                                     -------------- -------------- --------------- --------------- -------------
                                                                    (in thousands of dollars except ratios and per share data)
<S>                                                      <C>            <C>               <C>            <C>           <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
  Net premiums written...........................         $125,383        $94,740          $70,000        $33,946       $10,274
  Increase in unearned premiums..................           (2,283)        (2,411)          (7,651)        (6,387)       (5,037)
  Net premiums earned............................          123,100         92,329           62,349         27,559         5,237
  Net investment income..........................           21,312         18,607           16,871          7,612         4,818
  Realized investment gains......................            1,515          1,167              161            491           435
         Total revenues..........................          145,927        112,103           79,381         35,662        10,490
Expenses:
  Losses incurred................................           34,354         30,272           20,681          7,757           262
  Policy acquisition costs.......................           22,340         10,520            8,485          6,641         2,456
   Underwriting and other expenses...............           16,046         14,643           10,623          6,915         5,765
  Merger expenses................................            1,098              -                -              -             -
    Compensation charge resulting from initial
    public offering..............................                -              -                -         35,741            --
         Total expenses..........................           73,838         55,435           39,789         57,054         8,482
Income tax expense                                          20,906         15,909           11,363          1,419             -
Net income (loss)................................           51,183         40,759           28,229       (22,811)         2,008
Pay-in-kind dividends on
  preferred stock................................                -              -                -          5,287         5,067
Net income (loss) applicable to
  common stockholders............................           51,183         40,759           28,229       (28,098)       (3,059)

OTHER OPERATING DATA:
    Mortgage insurance operating ratios:
         (GAAP)(1)
         Loss ratio..............................            27.9%          32.8%            33.2%          28.2%          5.0%
         Expense ratio...........................            30.6%          26.6%            30.6%          49.2%        157.0%
         Combined ratio..........................            58.5%          59.3%            63.8%          77.3%        162.0%
         (Statutory)(1)
         Loss ratio..............................            27.9%          32.8%            33.2%          28.2%          5.0%
         Expense ratio...........................            25.4%          25.6%            27.4%          42.8%         97.4%
         Combined ratio..........................            53.3%          58.4%            60.6%          70.9%        102.4%

PER SHARE DATA:(2)
Net Income (loss) - Basic........................           $1.94           $1.56           $1.08        $(2.32)        $(0.36)
Net Income (loss) - Diluted......................           $1.92           $1.54           $1.07        $(2.32)        $(0.36)
Weighted average shares outstanding (in
thousands):
   Basic.........................................          26,374          26,119          26,038         12,106          8,467
   Diluted.......................................          26,702          26,483          26,351         12,106          8,467
Book value (at year end).........................          $15.44          $13.39          $11.53         $10.55          $5.59
</TABLE>

                                       25

<PAGE>
<TABLE>
<CAPTION>

                                                                        As of and for the years ended December 31,
                                                        ---------------------------------------------------------------------------
                                                               1998           1997            1996            1995          1994
                                                        ---------------------------------------------------------------------------
<S>                                                          <C>            <C>             <C>              <C>           <C>
OPERATING AND STATUTORY DATA:
    Number of policies in force...................            226,953        164,314         120,385          68,112        22,937
    Default rate..................................              1.41%          1.43%           1.20%           0.89%         0.18%
    Persistency...................................             69.3 %         87.2 %          87.6 %          93.0 %        96.2 %
    Direct primary insurance in force (in millions)
                                                             $ 28,147       $ 20,394        $ 14,777          $8,262        $2,750
    Direct primary risk in force (in millions)....
                                                               $7,032         $5,149         $3,671           $1,989         $ 580
    Amerin Guaranty Corporation:
        Statutory capital (in millions)...........
                                                                376.4         $307.8          $260.7          $227.0        $ 90.5
        Risk-to-capital ratio.....................               18.3           16.1            13.3             8.2           6.4
</TABLE>

<TABLE>
<CAPTION>

                                                                                      As of December 31,
                                                        ----------------------------------------------------------------------------
                                                            1998            1997             1996           1995           1994
                                                        -------------- ---------------- --------------- -------------- -------------
                                                                                 (in thousands of dollars)
<S>                                                      <C>             <C>              <C>            <C>            <C>
 CONSOLIDATED BALANCE SHEETS DATA:
    Total investments.............................        $ 439,142       $ 377,720        $ 328,793      $ 296,982      $ 96,246
    Total assets..................................          545,232         440,558          365,731        316,934       107,261
    Unearned premiums.............................           26,114          23,352           20,525         12,710         6,323
    Loss reserves.................................           43,849          31,280           18,730          7,092           262
    13.5% Convertible Preferred
    Stock(3)......................................                -               -               --             --        40,755
    Total common stockholders'
    equity........................................          409,230         350,155          300,609        274,137        58,081
</TABLE>
--------------------

 (1) GAAP and statutory accounting practices (SAP) ratios reflect the Company's
     status as a new company and include start-up and other expenses incurred
     prior to the commencement of significant operations. SAP ratios reflect the
     combined results of the Company's insurance subsidiaries and do not include
     holding company costs. Expense ratios exclude the compensation charge
     resulting from the Company's initial public offering.

 (2) For 1995 and subsequent, includes 13,340,000 shares issued in conjunction
     with the Company's November 28, 1995 initial public offering and also
     includes 2,250,068 shares, as of the date of such offering, out of a total
     of 11,000,000 shares that were previously excluded from weighted average
     shares. Such shares were subject to contingent recall provisions and the
     conditions required for the removal of recall provisions on the 11,000,000
     shares had not been met. The Company's initial public offering removed the
     recall provisions on 2,250,068 of the shares and resulted in the
     cancellation of the remaining 8,749,932 common shares.

 (3) The 13.5% Convertible Preferred Stock was redeemed on December 1, 1995 at a
     redemption price of $46.0 million.

                                       26

<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

RESULTS OF CONSOLIDATED OPERATIONS

         1998 COMPARED TO 1997

Total revenues for 1998 were $145.9 million, an increase of 30% over total 
revenues of $112.1 million for 1997. The growth in revenues was due primarily 
to the increases in net premiums earned and investment income in 1998 as 
compared to 1997, as discussed below.

New insurance written in 1998 was $15.2 billion, compared to $7.8 billion in 
1997. The dramatic growth in new insurance written is due to the increase in 
the Company's market share from 6.5% in 1997 to 8.1% in 1998 and the record 
volume of originations due to the heavy refinance environment. As of December 
31, 1998, Amerin's primary insurance in force was $28.1 billion as compared 
with $20.4 billion as of December 31, 1997, which represents a 38% increase.

Net premiums written for 1998 were $125.4 million compared to $94.7 million 
for 1997, which represents a 32% increase. The increase was primarily 
attributable to a 95% increase in Amerin Guaranty's new insurance written 
which resulted in the growth in insurance in force and related premium 
revenue which was partially offset by the reduced persistency rate which 
decreased to 69.3% at December 31, 1998 from 87.2% at December 31, 1997. The 
decline in the persistency rate was due to the increased level of refinance 
activity in 1998.

Net premiums earned increased by $30.8 million to $123.1 million for 1998 
from $92.3 million for 1997. This increase was due to the increase in 
insurance written and in force in 1998 as compared to 1997.

Net investment income of $21.3 million for 1998 increased by $2.7 million (or 
15%) over 1997, due primarily to Amerin's net operating cash flows over the 
course of 1998, which resulted in an increase in the average amount of 
invested assets. Realized investment gains for 1998 were $1.5 million 
compared to realized investment gains of $1.2 million for 1997. As of 
December 31, 1998 and 1997, the yields to maturity on the investment 
portfolio were 5.5% and 5.6%, respectively, and the average durations of the 
investment portfolio remained constant at 6.3 years.

Losses incurred in 1998 were $34.4 million, compared to $30.3 million in 
1997. The Company's loss ratio decreased from 32.8% for 1997 to 27.9% for 
1998. The reduction in loss ratio is due to the decline in the default rate 
from 1.43% at December 31, 1997 to 1.41% at December 31, 1998 and the growth 
rate in paid claims was significantly less than the growth rate in insurance 
in force. Approximately 86% of the Company's insurance in force has been 
issued within the last three years and has not reached the peak claim paying 
period. Based on historical industry experience, the majority of claims occur 
in the third through sixth year after loan origination. Because of the 
Company's limited operating history, its loss experience is expected to 
increase significantly as its policies continue to age.

                                       27

<PAGE>

The Company's expense ratio increased from 26.6% for 1997 to 30.6% in 1998. 
The significant increase in expenses is due to the increase in contract 
underwriting expenses associated with the 95% increase in new insurance 
written in 1998.

The Company's effective tax rate was 29.0% in 1998. The effective tax rate 
for 1998 was below the statutory rate of 35%, principally reflecting the 
benefits of tax-exempt investment income.

As a result of the foregoing factors, the Company had net income of $51.2 
million for 1998, or $1.92 per share on a diluted basis compared to net 
income of $40.8 for 1997 or $1.54 per share on a diluted basis.

           1997 COMPARED TO 1996

Total revenues for 1997 were $112.1 million, an increase of 41.2% over total 
revenues of $79.4 million for 1996. The growth in revenues was due primarily 
to the increases in net premiums earned as discussed below.

New insurance written in 1997 was $7.8 billion, compared to $7.7 billion in 
1996. Amerin's primary insurance in force was $20.4 billion as compared with 
$14.8 billion as of December 31, 1996, which represents a 38% increase.

Net premiums written for 1997 were $94.7 million compared to $70.0 million 
for 1996, which represents a 35.3% increase. The increase was primarily 
attributable to the 38% increase in insurance in force. Management believes 
that Amerin Guaranty was able to increase revenues due primarily to continued 
strong levels of new business with the Company's top 10 lenders, the addition 
of new lenders during 1997, and an annualized persistency rate on in force 
business of 87.2% at December 31, 1997.

Net premiums earned increased by $30.0 million to $92.3 million for 1997 from 
$62.3 million for 1996. This increase was primarily due to the increase in 
insurance in force in 1997 as compared to 1996.

Net investment income of $18.6 million for 1997 increased by $1.7 million (or 
10.3%) over 1996, due primarily to investment of Amerin's net operating cash 
flows over the course of 1997, which resulted in an increase of 16.1% in the 
monthly average amount of invested assets. Realized investment gains for 1997 
were $1.2 million compared to realized investment gains of $.2 million for 
1996. This increase reflected higher sales activity within the portfolio due 
to the Company's desire to maintain a certain duration of the investment 
portfolio. As of December 31, 1997 and 1996, the yields to maturity on the 
investment portfolio were 5.6% and 5.8%, respectively, and the average 
durations of the investment portfolio were 6.3 years and 6.4 years, 
respectively.

Losses incurred in 1997 were $30.3 million, compared to $20.7 million in 
1996, as a result of aging of the Company's policies. The Company's loss 
ratio decreased from 33.2% for 1996 to 32.8% for 1997 due to favorable 
delinquency rates on business issued during the last three years. 
Approximately 92% of Amerin Guaranty's insurance in force has been issued

                                       28

<PAGE>


within the last three years and has not reached the peak claim paying period. 
Based on historical overall mortgage insurance industry experience, the 
majority of claims occur in the third through sixth year after loan 
origination. At December 31, 1997, Amerin Guaranty's default rate of 1.43% 
compares favorably to an industry equivalent seasoned rate of 1.72%. Because 
of its limited operating history, the Company expects it loss experience to 
increase as its policies age.

Policy acquisition costs during 1997 of $10.5 million increased by $2.0 
million (or 24.0%) compared to 1996 principally due to the growth in the 
level of marketing and underwriting activity in connection with the 
production of new insurance written in 1997. Underwriting and other expenses 
during 1997 increased by $4.0 million or 37.8% due to the increase in 
insurance in force which resulted in various administrative, technology, and 
occupancy costs relating to growth in the Company's personnel.

The Company's effective tax rate was 28.1% in 1997. The effective tax rate 
for 1997 was below the statutory rate of 35%, principally reflecting the 
benefits of tax-exempt investment income.

As a result of the foregoing factors, the Company had net income of $40.8 
million for 1997 or $1.54 per share on a diluted basis, compared to net 
income of $28.2 million for 1996 or $1.07 per share on a diluted basis.

FINANCIAL CONDITION

The Company's consolidated total investments were $439.1 million at December 
31, 1998, compared with $377.7 million at December 31, 1997. The Company 
generated consolidated cash flows from operating activities of $57.8 million 
during 1998, compared to $54.6 million generated during 1997. All of the 
Company's fixed maturity securities at December 31, 1998 are rated 
"investment grade," which is defined by the Company as a security having a 
National Association of Insurance Commissioners ("NAIC") rating of 1 or 2 or 
an S&P rating ranging from "AAA" to "BBB-."

The aggregate fair value (carrying value) of the fixed maturity securities 
was greater than amortized cost at December 31, 1998 by $16.8 million. At 
December 31, 1997, the aggregate fair value (carrying value) of the Company's 
fixed maturity securities was greater than amortized cost by $12.7 million. 
The increase during 1998 in the fair value of the Company's fixed maturity 
securities compared to amortized cost is due primarily to the decrease in 
interest rates during 1998. Fixed maturity securities of $192.9 million or 
44.5% of total fixed maturity securities at December 31, 1998 have stated 
maturities of 10 years or greater. As a result of these long-term holdings, 
if interest rates should increase, the fair value of these securities will 
decline and common stockholders' equity will decrease.

Consolidated loss reserves increased by $12.5 million to $43.8 million at 
December 31, 1998 from $31.3 million at December 31, 1997, primarily due to 
the growth of insurance in force. See "-- Results of Consolidated Operations --
1998 Compared to 1997." Consistent with industry practices, the Company 
does not establish loss reserves for future claims on insured loans which are 
not currently in default.

                                       29

<PAGE>

Consolidated unearned premiums increased $2.7 million from $23.4 million at 
December 31, 1997 to $26.1 million at December 31, 1998, reflecting the 
increase in insurance in force during 1998 versus 1997. The unearned premium 
reserve growth rate is significantly lower then the increase in insurance in 
force due to the increased concentration of monthly business.

Consolidated common stockholders' equity increased to $409.2 million at 
December 31, 1998, from $350.2 million at December 31, 1997, an increase of 
17%. This increase resulted primarily from the results of 1998 operations.

LIQUIDITY AND CAPITAL RESOURCES

THE FOLLOWING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE EFFECTS OF THE 
PENDING MERGER BETWEEN THE COMPANY AND CMAC INVESTMENT CORPORATION ON THE 
OVERALL LIQUIDITY AND CAPITAL RESOURCES OF THE RESULTING COMBINED COMPANY. 
SEE "BUSINESS - PENDING MERGER."

The Company's consolidated sources of funds consist primarily of premiums 
written and investment income. The principal uses of funds are the payment of 
claims and expenses. The Company's principal expense categories are policy 
acquisition costs, underwriting and other expenses and losses incurred on 
insurance policies. Policy acquisition costs include only those expenses that 
relate directly to, and vary with premium production, such as compensation of 
employees involved in underwriting, marketing and policy issuance functions, 
state premium taxes, and certain other underwriting expenses. Underwriting 
and other expenses include occupancy costs, personnel-related costs of 
non-production personnel, and administrative support and compliance costs.

The Company generated positive cash flows from operations of approximately 
$57.8 million, $54.6 million and $43.3 million, respectively, in 1998, 1997 
and 1996, as shown on the Consolidated Statements of Cash Flows. Positive 
cash flows are invested pending future payments of claims and other expenses. 
Should Amerin Guaranty experience cash flow shortfalls due to significantly 
higher than anticipated claims, or for other reasons, the Company anticipates 
funding such shortfalls through sales of short-term investments and, if 
required, other investment portfolio securities.

The Company does not expect to incur significant capital costs in 1999.

In connection with the merger of CMAC Investment Corporation, the Company 
expects to incur investment banking, legal, accounting and other related cash 
transaction costs and fees. Additionally, the Company expects to incur merger 
related employee severance associated with the integration of the separate 
companies. The merger related cash expenses, estimated to be approximately 
$15 million in 1999, will be charged to expense in the period incurred and 
funded from current operations of Amerin Guaranty. A majority of the 
expenditures will be incurred in the second and third quarters of 1999.

The payment of dividends from unassigned surplus by the insurance 
subsidiaries without prior approval of the Illinois Insurance Department is 
subject to certain restrictions principally including those relating to the 
greater of 10% of the prior year's statutory basis surplus or net income. The 
total amount of dividends that could be paid in 1999 without regulatory 
approval is approximately $8.5 million.

                                       30

<PAGE>


In addition, dividend restrictions have been placed on the Company and its 
subsidiaries by Moody's Investor Services, Inc., Fitch Investor Services, 
L.P., and Standard & Poor's Corporation(collectively, Rating Agencies) as 
embodied in various support agreements (Agreements). Those restrictions 
require that no dividend will be declared or paid if the subsidiaries' net 
risk in force exceeds the maximum multiple of capital , as specified in the 
Agreements, or the subsidiaries' rating is less than the minimum rating 
allowed.

Amerin Guaranty is the principal insurance subsidiary of the Company. Amerin 
Guaranty's risk-to-capital ratio was 18.3:1 at December 31, 1998, compared to 
16.1:1 at December 31, 1997. This increase was due to the growth in Amerin 
Guaranty's risk in force during 1998.

To provide against the possibility that rapid growth of the Company's 
business may generate levels of risk in force that could not be supported 
solely by internally-generated capital, the Company entered into an excess 
loss agreement with a major reinsurer effective January 1, 1996, and 
cancelable by the Company beginning in 2000. The claims-paying ability of the 
reinsurer is rated AA by S&P. This agreement provides additional support in 
the event that the Company's risk-to-capital ratio and its combined ratio 
both exceed specified levels and will be taken into account by S&P in 
measuring the Company's risk-to-capital ratio to the extent required by rapid 
growth. Premiums payable with respect to any quarterly period may vary to the 
extent that the Company's combined insurance risk-to-capital ratio exceeds 
certain specified levels.

YEAR 2000 ISSUE

The Company has determined that it will need to modify or replace significant 
portions of its software so that its computer systems will function properly 
with respect to dates in the year 2000 and beyond. In April 1996 the Company 
commenced a major initiative to enhance its entire computer system. While 
this initiative was not undertaken with the primary goal of addressing the 
Year 2000 issue, all internal matters relating to the Year 2000 issue will be 
fully addressed upon completion of this initiative.

The Company's comprehensive Year 2000 initiative is being managed by a team 
of internal staff and outside consultants. The team's activities are designed 
to ensure that there is no adverse effect on the Company's core business 
operations and that transactions with customers are fully supported. The 
Company is well underway with these efforts, which are scheduled to be 
completed in early 1999.

The Company also has initiated discussions with its large customers and 
certain servicing companies to ensure that those parties have appropriate 
plans to fully address Year 2000 issues where their systems interface with 
the Company's systems or could otherwise impact its operations. The Company 
is assessing the extent to which its operations are vulnerable should those 
organizations fail to properly convert their computer systems on a timely 
basis. While the Company believes its planning efforts are adequate to 
address its Year 2000 concerns, there can be no guarantee that the systems 
and operations of other companies on which the Company's systems and 
operations rely will be converted on a timely basis. The failure of these 
other companies to fully convert their systems and operations on a timely 
basis could have a material adverse effect on the Company.

                                       31

<PAGE>


The Company has reviewed the Year 2000 initiatives of CMAC. CMAC has 
indicated they have experienced very few problems related to year 2000 
testing. CMAC believes that it does not have material exposure to the Year 
2000 issue with respect to its information systems since its existing systems 
correctly define the year 2000. CMAC's information systems will be used for 
the combined company's operations.

ITEM 7A.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK EXPOSURE

The Company is exposed to various market risks, most specifically changes in 
interest rates. Market risk is the potential loss arising from adverse 
changes in market rates and prices. The Company does not enter into 
derivatives or other similar financial instruments for trading or speculative 
purposes. The following analysis presents the hypothetical loss in fair value 
of the financial instruments held by the Company at December 31, 1998. The 
range of changes in interest rates used in the analysis reflects the 
Company's view of changes that are reasonably possible over a one year 
period. This discussion of market risks related to the Company's consolidated 
balance sheet includes estimates of future economic environments caused by 
changes in market risks. The effect of actual changes in these risk factors 
may differ materially from the Company's estimates. In the ordinary course of 
business, the Company also faces risks that are either nonfinancial or 
nonquantifiable, including credit risk and legal risk. These risks are not 
included in the following analysis.

The fair value of the Company's cash and cash equivalents investment 
portfolio at December 31, 1998 approximated its carrying value due to its 
short-term duration. Market risk was estimated as the potential decrease in 
fair value resulting from a hypothetical one percentage point increase in 
interest rates for the instruments contained in the cash and cash equivalents 
investment portfolio and the resulting fair value was not materially 
different from the December 31, 1998 carrying value.

At December 31, 1998, the fair value of the Company's fixed maturities 
available for sale was $433.4 million, which was $16.8 million greater than 
its aggregate amortized cost. This portfolio, which is not hedged, consists 
of investment grade fixed income securities. At December 31, 1998, municipal 
securities represented 76.8% of the carrying value of the investment 
portfolio. The valuation of the Company's fixed maturity portfolio is subject 
to long-term interest rate risk. A hypothetical one percentage point increase 
in long-term interest rates would decrease the fair value of the portfolio at 
December 31, 1998 by approximately $13 million.

This sensitivity analysis provides only a limited, point-in-time view of the 
market risk sensitivity of the Company's financial instruments. The actual 
impact of interest rate and price changes may differ significantly from those 
shown in the analysis. The sensitivity is further limited as it does not take 
into consideration any actions the Company could take in response to or in 
anticipation of movements in interest rates or prices.

                                       32

<PAGE>


ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements and supplementary data are indexed in 
the Index to Financial Statements and Schedules which appears on Page F-1 
hereof and incorporated in this Item by reference thereto.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
FINANCIAL DISCLOSURE.

There were no disagreements on accounting and financial disclosure.

                                     PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table sets forth certain information regarding the Registrant's 
executive officers as of March 15, 1999:

<TABLE>
<CAPTION>

Name and Age                                                                  Title
--------------------------------------------   ---------------------------------------------------------------------
<S>                                           <C>
Gerald L. Friedman (60)....................    Chairman of the Board of Directors and Chief Executive Officer of the
                                               Company and Amerin Guaranty
Roy J. Kasmar (43).........................    President, Chief Operating Officer and Director of the Company and
                                               Amerin Guaranty
Jerome J. Selitto (57).....................    Vice Chairman of the Company and Amerin Guaranty and Director of
                                               Amerin Guaranty
David I. Vickers (38)......................    Senior Vice President, Chief Financial Officer and Treasurer of the
                                               Company and Amerin Guaranty and Director of Amerin Guaranty
Randolph C. Sailer II (44).................    Senior Vice President, General Counsel and Secretary of the Company
                                               and Amerin Guaranty and Director of Amerin Guaranty
William V. Nardiello (50)..................    Executive Vice President, Sales and Marketing of Amerin Guaranty
Albert V.Will (43).........................    Executive Vice President, Operations of Amerin Guaranty
Sean P. Connelly (32)......................    Senior Vice President, Director of Information Technology of Amerin
                                               Guaranty
Michael J. Dirrane (42)....................    Senior Vice President, National Sales Director of Amerin Guaranty
Matthew K. Lindland (36)...................    Senior Vice President, Director of Corporate Transactions of Amerin
                                               Guaranty
Sergio E. Murer (34).......................    Senior Vice President, Operations of Amerin Guaranty
R. Bruce Van Fleet, III (47)...............    Senior Vice President, National Accounts Director, of Amerin Guaranty
Philip P. Yee (45).........................    Senior Vice President, Marketing Services and Corporate
                                               Communications, of Amerin Guaranty
Alan E. Goldberg (44)......................    Director of the Company and Amerin Guaranty
Howard I. Hoffen (35)......................    Director of the Company and Amerin Guaranty
Larry E. Swedroe (47)......................    Director of the Company
</TABLE>

                                       33

<PAGE>


Mr. Friedman founded the Company and has been Chairman and Chief Executive 
Officer of the Company and Amerin Guaranty since April 1992. Prior thereto, 
he founded and served as Chairman and President of Financial Guaranty 
Insurance Corporation ("FGIC"), a AAA rated financial guarantor, from 
September 1983 to December 1990. Mr. Friedman began his career with MGIC in 
1961, and, from 1978 to 1981, Mr. Friedman was President of MGIC Investment 
Corporation, the holding company of MGIC. Mr. Friedman has been a member of 
Amerin Corporation's and Amerin Guaranty's boards of directors since April 
1992.

Mr. Kasmar has been President and Chief Operating Officer of the Company and 
Amerin Guaranty since December 1997, Executive Vice President of Operations 
of Amerin Guaranty from May 1996 to December 1997, and a Director of Amerin 
Guaranty since December 1996. Prior to joining Amerin Guaranty, Mr. Kasmar 
was Managing Director for Prudential Home Mortgage's Capital Markets from May 
1988 to April 1996. He was Vice President in charge of Secondary Marketing 
and Chief Operating Officer at First Boston Capital Group from 1984 to 1988.

Mr. Selitto has been Vice Chairman of the Company and Amerin Guaranty since 
November 1997, Executive Vice President and National Director of Marketing 
and Sales of Amerin Guaranty from December 1995 through November 1997, Senior 
Vice President and National Director of Marketing of Amerin Guaranty from 
September 1994 through December 1995, and a director of Amerin Guaranty since 
December 1996. Prior thereto he was Senior Vice President and Director of 
Marketing for Amerin Guaranty's Central Region from October 1992 to September 
1994. Prior to joining Amerin Guaranty, Mr. Selitto was managing director and 
manager of the Asset-Backed Securities Group at First Chicago Capital 
Markets, Inc. from August 1989 to October 1992.

Mr. Vickers has been Senior Vice President, Chief Financial Officer and 
Treasurer of the Company and Amerin Guaranty since September 1997. Prior 
thereto, he was Senior Vice President, Chief Financial Officer, and Treasurer 
of Pioneer Financial Services from June 1992 to August 1997. He was with the 
public accounting firm of Ernst & Young from July 1983 to May 1992 where he 
was a Senior Manager in the Insurance Division. Mr. Vickers has been a member 
of Amerin Guaranty's board of directors since September 1997.

Mr. Sailer has been Senior Vice President, General Counsel and Secretary of 
the Company and Amerin Guaranty since November 1992 and Vice President, 
General Counsel and Secretary of the Company and Amerin Guaranty from August 
1992 to November 1992. Prior thereto, he was Vice President and Assistant 
General Counsel of Connie Lee Insurance Company in Washington, D.C. from 
February 1990 to July 1992. He served as Vice President and Assistant General 
Counsel of FGIC from October 1985 to January 1990, and worked in the 
securities law and corporate and municipal finance departments of three major 
New York firms from September 1980 to September 1985. Mr. Sailer has been a 
member of Amerin Guaranty's board of directors since September 1993.

Mr. Nardiello has been Executive Vice President of Sales and Marketing since 
August of 1998. Prior thereto, Mr. Nardiello was Vice President of Business 
Development for the Thomas Group from July 1996 to May 1998, President and 
Chief Executive Officer of Residential Information Services from March 1995 
until May 1996, Vice President of the Thomas Group from July 1994 to March 
1995, and a partner in Results Marketing Group from May 1992 to June 1994.

Mr. Will has been Executive Vice President, Operations, of the Company since 
August 1998. Since August 1997, he has been a Principal of eoTek, LLC., and of 
Looking Glass Partners. He served as Chief Operating Officer of Ban One 
Mortgage from November 1995 through August 1997, and Senior Vice President of 
Residential Services Corporation of America from September 1989 through 
November 1995.

                                       34

<PAGE>


Mr. Connelly has been Senior Vice President and Director of Information 
Technology of Amerin Guaranty since December 1997, and Vice President and 
Director of Management Information Systems of Amerin Guaranty from January 
1996 through December 1998. Prior thereto, he was Vice President of 
Information Technology for Prudential Home Mortgage from January 1993 to 
December 1995, and worked in various technology positions within Prudential 
Home Mortgage from June 1987 through December 1992.

Mr. Dirrane has been Senior Vice President and National Field Sales Director 
of Amerin Guaranty since January 1997.  Prior thereto, Mr. Dirrane was Vice 
President and Northeast Regional Marketing Director of Amerin Guaranty from 
February 1993 to January 1997.  Mr. Dirrane was Vice President of 
Correspondent Lending at Salem Five Mortgage from July 1992 to February 1993 
and an Account Executive for MGIC from October 1987 to July 1992.

Mr. Lindland has been Senior Vice President and Director of Corporate 
Transactions of Amerin Guaranty since December 1997, Vice President of Amerin 
Guaranty from December 1995 through December 1997, Director of Risk Analysis 
Assistant of Amerin Guaranty from December 1993 through December 1995, and 
Financial Analyst of Amerin Guaranty from July 1993 through December 1995. 
Prior thereto, Mr. Lindland was a Vice President of Rothschild Inc. from May 
1992 through November 1992 and an Associate of Kidder, Peabody & Co. 
Incorporated from May 1988 through May 1992.

Mr. Murer has been Senior Vice President, Product Development of Amerin 
Guaranty since October 1998, Senior Vice President, Operations of Amerin 
Guaranty from December 1997 to October 1998, and Vice President of Amerin 
Guaranty from September 1996 to December 1997. Prior thereto, Mr. Murer was 
Vice President of Finance for Norwest Mortgage from May 1996 through 
September 1996, Vice President of Correspondent Lending for Prudential Home 
Mortgage from August 1992 through May 1996, and Vice President of Secondary 
Marketing for Prudential Home Mortgage from April 1988 through July 1992.

Mr. Van Fleet has been Senior Vice President and National Accounts Director 
since January 1997 and Senior Vice President and Director of Marketing for 
Amerin Guaranty's Eastern Region from December 1995 to January 1997. Prior to 
joining Amerin Guaranty, Mr. Van Fleet was Senior Vice President of Corporate 
Sales for Strategic Mortgage Services from August 1993 until December 1995, 
and a Director of National Accounts at PMI Mortgage Insurance Company from 
December 1990 until August 1993.

Mr. Yee has been Senior Vice President, Marketing Services and Corporate 
Communications for Amerin Guaranty since December 1995 and Vice President, 
Director of Marketing Services and Corporate Communications from June 1994 to 
December 1995. Prior thereto, he was Director of Creative Services at 
Chemical Residential Mortgage Corporation from January 1993 to June 1994, and 
Director of Marketing for Bank of America's Residential Loan Division from 
January 1990 to April 1992.

Mr. Goldberg has been a director of the Company and Amerin Guaranty since 
April 1992.  Mr. Goldberg has been Chairman of Morgan Stanley Dean Witter 
Capital Partners since February 1998.  Prior thereto, he was co-head of MSDW 
Capital Partners.  He has been a Managing Director of Morgan Stanley & Co. 
Incorporated since January 1988. Mr. Goldberg also serves as a director of 
Allegiance Telecom, Inc., Catalytica, Inc., Smurfit-Stone Container 
Corporation, Equant, N. V., and several other private companies.

                                       35

<PAGE>


Mr. Hoffen is currently a Managing Director, from November 1996 was a 
Principal, from February 1994 through November 1996 was a Vice President, and 
from September 1989 through February 1994 an Associate, at Morgan Stanley & 
Co. Incorporated.  He is a Vice President of Morgan Stanley Leveraged Equity 
Fund II, Inc. (MSLEF, Inc.), which is the general partner of MSLEF and a 
Director of Coho Energy Inc. and Catalytica, Inc.  Mr. Hoffen has been a 
director of Amerin Guaranty since January 1993.

Mr. Swedroe has been a principal of Buckingham Asset Management, Inc., a 
personal investment advisory firm, since May 1996. From January 1994 to April 
1996, he was Vice Chairman of Residential Services Corporation of America 
(RSCA), the holding company for Prudential Home Mortgage and Lender's 
Service, Inc. Prior thereto, he served as a Managing Director of RSCA from 
November 1986 through December 1993.

NOTE: PURSUANT TO THE TERMS OF THE MERGER AGREEMENT, DATED AS OF NOVEMBER 22, 
1998, BETWEEN THE COMPANY AND CMAC INVESTMENT CORPORATION, UPON COMPLETION OF 
THE MERGER, THE COMPANY WILL BE ENTITLED TO NOMINATE FIVE OF THE FOURTEEN 
MEMBERS OF THE BOARD OF DIRECTORS OF THE COMBINED ENTITY. OF THE CURRENT 
DIRECTORS OF THE COMPANY, MESSRS. GOLDBERG AND HOFFEN WILL RESIGN UPON 
COMPLETION OF THE MERGER. MESSRS. KASMAR AND SWEDROE, AND THREE OTHER PERSONS 
TO BE DETERMINED, WILL BE NOMINATED AS DIRECTORS OF THE COMBINED ENTITY TO 
FILL THESE FIVE POSITIONS.

MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES

The Board of Directors held seven meetings during 1998. All directors 
attended at least 75% of the meetings of the board and any committee on which 
they serve held during 1998 or the portion of 1998 during which they were a 
director.

The board of directors has an Audit Committee, a Compensation Committee, a 
Stock Plan Committee, and a Finance Committee. The board does not have a 
nominating or similar committee. The present member of the Audit Committee is 
Howard I. Hoffen. The responsibilities of the Audit Committee include: 
recommending to the board of directors the independent auditors to be 
selected to conduct the annual audit of the books and records of the Company; 
reviewing the proposed scope of such audit and approving the audit fees to be 
paid; and reviewing the adequacy and effectiveness of the internal accounting 
and financial controls of the Company with the independent auditors and the 
Company's financial and accounting staff. The Audit Committee did not meet 
during 1998.

The Compensation Committee of the board of directors of Amerin Corporation is 
comprised of Alan E. Goldberg (Chairman), Larry E. Swedroe and Gerald L. 
Friedman.  Mr. Friedman does not participate in consideration of his own 
compensation.  The responsibilities of the Compensation Committee include: 
reviewing and approving executive compensation, including setting salaries 
and bonuses, approving employment agreements, establishing bonus plans and 
making awards thereunder and any related matters. The Compensation Committee 
met once during 1998.

The Stock Plan Committee of the board of directors of Amerin Corporation is 
comprised of Larry E. Swedroe (Chairman) and Alan E. Goldberg. The 
responsibilities of the Stock Plan Committee include establishing stock 
incentive plans and making awards thereunder and any related matters. The 
Stock Plan Committee met twice during 1998.

                                       36

<PAGE>


The current members of the Finance Committee are Larry E. Swedroe (Chairman), 
Gerald L. Friedman and Alan E. Goldberg.  Until February 5, 1998, the members 
of the Finance Committee were Alan E. Goldberg (Chairman), Gerald L. Friedman 
and Howard I. Hoffen.  The responsibilities of the Finance Committee include: 
recommending to the board of directors the  investment advisor(s) to be 
selected to manage the investment of the Company's assets; reviewing and 
modifying as necessary the Company's internal investment guidelines; and 
reviewing the performance of the Company's investment portfolio. The Finance 
Committee met once during 1998.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires that the 
Company's officers, directors and persons who beneficially own more than 10% 
of a registered class of the Company's equity securities file with the 
Securities and Exchange Commission and the Nasdaq Stock Market, Inc. certain 
reports with respect to beneficial ownership of the Company's equity 
securities.

To the Company's knowledge, based solely on a review of the copies of such 
reports furnished to the Company and on written representations provided to 
the Company by each executive officer, director and 10% beneficial owner, the 
Company believes each such person filed on a timely basis the reports 
required by Section 16(a) with respect to the beneficial ownership of equity 
securities of the Company during the fiscal year ended December 31, 1998.

ITEM 11.       EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table provides information relating 
to compensation for the year ended December 31, 1998 for the Chairman and the 
other four most highly compensated executive officers of the Company 
(collectively, the "Named Executive Officers").

<TABLE>
<CAPTION>

                                            ANNUAL COMPENSATION                  LONG-TERM COMPENSATION
                                            -------------------                  ----------------------
                                                                                          AWARDS             PAYOUTS
                                                                                          ------             -------
                                                                                 RESTRICTED    SECURITIES
                                                               OTHER ANNUAL        STOCK       UNDERLYING     LTIP     ALL OTHER
NAME AND                                                       COMPENSATION        AWARDS     OPTIONS/SARS   PAYOUTS  COMPENSATION
PRINCIPAL POSITION           YEAR    SALARY($)    BONUS($)          ($)             ($)            (#)         ($)        ($)
------------------           ----    ------       -------      ------------      ----------   ------------   -------  ------------
<S>                         <C>     <C>          <C>           <C>               <C>          <C>            <C>      <C>
Gerald L. Friedman           1998    $250,000     $225,000
Chairman and Chief           1997    $240,000     $ 90,000                                     278,000
Executive Officer            1996    $215,000     $101,000

Roy J. Kasmar(1)             1998    $275,000     $325,000                                      34,400
President and Chief          1997    $245,000     $ 86,875                                     100,000                $102,188
Operating Officer            1996    $143,013     $ 74,000                        $514,400     178,345                $105,509

Jerome J. Selitto            1998    $275,000     $ 60,000
Vice Chairman                1997    $265,000     $ 60,375                                     278,000
                             1996    $245,000     $ 66,000

Randolph C. Sailer II        1998    $185,500     $125,000
Senior Vice President        1997    $175,000     $ 55,000                                      23,112
and General Counsel;         1996    $155,000     $ 44,000

David I. Vickers(2)          1998    $200,000     $100,000
Senior Vice President        1997    $ 66,667     $ 36,000                                      41,602
</TABLE>

                                       37

<PAGE>

---------

(1)      Mr. Kasmar joined Amerin Guaranty in May 1996 at an annual salary of
         $245,000. Of the amounts set forth for Mr. Kasmar for 1996 and 1997,
         respectively, under "All Other Compensation," $105,509 and $102,188,
         represent payment to Mr. Kasmar with respect to relocation expenses.

(2)      Mr. Vickers joined Amerin Guaranty in August 1997 at an annual salary
         of $200,000.

STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR. The following table sets forth 
certain information regarding grants of stock options made during 1998 to the 
Named Executive Officers pursuant to the Company's 1992 Long-Term Stock 
Incentive Plan (the "Stock Incentive Plan"). No grants of stock appreciation 
rights were made during 1997 to any of the Named Executive Officers.

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>

                NAME          NUMBER OF                                      EXPIRATION     POTENTIAL REALIZABLE VALUE OF
                ----          ----------                                     ----------    -----------------------------
                              SECURITIES                         EXERCISE       DATE        ASSUMED ANNUAL RATES OF STOCK
                              -----------      % OF TOTAL         PRICE         ----        -----------------------------
                              UNDERLYING     OPTIONS GRANTED    ($/SH.)(1)                  PRICE ANNUAL APPRECIATION FOR
                              -----------     TO EMPLOYEES      ----------                  -----------------------------
                               OPTIONS       IN FISCAL YEAR                                       OPTION TERM
                               -------       ---------------                                      -----------
                               GRANTED
                               -------                                                         5%($)            10%($)
                                                                                               -----            -----
        <S>                    <C>              <C>               <C>        <C>            <C>               <C>
         R. Kasmar (2)......    34,400            14.8%            29.50      4/21/07        $280,360          $619,544
</TABLE>
---------

(1)      Based on the last reported sale price of the Common Stock on the Nasdaq
         National Market on the business day immediately preceding the grant
         date.

(2)      Twenty percent of each of the options awards vests on each of the first
         five anniversaries of the award.

STOCK OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END 
OPTIONS/SAR VALUES. The following table sets forth information regarding the 
number and value of securities resulting from the exercise of stock options 
by the Named Executive Officers and the underlying unexercised stock options 
held by the Named Executive Officers as of December 31, 1998.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END 
OPTION/SAR VALUES

<TABLE>
<CAPTION>

           NAME              SHARES     VALUE REALIZED         EXERCISABLE/                  EXERCISABLE/
           ----            ACQUIRED ON        ($)              UNEXERCISABLE                UNEXERCISABLE
                            EXERCISE          ---              -------------                -------------
                               (#)
                               ---
                                                           NUMBER OF SECURITIES          VALUE OF UNEXERCISED
                                                          UNDERLYING UNEXERCISED      IN-THE-MONEY OPTIONS/SARS
                                                          OPTIONS/SARS AT FISCAL          AT FISCAL YEAR END
                                                               YEAR END (#)                    ($) (1)
                                                               ------------                    -------
<S>                          <C>          <C>                 <C>                        <C>
G. Friedman...........               0              0          55,600/222,400             $326,650/$1,306,600
R. Kasmar.............               0              0          35,633/242,532             $ 72,139/$  244,365
J. Selitto............         126,000     $3,389,550          62,100/228,900             $446,153/$1,426,103
R. Sailer.............               0              0          17,748/ 22,989             $254,859/$  103,263
D. Vickers............               0              0           8,321/ 33,281             $  9,361/$   43,674
</TABLE>
---------

(1)      In addition to the options shown as exercisable as of December 31,
         1998, an additional 6,500 of the options shown in the table as
         unexercisable became exercisable on January 1, 1998, for Mr. Selitto.

                                       38

<PAGE>

(2)      The last reported sale price of the Common Stock on the Nasdaq National
         Market on December 31, 1998 ($23.625 per share) was used to determine
         the value of the in-the-money options. The dollar amounts shown
         represent the amount by which the product of such last reported sale
         price and the number of shares purchasable upon the exercise of such
         in-the-money options exceeds the aggregate exercise price payable upon
         such exercise.

COMPENSATION OF DIRECTORS

No additional compensation is paid to any director who is an employee of the 
Company or of any of its subsidiaries for service on the board of directors. 
Directors who are not representatives of the original group of five 
institutional investors ("Outside Directors") receive $2,000 for each board 
meeting attended. In addition, each Outside Director receives (i) at his or 
her election, either (A) $30,000 in cash or (B) an annual grant of shares of 
Common Stock under the Company's 1992 Long-Term Stock Incentive Plan (the 
"Stock Incentive Plan"), with the number of shares equal to $30,000 divided 
by the Fair Market Value (as defined below) of a share of the Company's 
Common Stock on the Grant Date (as defined below), and (ii) an annual grant 
under the Stock Incentive Plan of non-qualified options to purchase 1,000 
shares of Common Stock. The options will vest in three equal installments on 
the first, second and third anniversaries of the Grant Date, and will be 
subject to an exercise price per share equal to the Fair Market Value of a 
share of Common Stock on the Grant Date. For purposes of the foregoing, the 
"Fair Market Value" of a share of Common Stock is the closing price per share 
of the Common Stock on the Nasdaq National Market on the first day prior to 
the Grant Date on which the Nasdaq National Market was open for trading. The 
"Grant Date" is the date of the Annual Meeting of Stockholders of the 
Company; provided, however, that if a director is appointed on a date other 
than the date of the Annual Meeting of Stockholders, the "Grant Date" in such 
year shall be the date of such appointment. Directors receive no additional 
compensation for service on committees of the board. Outside Directors are 
reimbursed for travel and expenses related to attendance at meetings of the 
board of directors or board committees.

IT IS ANTICIPATED THAT, UPON CONSUMMATION OF THE MERGER, OUTSIDE DIRECTORS OF 
THE SURVIVING CORPORATION WILL BE COMPENSATED SUBSTANTIALLY IN ACCORDANCE 
WITH THE CURRENT COMPENSATION PRACTICES OF CMAC INVESTMENT CORPORATION.

SEVERANCE AGREEMENTS

In September 1997, the Company entered into severance agreements (the 
"Severance Agreements") with each of Messrs. Friedman, Kasmar and Selitto. 
The Severance Agreements provide for the payment of cash and the provision of 
certain employee benefits in the event that a "Change in Control" of the 
Company occurs and the executive is terminated within a two-year period 
following such Change in Control. Pursuant to the Severance Agreements, any 
of the following events will constitute a Change in Control: (i) A merger, 
reorganization, consolidation of the Company, or a sale or transfer of the 
assets of the Company, in which less than a majority of the combined voting 
power of the then-outstanding voting stock of the surviving entity 
immediately after such transaction is held in the aggregate by the holders of 
voting stock of the company immediately prior to such transaction; (ii) the 
filing of a Schedule 13D or Schedule 14D-1 disclosing that any person (other 
than one of the Company's five original institutional investors) has become 
the beneficial owner of securities representing 25% or more of the combined 
voting power of the then-outstanding voting stock of the Company. For 
purposes of the Severance Agreements, "termination" includes both actual 
termination and "constructive termination," which is defined as any of: (i) 
The failure to maintain the executive in substantially the same office or 
position which the

                                       39

<PAGE>


executive held immediately prior to the Change of Control; (ii) A significant 
adverse change in the nature or scope of the authorities, powers, functions, 
responsibilities or duties attached to the position which the executive held 
immediately prior to the Change in Control; (iii) a reduction in the 
aggregate of the cash compensation (salary and bonus) received by the 
executive prior to the Change in Control; or (iv) the failure of the 
surviving entity after a Change of Control to assume the Company's 
obligations under the Severance Arrangements.

In the event of a Change of Control and termination of any of Messrs. 
Friedman, Kasmar and Selitto as described above, the terminated executive 
will be entitled to the following benefits: (i) a cash payment equal to three 
times the executive's annual salary (not including any bonus); (ii) extension 
of Company medical benefits for two years; and (iii) payment of any certain 
"Excess Parachute Payment" excise tax amounts arising from the executive's 
receipt of value under the Severance Arrangements through a gross-up payment 
to the executive that covers (i) the applicable excise tax and (ii) the 
income tax and the excise tax on the gross-up payment itself. Under 
applicable federal tax laws, the Company (or its successor) will lose its 
income tax deductions for both (i) the amount of the Excess Parachute Payment 
and (ii) the gross-up payment.

PURSUANT TO THE TERMS OF THEIR RESPECTIVE SEVERANCE AGREEMENTS, MESSRS. 
FRIEDMAN AND SELITTO WILL, UPON CONSUMMATION OF THE MERGER AND THEIR 
TERMINATION OF EMPLOYMENT WITH THE COMPANY, BECOME ENTITLED TO THE SEVERANCE 
BENEFITS DESCRIBED ABOVE. IN CONNECTION WITH COMPLETION OF THE MERGER, MR. 
KASMAR WILL ENTER INTO AN EMPLOYMENT AGREEMENT WITH THE COMBINED ENTITY 
PURSUANT TO WHICH HE WILL BE ENTITLED TO CHANGE OF CONTROL BENEFITS 
SUBSTANTIALLY SIMILAR TO THOSE DESCRIBED ABOVE.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The  Compensation  Committee  of the board of  directors of Amerin  
Corporation  is  comprised of Alan E.  Goldberg (Chairman),  Larry E. Swedroe 
and Gerald L. Friedman.  Actions of the  Compensation  Committee  require a 
unanimous vote, except that Mr. Friedman does not participate in 
consideration of his own compensation.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the shares of 
Common Stock beneficially owned as of March 16, 1999 (except as noted) by: 
(i) each person or entity that is known by the Company to own beneficially 
more than five percent of the outstanding shares of Common Stock; (ii) each 
director of the Company, including the nominees for re-election as directors; 
(iii) each Executive Officer named in the Summary Compensation Table herein; 
and (iv) all directors and executive officers as a group.

                                       40

<PAGE>

<TABLE>
<CAPTION>

                                                                                  SHARES BENEFICIALLY     PERCENT OF
           NAME OF BENEFICIAL OWNER(1)                                                    OWNED              CLASS
<S>                                                                                   <C>                    <C>
Gerald L. Friedman....................................                                 1,267,742(2)           4.8%
Alan E. Goldberg......................................                                   705,018(3)           2.7%
Howard I. Hoffen......................................                                   705,018(3)           2.7%
Larry E. Swedroe......................................                                     2,760(4)              *
Randolph C. Sailer II.................................                                    17,748(5)              *
Roy J. Kasmar.........................................                                   334,400(6)              *
Jerome J. Selitto.....................................                                   328,840(7)              *
David I. Vickers......................................                                    10,821(8)              *
  All directors and executive officers as a group
  (10 persons)........................................                                 2,766,956(9)          13.4%
First Plaza Group Trust...............................                                 1,350,189(10)(15)      5.3%
Jurika & Voyles, L. P.................................                                 1,976,033(11)(15)      8.0%
Legg Mason, Inc.......................................                                 1,800,613(12)(15)      7.3%
Lazard Freres & Co. LLC...............................                                 1,617,517(13)(15)      6.3%
Mellon Bank Corporation...............................                                 1,457,095(14)(15)      5.9%
</TABLE>
--------
 *       Less than one percent

 (1)     Unless otherwise indicated in these footnotes, each stockholder has
         sole voting and investment power with respect to the shares
         beneficially owned. All share amounts reflect beneficial ownership
         determined pursuant to Rule 13d-3 under the Securities Exchange Act of
         1934, as amended. All information with respect to beneficial ownership
         has been furnished by the respective director, executive officer or
         stockholder, as the case may be.

 (2)     Includes 55,600 shares issuable upon exercise of stock options, 7,500
         shares held by the Friedman Family Foundation (the "Foundation"), a
         private charitable foundation, 30,000 shares held by the Gerald L.
         Friedman Charitable Remainder Unitrust of 1997 (the "GLF Unitrust"), a
         charitable remainder trust, 30,000 shares held by the Sheree A.
         Friedman Charitable Remainder Unitrust of 1997 (the "SAF Unitrust") a
         charitable remainder trust, 6,875 shares (as to which Mr. Friedman
         disclaims beneficial ownership) held by the Sarah Beth Friedman 1989
         Trust, a trust created for the benefit of Mr. Friedman's daughter,
         6,875 shares (as to which Mr. Friedman disclaims beneficial ownership)
         held by Rachael L. Friedman (Mr. Friedman's daughter), 7,000 shares (as
         to which Mr. Friedman disclaims beneficial ownership) held by Daniel B.
         Rand, and 222,400 stock options that will become exercisable upon
         completion of the Merger.

 (3)     All of the shares shown are held by two wholly-owned subsidiaries of
         Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"). Mr. Goldberg and
         Mr. Hoffen are a Managing Director and Principal, respectively, of
         Morgan Stanley & Co., Incorporated, an affiliate of MSDWD. Share data
         shown for such individuals reflects shares shown as held by the two
         wholly-owned subsidiaries of MSDWD, as to which such individuals
         disclaim beneficial ownership.

 (4)     Includes 667 shares issuable upon exercise of stock options.

 (5)     Includes 17,748 shares issuable upon exercise of stock options.

 (6)     Includes 13,101 shares as to which restrictions on transferability will
         lapse upon completion of the Merger, 91,266 shares issuable upon
         exercise of vested stock options and 221,299 stock options that will
         become vested upon completion of the Merger.

                                       41

<PAGE>


 (7)     Includes 68,350 shares issuable upon exercise of vested stock
         options and 222,400 stock options that will become exercisable upon
         completion of the Merger.

 (8)     Includes 8,321 shares issuable upon exercise of stock options.

 (9)     Includes 1,010,178 shares issuable upon exercise of stock options,
         13,101 shares as to which restrictions on transferability will lapse
         upon completion of the Merger, and 705,018 shares in the aggregate for
         Messrs. Goldberg and Hoffen. Messrs. Goldberg and Hoffen have
         disclaimed beneficial ownership of such shares as described in Note (3)
         above.

(10)     The address of First Plaza Group Trust is Mellon Bank, N.A., as
         Trustee, One Mellon Bank Center, Pittsburgh, PA 15258.

(11)     The address of Jurika & Voyles, L. P. is 1999 Harrison Street,
         Suite 700, Oakland, CA 94612.

(12)     The address of Legg Mason, Inc. is 100 Light Street, Baltimore,
         MD 21202.

(13)     The address of Lazard Freres & Co. LLC is 30 Rockefeller Plaza,
         New York, NY 10020.

(14)     The address of Mellon Bank Corporation is One Mellon Bank Center,
         Pittsburgh, PA 15258.

(15)     Share ownership numbers and percentages are as of December 31, 1998,
         the last date at which each of these holders was required to report
         such ownership.

ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to an employment agreement between Mr. Friedman and Amerin Guaranty, 
in order to provide assistance with the tax liability, if any, associated 
with the grant to Mr. Friedman of certain shares (the "Friedman Shares"), Mr. 
Friedman has the right to borrow from Amerin Guaranty an amount equal to such 
tax liability. Such loan would have a term of five years and bear interest 
(payable at maturity) at the prime rate at the time the loan is made, would 
be prepayable in whole or in part by Mr. Friedman at any time or from time to 
time and would be accelerated to the extent of any cash proceeds from sales 
by Mr. Friedman of the Friedman Shares. No loans have been made by Amerin 
Guaranty to Mr. Friedman and no amounts are outstanding.

Pursuant to an agreement dated March 1, 1998, between Amerin Guaranty and 
John F. Peterson, Senior Vice President of Amerin Guaranty, Mr. Peterson 
resigned from Amerin Guaranty as of April 30, 1998. Pursuant to this 
agreement, Mr. Peterson became entitled to exercise options to purchase 
12,874 shares of Amerin Common Stock which otherwise would have become 
exercisable in two equal installments of 6,437 on January 1, 1999 and 2000, 
respectively. The agreement also provided for the payment by Amerin Guaranty 
of Mr. Peterson's medical insurance premiums through April 30, 1999. The 
estimated aggregate value of these benefits was $193,979, based on the market 
prices per share of Amerin Common Stock at the dates of exercise.

The Company and Messrs. Friedman,  Kasmar and Selitto are parties to certain 
severance  agreements.  See "Executive Compensation -- Severance Agreements."

                                       42
<PAGE>


                                     PART IV

ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K:

         (a)          1. Financial Statements:

                      The consolidated financial statements are indexed in the
                      Index to Financial Statements and Schedules which appears
                      on Page F-1 hereof and incorporated by reference in this
                      Item by reference thereto.

                      2. Financial Statement Schedules:

                      The financial statement schedules are indexed in the Index
                      to Financial Statements and Schedules which appears on
                      Page F-1 hereof and incorporated by reference in this Item
                      by reference thereto.

                      Other schedules are omitted due to the absence of
                      conditions under which they are required or because the
                      required information is provided in the financial
                      statements or notes thereto.

                      3. Exhibits:

                      See Exhibit Index on pages 44 to 45 for exhibits filed
                      with this report on Form 10-K.

    (b) Reports on Form 8-K:

                      On October 15, 1998, the Registrant filed one report on
                      Form 8-K with respect to the adoption by the Registrant of
                      a Shareholders Rights Plan.

                      On November 25, 1998, the Registrant filed one report on
                      Form 8-K with respect to the Agreement and Plan of Merger,
                      dated November 22, 1998, entered into between the
                      Registrant and CMAC Investment Corporation.

                                       43

<PAGE>


    (c)
                                                       EXHIBITS
                                                       FORM 10-K

                                                   INDEX TO EXHIBITS

<TABLE>
<CAPTION>

   Exhibit                                                                                                         Page
   Number        Description of Document                                                                          Number
   -------       -----------------------                                                                          ------
  <S>           <C>                                                                                               <C>
  3.1            Amended and Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3.1
                 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-97514) and
                 incorporated herein by reference).

  3.2            Amended and Restated By-laws of the Registrant (filed as Exhibit 3.2 to Amendment No. 1 to
                 the Registrant's Registration Statement on Form S-1 (Registration No. 33-97514) and
                 incorporated herein by reference).

  4.1            Amended and Restated Shareholders Agreement dated as of November 1, 1995 among the
                 Registrant, Gerald L. Friedman, Stuart M. Brafman and the Investors party thereto (filed as
                 Exhibit 4.2 to the Registrant's Registration Statement on Form S-3 (Registration No.
                 333-19757) and incorporated herein by reference).

  4.2            Amendment No. 1 to the Amended and Restated Management Stock and Voting Agreement dated as
                 of November 1, 1995 among the Registrant, Gerald L. Friedman and Stuart M. Brafman (filed
                 as Exhibit 4.4 to the Registrant's Registration Statement on Form S-1 (Registration No.
                 33-97514) and incorporated herein by reference).

  4.3            Amended and Restated Employee-Shareholders Agreement dated as of November 1, 1995 among the
                 Registrant and the Employee Grantees party thereto (filed as Exhibit 4.5 to the
                 Registrant's Registration Statement on Form S-1 (Registration No. 33-97514) and
                 incorporated herein by reference).

 10.1            Form of Second Amended and Restated Employment Agreement dated as of November 1, 1995
                 between Amerin Guaranty and Gerald L. Friedman (filed as Exhibit 10.1 to the Registrant's
                 Registration Statement on Form S-1 (Registration No. 33-97514) and incorporated herein by
                 reference).

 10.2            Form of Second Amended and Restated Employment Agreement dated as of November 1, 1995 between
                 Amerin Guaranty and Stuart M. Brafman (filed as Exhibit 10.2 to the Registrant's Registration
                 Statement on Form S-1 (Registration No. 33-97514) and incorporated herein by reference).

 10.3            Amended and Restated 1992 Long-Term Incentive Plan dated as of November 1, 1995 (filed as 
                 Exhibit 10.3 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-97514)
                 and incorporated herein by reference).
</TABLE>

                                       44

<PAGE>

<TABLE>
<CAPTION>

   Exhibit                                                                                                         Page
   Number        Description of Document                                                                          Number
   -------       -----------------------                                                                          ------
  <S>           <C>                                                                                               <C>
 10.5            Support Agreement (Moody's Investors Service, Inc.) dated as of August 26, 1992 among the
                 Registrant (as successor in interest to USMIC Corporation), Amerin Guaranty Corporation (as
                 successor in interest to Merit Mortgage Assurance Corporation) and Security Pacific National
                 Trust Company (filed as Exhibit 10.5 to the Registrant's Registration Statement on Form S-1
                 (Registration No. 33-97514) and incorporated herein by reference).

  10.6           Support Agreement (Second) dated as of August 26, 1992 among the Registrant (as successor
                 in interest to USMIC Corporation), Amerin Guaranty Corporation (as successor in interest to Merit
                 Mortgage Assurance Corporation) and Security Pacific National Trust Company (filed as
                 Exhibit 10.6 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-97514)
                 and incorporated herein by reference).

 10.7            Office Lease dated April 13, 1995 by and between Amoco Properties Incorporated and Amerin Guaranty
                 Corporation (filed as Exhibit 10.7 to the Registrant's Registration Statement on Form S-1 
                 (Registration No. 33-97514) and incorporated herein by reference).

 10.8            Severance Agreement dated as of September 17, 1997 between Amerin Corporation and Gerald L.
                 Friedman. (incorporated by reference)

 10.9            Severance Agreement dated as of September 17, 1997 between Amerin Corporation and Roy J.
                 Kasmar. (incorporated by reference)

 10.10           Severance Agreement dated as of September 17, 1997 between Amerin Corporation and Jerome J.
                 Selitto. (incorporated by reference)

 10.11           Release and Separation Agreement, dated as of March 1, 1998, between Amerin Guaranty
                 Corporation and John F. Peterson

 21.1            Subsidiaries of the Registrant (filed as Exhibit 21.1 to the Registrant's Registration Statement
                 on Form S-1 (Registration No. 33-97514) and incorporated herein by reference).

 23.1            Consent of Ernst & Young LLP.

 27.0            Financial Data Schedule
</TABLE>

                                           45

<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.

                                       AMERIN CORPORATION

                                       By: /S/ GERALD L. FRIEDMAN
                                          ------------------------------
                                             Gerald L. Friedman
                                             Chairman of the Board and
                                             Chief Executive Officer

Date:  April 15, 1999

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

<TABLE>
<CAPTION>

          SIGNATURE                                       TITLE                                 DATE
<S>                                                  <C>                                      <C>

    /S/ GERALD L. FRIEDMAN                            Director; Chairman of the Board and      April 15, 1999
    ----------------------                           Chief Executive Officer (PRINCIPAL
    Gerald L. Friedman                                EXECUTIVE OFFICER)


    /S/ ROY J. KASMAR                                 Director; President and Chief            April 15, 1999
    ---------------------                             Operating Officer
    Roy J. Kasmar


    /S/ DAVID I. VICKERS                              Senior Vice President, Chief             April 15, 1999
    ---------------------                             Financial Officer (PRINCIPAL
    David I. Vickers                                  FINANCIAL OFFICER and PRINCIPAL
                                                      ACCOUNTING OFFICER)


    /S/ ALAN E. GOLDBERG                                        Director                       April 15, 1999
    ------------------------
    Alan E. Goldberg


    /S/ HOWARD I. HOFFEN                                        Director                       April 15, 1999
    ------------------------
    Howard I. Hoffen


    /S/ LARRY E. SWEDROE                                       Director                        April 15, 1999
    ------------------------
    Larry E. Swedroe

</TABLE>

                                       46


<PAGE>

                       Amerin Corporation and Subsidiaries



                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<CAPTION>

                                                                                                               Page
                                                                                                               ----
<S>                                                                                                           <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Auditors..................................................................................F-2

Consolidated Balance Sheets at December 31, 1998 and 1997.......................................................F-3

Consolidated Statements of Operations For the Years Ended
  December 31, 1998, 1997 and 1996..............................................................................F-4

Consolidated Statements of Common Stockholders' Equity
  for the Years Ended December 31, 1998, 1997 and 1996..........................................................F-5

Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1998, 1997 and 1996..............................................................................F-6

Notes to Consolidated Financial Statements......................................................................F-7


FINANCIAL STATEMENT SCHEDULES

II.      Condensed Financial Information of Registrant
           Condensed Balance Sheets.............................................................................S-1
           Condensed Statements of Operations...................................................................S-2
           Condensed Statements of Cash Flows...................................................................S-3
III.     Supplementary Insurance Information....................................................................S-4
V.       Valuation and Qualifying Accounts......................................................................S-5
</TABLE>

         Schedules other than those listed above have been omitted because 
they are either not required, are not applicable, or the required information 
is shown in the Consolidated Financial Statements and related notes.

                                       F - 1


<PAGE>


                            Report of Independent Auditors


Board of Directors
AMERIN CORPORATION

We have audited the accompanying consolidated balance sheets of Amerin 
Corporation and subsidiaries as of December 31, 1998 and 1997, and the 
related consolidated statements of operations, common stockholders' equity, 
and cash flows for each of the three years in the period ended December 31, 
1998. Our audits also included the financial statement schedules listed in 
the Index at Item 14(a). These financial statements and schedules are the 
responsibility of the Company's management. Our responsibility is to express 
an opinion on these financial statements and schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards 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. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the consolidated financial position of Amerin 
Corporation and subsidiaries at December 31, 1998 and 1997, and the 
consolidated 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. Also, in our opinion, the related 
financial statement schedules, when considered in relation to the basic 
financial statements taken as a whole, present fairly in all material 
respects the information set forth therein.


                                       ERNST & YOUNG LLP


Chicago, Illinois
January 21, 1999

                                       F - 2

<PAGE>


                          Amerin Corporation and Subsidiaries
                              Consolidated Balance Sheets
                           (in thousands, except share data)

<TABLE>
<CAPTION>

                                                                                         December 31,
                                                                               ---------------------------------
                                                                                     1998              1997
                                                                                     ------            ------
<S>                                                                               <C>               <C>

 ASSETS
 Investments (NOTE 4):
    Fixed maturities available-for-sale, at fair value (amortized cost
    $416,533 in 1998 and $361,660 in 1997)............................          $   433,377         $ 374,320
    Short-term investment.............................................                5,765             3,400
                                                                                   --------          --------
Total investments.....................................................              439,142           377,720
Cash and cash equivalents.............................................                7,186             4,456
Accrued investment income.............................................                6,024             5,872
Premiums receivable...................................................                5,607             5,020
Deferred policy acquisition costs.....................................               16,839             7,776
Prepaid federal income taxes (NOTE 7).................................               45,000            25,257
Leasehold improvements, furniture and equipment, at cost, net of
   accumulated depreciation of $5,255 in 1998 and $2,775 in 1997......               13,203             9,315
Goodwill, net of accumulated amortization of $993 in 1998 and $844
   in 1997 ...........................................................                1,984             2,133
Other assets..........................................................               10,247             3,009
                                                                             -----------------   ---------------
 Total assets                                                                   $   545,232         $ 440,558
                                                                             -----------------   ---------------
                                                                             -----------------   ---------------


  LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
  Liabilities:
     Loss reserves (NOTE 6)............................................         $    43,849         $  31,280
     Unearned premiums.................................................              26,114            23,352
     Current income taxes..............................................                 --                790
     Deferred income taxes (NOTE 7)....................................              54,221            30,272
     Payable for securities............................................               2,699                --
     Accrued expenses and other liabilities............................               9,119             4,709
                                                                             -----------------   ---------------
     Total liabilities                                                              136,002            90,403

 Commitments and contingencies (NOTES 8, 12, AND 13)

 Common stockholders' equity (NOTE 11):
        Voting Common Stock, $.01 par, 50,000,000 shares authorized,
              25,755,221 and 24,488,725 shares issued and outstanding
              in 1998 and 1997, respectively...........................                 258               245
        Nonvoting Common Stock, $.01 par, 50,000,000 shares authorized,
              752,547 and 1,656,909 issued and outstanding in 
              1998 and 1997, respectively..............................                   8                17
     Additional paid-in capital........................................             321,811           316,642
     Accumulated other comprehensive income............................              10,948             8,229
                                                                             --------------   ---------------
     Retained earnings ................................................              76,205            25,022
                                                                             --------------   ---------------
 Total common stockholders' equity ....................................             409,230           350,155
                                                                             --------------   ---------------
     Total liabilities and common stockholders' equity.................           $ 545,232         $ 440,558
                                                                             --------------   ---------------
                                                                             --------------   ---------------
</TABLE>

                                     See accompanying notes.


                                       F - 3


<PAGE>


                                       Amerin Corporation and Subsidiaries
                                      Consolidated Statements of Operations


<TABLE>
<CAPTION>

                                                                       Years Ended December 31,
                                                        -------------------------------------------------------
                                                               1998                1997              1996
                                                             ---------           ----------        ----------
                                                               (in thousands, except per share data)
<S>                                                         <C>                  <C>                 <C>
REVENUES:                                                                                          
    Net premiums written............................         $      125,383       $       94,740      $    70,000
    Increase in unearned premiums...................                 (2,283)              (2,411)          (7,651)
                                                           -----------------    ------------------ ----------------
    Net premiums earned.............................                123,100               92,329           62,349
    Net investment income (NOTE 4)..................                 21,312               18,607           16,871
    Realized investment gains (NOTE 4)..............                  1,515                1,167              161
                                                           -----------------    ------------------ ----------------
Total revenues......................................                145,927              112,103           79,381

EXPENSES:
    Losses incurred.................................                 34,354               30,272           20,681
    Policy acquisition costs........................                 22,340               10,520            8,485
    Underwriting and other expenses...............                   16,046               14,643           10,623
    Merger expenses.................................                  1,098                   --               --
                                                           -----------------    ------------------ ----------------
Total expenses......................................                 73,838               55,435           39,789
                                                           -----------------    ------------------ ----------------
Income before income taxes..........................                 72,089               56,668           39,592
Deferred income tax expense.........................                 20,906               15,909           11,363
                                                           -----------------    ------------------ ----------------
Net income..........................................         $       51,183       $       40,759 $         28,229
                                                           -----------------    ------------------ ----------------
                                                           -----------------    ------------------ ----------------
Net income per common share (NOTE 15):
      Basic.........................................         $         1.94       $         1.56 $           1.08
                                                           -----------------    ------------------ ----------------
                                                           -----------------    ------------------ ----------------
      Diluted.......................................         $         1.92       $         1.54 $           1.07
                                                           -----------------    ------------------ ----------------
                                                           -----------------    ------------------ ----------------
</TABLE>

                                       See accompanying notes.

                                                 F - 4


<PAGE>

                             Amerin Corporation and Subsidiaries
                       Consolidated Statements of Common Stockholders' Equity

<TABLE>
<CAPTION>
                                                                                       ACCUMULATED
                                             VOTING      NONVOTING     ADDITIONAL         OTHER        RETAINED
                                             COMMON       COMMON        PAID-IN       COMPREHENSIVE    EARNINGS
                                             STOCK         STOCK        CAPITAL          INCOME       (DEFICIT)       TOTAL
                                            ---------   ------------  -------------  ---------------- -----------   -----------
                                                                (in thousands)
<S>                                          <C>          <C>          <C>            <C>             <C>           <C>
Balance, January 1, 1996..................... $  224       $  36        $ 314,614      $  3,229         $ (43,966)    $ 274,137
Comprehensive income:
Net income ..................................     --          --               --            --            28,229        28,229
Net unrealized investment losses,
   net of tax and reclassification adjustment     --          --               --        (3,007)               --        (3,007)
                                                                                                                      ---------
Comprehensive income.........................                                                                            25,222
Shares issued under long-term
 incentive plan and options exercised .......      1          --            1,249           --                --          1,250
                                            ----------   ------------  -------------  ---------------    --------   -----------
Balance, December 31, 1996...................     225         36          315,863           222           (15,737)      300,609
Comprehensive income:
Net income...................................      --         --               --           --             40,759        40,759

Net unrealized investment gains, net of
   tax and reclassification adjustment.......      --         --               --         8,007                --         8,007
                                                                                                                     ----------
Comprehensive income.........................                                                                            48,766
Shares issued under long-term
   incentive plan and options exercised .....       1         --              779           --                 --           780
Nonvoting conversion.........................      19        (19)              --           --                 --            --
                                             --------   ------------  -------------  ---------------     --------   -----------
Balance, December 31, 1997 ..................     245         17          316,642         8,229            25,022       350,155
Comprehensive income:
Net income...................................      --         --               --            --            51,183        51,183
Net unrealized investment gains, net of
   tax and reclassification adjustment.......      --         --               --         2,719                --         2,719
                                                                                                                    -----------
Comprehensive income.........................                                                                            53,902
Shares issued under long-term
   incentive plan and options exercised .....       4         --            5,169            --                --         5,173
Nonvoting conversion.........................       9         (9)              --            --                --            --
                                             --------   ------------  -------------  ---------------   ----------   -----------
Balance, December 31, 1998................... $   249      $  17        $ 321,811      $ 10,948         $  76,205     $ 409,230
                                             --------   ------------  -------------  ---------------   ----------   -----------
                                             --------   ------------  -------------  ---------------   ----------   -----------
</TABLE>
                                                   See accompanying notes.


                                          F - 5


<PAGE>



                                         Amerin Corporation and Subsidiaries
                                        Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
                                                        ----------------------------------------------------------
                                                              1998                 1997               1996
                                                              -----               -----              ----
                                                                              (in thousands)
<S>                                                       <C>                   <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                                             
Net income                                                 $  51,183             $  40,759             $ 28,229
 Adjustments to reconcile net income to net cash
   provided by operating activities:
   Change in:
     Accrued investment income.....................             (152)               (1,479)              (2,017)
     Premiums receivable...........................             (587)                  813               (3,458)
     Unearned premiums.............................            2,762                 2,827                7,815
     Loss reserves.................................           12,569                12,550               11,638
     Accrued expenses and other liabilities........            4,578                   101                1,301
     Federal income taxes..........................           (2,149)                1,094                 (365)
    Policy acquisition costs deferred.............           (17,533)               (9,309)              (9,087)
    Policy acquisition costs amortized............             8,470                 7,102                7,937
    Amortization..................................               149                   304                  472
    Depreciation...................................            2,480                 1,211                  718
    Realized investment gains......................           (1,515)               (1,167)                (161)
    Other items, net...............................           (2,472)                 (230)                 240
                                                          ----------------     ----------------    ---------------
    Net cash provided by operating activities.........        57,783                54,576               43,262

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of:
    Fixed maturity securities.........................      (254,823)            (115,530)             (223,025)
    Short-term investments, net.......................        (3,116)                  --                    --
    Property and equipment............................        (6,368)              (6,294)               (1,422)
 Sale or maturity of:                                                                            
    Fixed maturity securities.........................       204,081               52,431                55,350
    Short-term investments, net.......................            --               17,318               125,242
    Property and equipment..........................              --                   29                     2
                                                          ----------------     ----------------    ---------------
 Net cash used by investing activities                       (60,226)             (52,046)              (43,853)

CASH FLOWS FROM FINANCING ACTIVITIES                                                             
Issuance of common stock..............................         5,173                  750                   713
                                                          ----------------     ----------------    ---------------
Net cash provided by financing activities.............         5,173                  750                   713
                                                          ----------------     ----------------    ---------------
Net increase in cash and cash equivalents.............         2,730                3,280                   122
Cash and cash equivalents at beginning of year........         4,456                1,176                 1,054
                                                          ----------------     ----------------    ---------------
Cash and cash equivalents at end of year..............   $     7,186             $  4,456              $  1,176
                                                          ----------------     ----------------    ---------------
                                                          ----------------     ----------------    ---------------
</TABLE>


                                        See accompanying notes.


                                       F - 6

<PAGE>


                            Amerin Corporation and Subsidiaries
                             Notes to Consolidated Statements

1.   BUSINESS

     Amerin Corporation (Company or Amerin), through its primary insurance 
subsidiary, Amerin Guaranty Corporation (Amerin Guaranty), provides mortgage 
guaranty insurance through lending institutions on first mortgages secured by 
residential property. A second wholly owned insurance subsidiary, Amerin Re 
Corporation (Amerin Re) reinsures mortgage guaranty insurance written by 
Amerin Guaranty. The Company's three largest customers accounted for 65%, 
69%, and 71% of net premiums written in 1998, 1997 and 1996, respectively. 
Additionally, net premiums written in 1998 for the Company's three largest 
customers were $49 million, $22 million, and $11 million. Similarly, net 
premiums written in 1997 for the Company's three largest customers were $40 
million, $19 million, and $7 million, while in 1996, net premiums written for 
the Company's three largest customers were $29 million, $14 million, and $7 
million. Approximately 20% of the Company's risk in force at December 31, 
1998 was concentrated in California.

     On November 23, 1998, the Company announced a proposed merger (the 
"Merger") with CMAC Investment Corporation ("CIC"), a holding company which, 
through Commonwealth Mortgage Assurance Company ("CMAC"), competes with the 
Company as a provider of private mortgage insurance coverage in the United 
States. As proposed, upon consummation of the Merger, Amerin shareholders 
will receive, in a tax free exchange, .5333 shares of CIC common stock for 
each share of Amerin stock. Consummation of the Merger is subject to 
customary conditions, including the approval of the stockholders of Amerin 
and CIC.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying consolidated financial statements include the accounts 
of the Company and its subsidiaries. All significant intercompany accounts 
and transactions have been eliminated. These financial statements have been 
prepared in conformity with generally accepted accounting principles (GAAP) 
which, for the insurance subsidiaries, differ in certain respects from the 
accounting practices prescribed or permitted by state insurance regulatory 
authorities (statutory basis) (see Note 3). Significant accounting policies 
are as follows:

USE OF ESTIMATES

     The preparation of financial statements in conformity with GAAP requires 
management to make estimates and assumptions that affect the amounts reported 
in the financial statements and accompanying notes. Actual results could 
differ from those estimates.

INVESTMENTS

     Fixed maturities that are available for sale are carried at fair value. 
Unrealized gains and losses on fixed maturities available for sale are 
excluded from operations and are recorded directly to accumulated other 
comprehensive income, net of related deferred income taxes.

     The amortized cost of fixed maturities is adjusted for amortization of 
premiums to the first call date and the accretion of discounts to maturity. 
Such adjustments are included in net investment income. Included in fixed 
maturities are investments in mortgage-backed securities whose amortized cost 
is determined using the interest method including anticipated prepayments. 
Prepayment assumptions are obtained from dealer surveys.

     Short-term investments are carried at cost, which approximates fair 
value. Cash equivalents are highly liquid investments. Both short-term 
investments and cash equivalents have maturities of one year or less at the 
date of purchase.

     Realized gains and losses on investments are computed using specific 
amortized costs of the securities sold and are reported in the consolidated 
statements of operations.


                                       F - 7



<PAGE>



                           Amerin Corporation and Subsidiaries
                            Notes to Consolidated Statements


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FINANCIAL INSTRUMENTS

     The fair values recorded in the financial statements for 
available-for-sale fixed maturity securities are based principally on quoted 
market prices. The carrying amounts for other financial instruments 
approximate their fair values.

PREMIUM REVENUE RECOGNITION

     Premiums are written on an annual, monthly and single premium basis. 
Annual and monthly premiums written with respect to a policy year are earned 
on a daily pro rata basis over the policy year. Portions of annual premiums 
which relate to risk periods extending beyond the policy year are amortized 
over the period at risk in correspondence with the anticipated claim payment 
pattern based on historical industry experience. Single premiums written for 
a coverage period of more than one year are amortized over the entire 
coverage period, principally in correspondence with the anticipated claim 
payment pattern based on historical industry experience.


POLICY ACQUISITION COSTS

     Policy acquisition costs include only those costs that relate directly 
to, and vary with, premium production. Such costs include compensation of 
employees involved in underwriting, marketing and policy issuance functions, 
state premium taxes, and certain other underwriting expenses. Net acquisition 
costs are deferred and amortized over the period in which the related 
premiums are earned. Anticipated losses and loss adjustment expenses are 
considered in determining the recoverability of acquisition costs.

LOSS RESERVES

     Reserves are established for reported insurance losses based on when 
notices of default of insured mortgage loans are received. Reserves also 
reflect estimates for losses incurred on notices of default not yet reported 
by the lender. Reserves are established by management using estimated claim 
rates and claim amounts in estimating the ultimate loss. Although 
considerable variability is inherent in such estimates, management believes 
that the reserves for losses are adequate. Adjustments to reserve estimates 
are reported in the financial statements in the periods in which the 
adjustments are made.

REINSURANCE

     Reinsurance premiums and commissions are accounted for on a basis 
consistent with the accounting for the original policies issued and the terms 
of the reinsurance contracts. Prepaid reinsurance premium amounts are 
reported as assets.

LEASEHOLD IMPROVEMENTS, FURNITURE AND EQUIPMENT

     Leasehold improvements, furniture and equipment consist of office 
improvements, furniture and fixtures, office equipment, computer hardware and 
software, which are recorded at cost and charged against income principally 
over their estimated service lives or, in the case of leasehold improvements, 
over the term of the lease. Depreciation is computed on the straight-line 
method over a period of five to ten years. Maintenance and repairs are 
charged to expense as incurred.

GOODWILL

     Goodwill represents the excess of cost over net assets purchased in 
connection with the 1992 acquisition of Amerin Guaranty by the Company and is 
amortized on a straight-line basis over 20 years.

                                       F - 8


<PAGE>



                           Amerin Corporation and Subsidiaries
                            Notes to Consolidated Statements


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES

     Deferred income taxes are provided for temporary differences between the 
financial reporting and tax bases of assets and liabilities.

     Mortgage guaranty insurance companies are permitted to deduct from 
taxable income, subject to certain limitations, amounts added to statutory 
basis contingency loss reserves. The amounts deducted must be included in 
taxable income in the 10th year after being added to the contingency reserves 
or upon prior release of such reserves to cover excess losses as permitted by 
insurance regulators. The deductions from taxable income are only allowed to 
the extent that United States Mortgage Guaranty Tax and Loss Bonds ("Tax and 
Loss Bonds") are purchased and held in an amount equal to the tax benefit 
attributable to such deductions. At December 31, 1998, the Company had 
investments in Tax and Loss Bonds of $45.0 million.

COMPREHENSIVE INCOME

     As of January 1, 1998, the Company adopted Statement of Financial 
Accounting Standards (SFAS) 130, "Reporting Comprehensive Income." SFAS 130 
establishes new rules for the reporting and display of comprehensive income 
and its components; however, the adoption of SFAS 130 had no impact on the 
Company's net income or common stockholders' equity. SFAS 130 requires 
unrealized gains or losses on the Company's available-for-sale securities, 
which prior to adoption were reported separately in common stockholders' 
equity, to be included in other comprehensive income. Prior year financial 
statements have been reclassified to conform to the requirements of SFAS 130.

SEGMENT INFORMATION

     In 1997, the Financial Accounting Standards Board (FASB), issued SFAS 
131, "Disclosure About Segments of an Enterprise and Related Information", 
which became effective on December 31, 1998. The Company operates in only one 
reportable industry segment, and therefore, SFAS 131 did not require 
disclosure of any significant information beyond that previously provided in 
the Company's financial statements.

NET INCOME PER COMMON SHARE

     Net income per common share is computed based on the weighted average 
number of common and common equivalent shares outstanding during the 
respective period. Common equivalent shares include incremental shares from 
dilutive stock options, which are calculated from the date of grant under the 
treasury stock method using the average market price for the period.

EFFECT OF NEW PRONOUNCEMENTS

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative 
Instruments and Hedging Activities." The Company expects to adopt the new 
Statement effective January 1, 2000. The Statement will require the Company 
to recognize all derivatives on the balance sheet at fair value. The Company 
does not anticipate that the adoption of this Statement will have a 
significant effect on its results of operations or financial position.

RECLASSIFICATIONS

     Certain items in the 1997 consolidated financial statements have been 
reclassified to conform with the presentation in the 1998 consolidated 
financial statements.

3.   STATUTORY ACCOUNTING PRACTICES

     The consolidated financial statements are prepared in conformity with 
GAAP which, for Amerin Guaranty and Amerin Re, differ in certain respects 
from statutory basis accounting practices. The following are the significant 
differences between statutory basis accounting practices and GAAP:

                                       F - 9


<PAGE>



                          Amerin Corporation and Subsidiaries
                            Notes to Consolidated Statements


3.   STATUTORY ACCOUNTING PRACTICES (CONTINUED)

-    Investments in bonds are carried at amortized cost on a statutory basis.
     GAAP requires that such fixed-maturity securities be classified as
     held-to-maturity, trading, or available-for-sale. Held-to-maturity
     securities are carried at amortized cost, and securities classified as
     trading or available-for-sale are carried at fair value. Unrealized
     holding gains and losses are reported in income for those securities
     classified as trading and as accumulated other comprehensive income for
     those securities classified as available-for-sale.

-    Policy acquisition costs are charged to current operations on a statutory
     basis as incurred rather than deferred and amortized as related premiums
     are earned under GAAP.

-    A contingency reserve is computed on the basis of statutory requirements
     for the security of all policyholders, regardless of whether loss
     contingencies actually exist; such reserves are not permitted under GAAP.

-    Certain assets designated as "nonadmitted assets" are charged directly   
     against surplus on a statutory basis but are reflected as assets under     
     GAAP.

-    Federal income taxes on a statutory basis are only provided on taxable
     income for which income taxes are currently payable, while under GAAP,
     taxes are also provided for temporary differences between the financial
     reporting and tax bases of assets and liabilities.

-    Purchases of Tax and Loss Bonds are recorded as investments on a statutory
     basis while such purchases are recorded as prepaid federal income taxes 
     under GAAP.



                                       F - 10


<PAGE>



                             Amerin Corporation and Subsidiaries
                               Notes to Consolidated Statements


3.   STATUTORY ACCOUNTING PRACTICES (CONTINUED)

     The following is a reconciliation of the Company's 1998, 1997 and 1996 
consolidated net income and common stockholders' equity presented on a GAAP 
basis to the corresponding amounts reported on a statutory basis for the 
insurance subsidiaries:

<TABLE>
<CAPTION>
                                                                                             Common
                                                                      Net Income         Stockholders' Equity
                                                                  -------------------  ---------------------
                                                                               (in thousands)
                                                                        <C>                    <C>  
        1998:
            Consolidated GAAP basis amounts..................            $    51,183            $  409,230
            Company and non-insurance subsidiary amounts
              and eliminations...............................                 11,840                (3,227)
                                                                    -----------------      -----------------
            Insurance subsidiaries GAAP basis amounts........                 63,023                406,003
            Fixed maturities available-for-sale..............                     --               (16,825)
            Deferred policy acquisition costs................                (9,063)               (16,839)
            Contingency reserve..............................                     --              (157,039)
            Nonadmitted assets...............................                     --               (11,049)
            Deferred income taxes............................                  2,739                  9,105
            Contingency reserve tax deduction................                 19,700                 45,000
                                                                    -----------------      -----------------
            Statutory basis amounts..........................            $    76,399            $   258,356
                                                                    -----------------      -----------------
                                                                    -----------------      -----------------

        1997:
            Consolidated GAAP basis amounts..................            $    40,759            $   350,155
            Company and non-insurance subsidiary amounts
              and eliminations...............................                  2,192                 (9,899)
                                                                    -----------------      -----------------
            Insurance subsidiaries GAAP basis amounts........                 42,951                340,256
            Fixed maturities available-for-sale..............                     --                (12,635)
            Deferred policy acquisition costs................                 (2,207)                (7,776)
            Contingency reserve..............................                     --                (95,488)
            Nonadmitted assets...............................                     --                 (7,961)
            Deferred income taxes ...........................                    355                  4,943
            Contingency reserve tax deduction ...............                 14,350                 25,257
                                                                    -----------------      -----------------
            Statutory basis amounts..........................             $   55,449            $   246,596
                                                                    -----------------      -----------------
                                                                    -----------------      -----------------

        1996:
            Consolidated GAAP basis amounts.................              $   28,229            $   300,609
            Company and non-insurance subsidiary amounts
              and eliminations..............................                     751                 (6,265)
                                                                    -----------------      -----------------
            Insurance subsidiaries GAAP basis amounts........                 28,980                294,344
            Fixed maturities available-for-sale..............                     --                   (388)
            Deferred policy acquisition costs................                (1,150)                 (5,569)
            Contingency reserve..............................                     --                (49,330)
            Nonadmitted assets...............................                     --                 (3,587)
            Deferred income taxes ...........................                    122                    302
            Contingency reserve tax deduction ...............                 10,300                 10,907
                                                                    -----------------      -----------------
            Statutory basis amounts..........................             $   38,252            $   246,679
                                                                    -----------------      -----------------
                                                                    -----------------      -----------------
</TABLE>


                                       F - 11


<PAGE>

                         Amerin Corporation and Subsidiaries
                          Notes to Consolidated Statements

4.       INVESTMENTS

    The amortized cost and fair value of investments in fixed-maturity
securities are summarized as follows:
<TABLE>
<CAPTION>
                                                 Amortized          Unrealized        Unrealized
                                                    Cost               Gain              Loss           Fair Value
                                             ------------------   ---------------   ---------------  ------------------
                                                                               (in thousands)
<S>                                            <C>                  <C>              <C>               <C>
At December 31, 1998:                                                         
    U.S. Treasury..........................    $        23,685      $      1,144     $          18     $        24,811
    States and political subdivisions......            320,078            14,791               112             334,757
    Corporate securities...................             43,736               925               343              44,318
    Redeemable preferred stock.............              1,649                21                --               1,670
    Mortgage-backed securities.............             27,385               436                --              27,821
                                                ---------------      ------------     -------------     ---------------

Total fixed maturities.....................    $       416,533      $     17,317     $         473     $       433,377
                                                ---------------      ------------     -------------     ---------------
                                                ---------------      ------------     -------------     ---------------
At December 31, 1997:
    U.S. Treasury..........................    $        30,785      $        349     $          58     $        31,076
    States and political subdivisions......            277,547            11,918                --             289,465
    Corporate securities...................             18,416               317                37              18,696
    Mortgage-backed securities.............             34,912               267                96              35,083
                                                ---------------      ------------     -------------     ---------------

Total fixed maturities.....................    $       361,660      $     12,851     $         191     $       374,320
                                                ---------------      ------------     -------------     ---------------
                                                ---------------      ------------     -------------     ---------------
</TABLE>

    The carrying amount of the Company's fixed-maturity securities can increase
or decrease significantly in the near term as a result of changes in market
interest rates.

    A summary of the amortized cost and fair value of investments in
fixed-maturity securities at December 31, 1998, by contractual maturity,
follows:

<TABLE>
<CAPTION>
                                                       Amortized Cost           Fair Value
                                                     -------------------   --------------------
                                                                  (in thousands)
<S>                                                     <C>                   <C>    
Due in one year or less...........................      $         3,041      $           3,079
Due after one year through five years.............               43,812                 44,335
Due after five years through ten years............              156,113                163,605
Due after ten years...............................              184,533                192,867
Redeemable preferred stock........................                1,649                  1,670
Mortgage-backed securities........................               27,385                 27,821
                                                         ---------------      -----------------
                                                        $       416,533      $         433,377
                                                         ---------------      -----------------
                                                         ---------------      -----------------
</TABLE>

    Expected maturities may differ from the contractual maturities shown in the
foregoing table because certain borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.


                                                        F - 12
<PAGE>

                                         Amerin Corporation and Subsidiaries
                                           Notes to Consolidated Statements

4.       INVESTMENTS (CONTINUED)

    Proceeds from sales of investment securities were $204.1 million, $40.6
million, and $46.1 million in 1998, 1997 and 1996, respectively. Gross gains and
losses realized on those sales are presented below:

<TABLE>
<CAPTION>
                                                              Years ended December 31,
                                                      1998              1997             1996
                                                  --------------   ---------------  ----------------
                                                                    (in thousands)
<S>                                               <C>               <C>              <C>   
Realized on sales of investment securities:
    Gains...................................      $       2,622     $       1,224    $          676
    Losses..................................             (1,107)              (57)             (515)
                                                   -------------     -------------    --------------
Net realized gains..........................      $       1,515     $       1,167    $          161
                                                   -------------     -------------    --------------
                                                   -------------     -------------    --------------
</TABLE>

    The changes in net unrealized gains on investments in fixed-maturity 
securities were $4.2 million in 1998, $12.3 million in 1997, and ($4.6 million) 
in 1996.

    At December 31, 1998, investments with a carrying amount of $8.9 million
were on deposit with state insurance departments to satisfy regulatory
requirements.

The composition of net investment income is as follows:

<TABLE>
<CAPTION>
                                                       Years ended December 31,
                                             1998               1997                1996
                                        ----------------   ----------------   ------------------
                                                            (in thousands)
<S>                                    <C>                  <C>               <C>
Fixed-maturity securities............  $         21,139     $       18,580    $          15,701
Short-term investments ..............               566                422                1,529
                                        ----------------     --------------    -----------------
                                                 21,705             19,002               17,230
Less:  Investment expenses...........               393                395                  359
                                        ----------------     --------------    -----------------
Net investment income................  $         21,312     $       18,607    $          16,871
                                        ----------------     --------------    -----------------
                                        ----------------     --------------    -----------------
</TABLE>

5.       COMPREHENSIVE INCOME

    The components of other comprehensive income and the related tax effects are
as follows:

<TABLE>
<CAPTION>
                                                              Year ended December 31, 1998
                                                     Amount                 Income         Amount
                                                     Before              Tax  Expense      Net of
                                                      Taxes               (Benefit)         Taxes
                                                ------------------   ----------------- ---------------
                                                                      (in thousands)
<S>                                                <C>                 <C>                <C>
Other comprehensive income:
    Net unrealized investment gains arising 
      during the year........................                4,953               1,994           3,704
    Reclassification adjustment..............                 (770)               (530)           (985)
                                                  ----------------    ----------------   -------------
      Net unrealized investment gain
      recognized in other
      comprehensive income...................     $          4,183     $         1,464    $      2,719
                                                  ----------------     ----------------   -------------
                                                  ----------------     ----------------   -------------
</TABLE>

                                                        F - 13
<PAGE>

                                         Amerin Corporation and Subsidiaries
                                           Notes to Consolidated Statements

<TABLE>
<CAPTION>
                                                             Year ended December 31, 1997
                                                     Amount               Income           Amount
                                                     Before             Tax Expense        Net of
                                                      Taxes              (Benefit)          Taxes
                                                ------------------   ----------------- ---------------
                                                                        (in thousands)
<S>                                            <C>                  <C>               <C>
Other comprehensive income:
  Net unrealized investment gains
    arising during the year....................            13,485             4,719            8,766
  Reclassification adjustment..................            (1,167)             (408)            (759)
                                                  -----------------    --------------   --------------
    Net unrealized investment gain
    recognized in other comprehensive
    income........................              $          12,318    $        4,311   $        8,007
                                                  -----------------    --------------   --------------
                                                  -----------------    --------------   --------------
</TABLE>

<TABLE>
<CAPTION>
                                                            Year ended December 31, 1996
                                                     Amount               Income            Amount
                                                     Before             Tax Expense         Net of
                                                      Taxes              (Benefit)           Taxes
                                                ------------------   ----------------- ---------------
                                                                        (in thousands)
<S>                                             <C>                   <C>               <C>
Other comprehensive income:
   Net unrealized investment losses arising
    during the year.........................               (4,465)           (1,563)          (2,902)
   Reclassification adjustment..............                 (161)              (56)            (105)
                                                  -----------------    --------------   --------------
    Net unrealized investment loss
    recognized in other comprehensive
    income..................................     $         (4,626)    $      (1,619)   $      (3,007)
                                                 -----------------    --------------   --------------
                                                 -----------------    --------------   --------------
</TABLE>

6.   LOSS RESERVES

    The following table is a reconciliation of the beginning and ending loss
reserves for the years shown:

<TABLE>
<CAPTION>
                                                                1998           1997            1996
                                                            -------------  -------------- ----------------
                                                                            (in thousands)
<S>                                                         <C>              <C>            <C>
Balance, January 1................................          $     31,280     $    18,730    $       7,092
Losses and loss adjustment expenses, principally in
    respect of default notices occurring in:
      Current year................................                36,133          29,196           20,344
      Prior years.................................                (1,779)          1,076              337
                                                             ------------     -----------   --------------
      Total losses and loss adjustment expenses...                34,354          30,272           20,681
                                                             ------------     -----------    -------------
Loss and loss adjustment expense payments 
  principally in respect of default notices 
  occurring in:
      Current year................................                 4,388           4,537            3,821
      Prior years.................................                17,397          13,185            5,222
                                                             ------------     -----------    -------------
      Total payments..............................                21,785          17,722            9,043
                                                             ------------     -----------    -------------
Balance, December 31..............................          $     43,849     $    31,280    $      18,730
                                                             ------------     -----------    -------------
                                                             ------------     -----------    -------------
</TABLE>
                                                        F - 14
<PAGE>

                                         Amerin Corporation and Subsidiaries
                                           Notes to Consolidated Statements


7.   INCOME TAXES

     The Company and its subsidiaries file a consolidated federal income tax
return.

     Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
                                                                  At December 31,
                                                             1998                 1997
                                                        ----------------    -----------------
                                                                   (in thousands)
<S>                                                      <C>                   <C>            
Deferred tax liabilities:
    Contingency reserve deduction....................     $      45,000        $      25,257
    Deferred policy acquisition costs................             5,894                2,722
    Unrealized gain on investments...................             5,895                4,431
    Tax over book depreciation.......................               635                  396
    Other liabilities................................                22                   --
    Other............................................               347                  323
                                                           -------------        -------------

Total deferred tax liabilities.......................            57,793               33,129

Deferred tax assets:
    Unearned premium reserves........................             1,754                1,594
    Accrued liabilities..............................                --                   43
    Reserve discounting..............................             1,204                  773
    Other............................................               614                  447
                                                           -------------        -------------
Total deferred tax assets............................             3,572                2,857
                                                           -------------        -------------

Net deferred tax liability...........................     $      54,221        $      30,272
                                                           -------------        -------------
                                                           -------------        -------------
</TABLE>

    The nature of the Company's deferred tax assets and liabilities at 
December 31, 1998 is such that the general reversal pattern for these temporary
differences is expected to result in the full realization of the Company's
deferred tax assets.

    The Company has elected to purchase non-interest bearing Tax and Loss 
Bonds in lieu of paying federal income taxes to the extent permissible under 
Internal Revenue Code Section 832(e). The purchases have been treated as 
prepaid federal income taxes for financial reporting purposes. The Company 
has included the allowable deductions attributable to the purchase of the Tax 
and Loss Bonds within the deferred tax provision. The Company purchased $19.7 
million, $14.4 million, and $10.3 million of Tax and Loss Bonds in 1998, 
1997, and 1996 respectively.

    The Company's income tax provision varied from the statutory federal income
tax rate applied to its net income before taxes as follows:

<TABLE>
<CAPTION>
                                                                  Years ended December 31,
                                                    1998                   1997                      1996
                                               ----------------     --------------------       ------------------
                                                                        (in thousands)
<S>                                             <C>                    <C>                      <C>
Statutory federal income tax rate applied
    to income before taxes.....................  $      25,231          $        19,834          $        13,857
    Add (deduct) tax effect of:
    Tax-exempt interest........................         (4,277)                  (4,016)                  (2,785)
      Nondeductible goodwill amortization
        and other nondeductible                  
        expenses...............                            170                      113                      106
    Other (net)................................           (218)                     (22)                     185
                                                 --------------         ----------------         ----------------
Income tax provision...........................  $      20,906          $        15,909          $        11,363
                                                 --------------         ----------------         ----------------
                                                 --------------         ----------------         ----------------
</TABLE>
                                                        F - 15
<PAGE>


                       Amerin Corporation and Subsidiaries
                        Notes to Consolidated Statements


8.   REINSURANCE

     Amerin Guaranty reinsures portions of its risk through reinsurance treaties
on an excess of loss basis. Amerin Guaranty remains liable to the extent that
the reinsuring companies do not meet their obligations under these reinsurance
treaties.

     Amerin Guaranty has entered into captive reinsurance arrangements with
certain customers. The arrangements are structured on an excess layer basis with
insured loans grouped by loan origination year. Amerin Guaranty retains the
first layer of risk on a particular book of business, the captive reinsurer
assumes the next layer, and Amerin Guaranty assumes all losses above that point.
The captive reinsurers are required to maintain minimum capitalization equal to
10% of the risk assumed. At December 31, 1998, approximately $154.7 million of
risk was ceded under captive reinsurance arrangements. Reinsurance ceded reduced
premiums earned by $12.2 million in 1998, $5.2 million in 1997, and $1.8 million
in 1996.

     In addition, Amerin Guaranty has a $100 million excess loss protection
treaty which covers Amerin Guaranty in the event the combined ratio exceeds 100%
and the risk to capital ratio exceeds 24.9 to 1. The amount ceded under the
treaty is based on the calculated leverage ratio at the end of each calendar
quarter. The total expense recognized under the treaty was $2.1 million, $1.8
million, and $1.8 million in 1998, 1997 and 1996, respectively.


9.   RELATED PARTY TRANSACTIONS

     During 1998 and 1997, both the Company and its subsidiaries maintained cash
accounts at an affiliate of one of the principal stockholders.

10.  INCENTIVE COMPENSATION

     The Company has a long-term incentive plan (Plan), which provides
additional compensation to officers of Amerin Guaranty. Under the Plan, an
aggregate of 8.3 million shares of common stock may be issued or sold as
restricted stock or sold under incentive stock options, as the result of awards
made to Plan participants. Incentive stock options awarded under the Plan vest
over a five-year schedule. Plan participants are bound by an agreement not to
vote any shares acquired under the Plan, until a future date determined by the
Company's Board of Directors.

     The Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees",
and, accordingly, recognizes no compensation expense for stock options granted
to employees. SFAS 123, "Accounting for Stock Based Compensation", requires
disclosure of pro forma information regarding net earnings and earnings per
share, using pricing models to estimate the fair value of stock option grants.
Had compensation expense for the Company's stock option plans been determined
based on the estimated fair value at the date of grant consistent with the
methodology prescribed under SFAS 123, approximate net income and net income per
share would have been as follows:

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                                      --------------------------------------------------
                                                            1998            1997            1996
                                                      --------------------------------------------------
                                                            (in thousands, except per share data)
<S>                                                         <C>             <C>              <C>

    Pro forma net income                                    $   47,685      $   38,013       $   27,788
    Pro forma net income per common share
         Basic                                              $     1.81      $     1.46       $     1.07
         Diluted                                            $     1.79      $     1.45       $     1.06

</TABLE>

                                                        F - 16
<PAGE>


                           Amerin Corporation and Subsidiaries
                             Notes to Consolidated Statements


10.  INCENTIVE COMPENSATION (CONTINUED)

     For purposes of the pro forma disclosures, the estimated fair values of the
option grants are amortized to expenses over the options' vesting period. The
fair value of options at the date of grant was estimated using the Black-Scholes
option pricing model with the following weighted-average assumptions:

<TABLE>
<CAPTION>
                                                                Years Ended December 31,
                                                 -------------------------------------------------------
                                                      1998             1997                1996
                                                 -------------------------------------------------------
<S>                                              <C>                <C>                   <C>
Dividend yield................................           0%               0%                  0%
Risk-free interest rate.......................         5.2%             6.5%                6.5%
Volatility....................................        49.3%            49.4%               51.3%
Expected life (years).........................         6.0              6.0                 6.0

</TABLE>


     The pro forma effects on net income and net income per common share are not
likely to be representative of the effects on reported net income in future
years as 1998, 1997 and 1996 pro forma amounts do not include pro forma
compensation expense related to grants made prior to 1995.

Transactions related to all stock options are as follows:

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                   -----------------------------------------------------------------------------------------
                                               1998                         1997                          1996
                                   -----------------------------------------------------------------------------------------
                                                    Weighted                       Weighted                      Weighted
                                     Shares         Average         Shares          Average        Shares        Average
                                     Under          Exercise         Under         Exercise         Under        Exercise
                                     Option           Price         Option           Price          Option        Price
                                   -----------------------------  ----------------------------------------------------------
                                                              (in thousands, except price data)
<S>                                     <C>       <C>             <C>             <C>            <C>             <C>
   Beginning Balance.............       1,820     $       15.64           943     $      11.40           692     $     5.11
   Granted.......................         232             22.46         1,030            19.04           329          23.02
   Exercised.....................        (362)             5.02           (63)            4.54           (73)          4.25
   Canceled .....................        (101)            16.25           (90)           18.10            (5)          5.30
                                   -----------     -------------  ------------     ------------  ------------     ----------
   Ending Balance................       1,589             19.09         1,820            15.64           943          11.40
                                   -----------                    ------------                   ------------
                                   -----------                    ------------                   ------------
   Exercisable at end of year....         398                             445                            295
                                   -----------                    ------------                   ------------
                                   -----------                    ------------                   ------------

</TABLE>

Under the plan, 1,016,000 shares were available for grant as awards or options
at December 31, 1998.

                                                        F -17
<PAGE>

                           Amerin Corporation and Subsidiaries
                              Notes to Consolidated Statements


10.  INCENTIVE COMPENSATION (CONTINUED)

Information regarding options outstanding and exercisable at December 31, 1998
is summarized as follows:

<TABLE>
<CAPTION>
                                      Options Outstanding                          Options Exercisable
                     ------------------------------------------------------ ----------------------------------
                                       Weighted Average
                                          Remaining                                              Weighted
                         Number        Contractual Life   Weighted Average      Number           Average
                       Outstanding        (in years)       Exercise Price     Exercisable     Exercise Price
                     ---------------- ------------------- ----------------- ---------------- -----------------
                                                (in thousands, except price data)
<S>                    <C>               <C>                 <C>                   <C>          <C>      
$ 4.24   -  $ 5.30              138         8.3             $    4.94                   95     $    5.68
$13.8125 -  $17.75              837         8.5                 17.21                  155         17.76
$21.25   -  $29.50              614         8.5                 24.83                  148         23.36
                     ---------------- -------------------                    ---------------
                              1,589         8.5                 19.09                  398         16.98
                     ---------------- -------------------                    ---------------
                     ---------------- -------------------                    ---------------
</TABLE>

     The weighted average fair value per share of options granted was $13.02,
$10.60, and $13.07 in 1998, 1997, and 1996, respectively.


11.  COMMON STOCKHOLDERS' EQUITY

     Common Stock

         Activity for Amerin Corporation's outstanding Common Stock, $.01 par
value, is as follows:

<TABLE>
<CAPTION>
                                                                    Number of Shares
                                                             --------------------------------
                                                                 Voting         Nonvoting
                                                                 Common           Common
                                                                  Stock           Stock
                                                             ---------------- ---------------

<S>                                                             <C>                <C>
Outstanding at January 1, 1996............................        22,381,818      3,609,625
Shares issued under long-term incentive plan..............            22,665             --
Options exercised.........................................            72,709             --
Pay-in-kind dividends.....................................            (5,978)            --

                                                             ---------------- ---------------
Outstanding at December 31, 1996..........................        22,471,214      3,609,625
Shares issued under long-term incentive plan..............             1,263             --
Options exercised.........................................            63,532             --
Conversion to voting common stock.........................         1,952,716     (1,952,716)
                                                             ---------------- ---------------
Outstanding at December 31, 1997..........................        24,488,725      1,656,909
Options exercised.........................................           362,134             --
Conversion to voting stock................................           904,362       (904,362)
                                                             ---------------- ---------------
Outstanding at December 31, 1998..........................        25,755,321        752,547
                                                             ---------------- ---------------
                                                             ---------------- ---------------
</TABLE>

Shares of Voting Common Stock and Nonvoting Common Stock shall rank equally as
regards dividend rights, rights on liquidation, and winding up and dissolution.

                                                        F - 18
<PAGE>

                                Amerin Corporation and Subsidiaries
                                  Notes to Consolidated Statements


11.  COMMON STOCKHOLDERS' EQUITY (CONT.)

    Each holder of shares of Voting Common Stock shall be entitled to one vote
per share on each matter on which the stockholders of the Company shall be
entitled to vote. Except as otherwise required by law, each outstanding share of
Nonvoting Common Stock shall not be entitled to vote on any matter on which the
stockholders of the Company shall be entitled to vote. On any matter on which
the holders of shares of Voting Common Stock and the holders of Nonvoting Common
Stock are entitled to vote, they shall vote together as a single class, and each
holder of shares of Nonvoting Common Stock shall be entitled to one vote for
each share of such stock.

        Notwithstanding the foregoing, holders of shares of Nonvoting Common
Stock shall be entitled to vote as a separate class on any amendment, repeal or
modification of any provision of the Certificate of Incorporation that adversely
affects the powers, preferences or special rights of holders of the Nonvoting
Common Stock.

      The Voting Common Stock is convertible into the same number of shares of
Nonvoting Common Stock by any regulated stockholder, at any time, provided that
the Company will not be required to effect a conversion that would result in a
violation by the Company or its subsidiaries, of any law, rule, regulation, or
requirement of any governmental authority at that time. Additional restrictions
apply to this conversion as defined in the Certificate of Incorporation.

       The Nonvoting Common Stock is convertible into the same number of shares
of Voting Common Stock by any stockholder, at any time, subject to restrictions
as defined in the Certificate of Incorporation.

Stock Purchase Rights

     The Company adopted a Stockholder Rights Plan on October 20, 1998. Under
the terms of the plan, Rights will be distributed as a dividend at the rate of
one Right for each share of common stock held. Each Right will entitle the
holder to purchase, upon the occurrence of certain events, one one-hundredth of
a share of preferred stock for $105. The Rights generally will be exercisable
only if a person or group acquires beneficial ownership of 15 percent or more of
the Company's common stock, or commences a tender or exchange offer that, upon
consummation, would result in a person or group owning 15 percent or more the
Company's common stock. Under certain circumstances, the Rights are redeemable
at a price of $.01 per right. The Rights will expire on October 7, 2008.


12.  COMMITMENTS AND CONTINGENCIES

          From time to time, the Company and its subsidiaries are involved in
certain routine legal proceedings arising in the normal course of their
business, none of which is currently expected to have a material adverse effect
on the Company's consolidated financial condition or results of operations.

          The Company entered into a noncancelable operating lease for office
space that expires in 2005. In addition to base rental costs, the lease provides
for rent escalations resulting from increased assessments for real estate taxes,
utilities and maintenance. Aggregate minimum rental commitments under the lease
are $.2 million in 1999, $.2 million in 2000, $.3 million in 2001, $.3 million
in 2002, $.3 million in 2003, and $.5 million thereafter. Rent expense was $.6
million in 1998, 1997 and 1996.







                                        F - 19
<PAGE>


               Amerin Corporation and Subsidiaries
                Notes to Consolidated Statements



13.  DIVIDEND RESTRICTIONS

      Under Illinois insurance regulations, Amerin Guaranty and Amerin Re are 
each required to maintain statutory basis capital and surplus of $1.5 
million. The statutory basis capital and surplus of Amerin Guaranty was 
$229.4 million and $218.6 million at December 31, 1998 and 1997 respectively. 
The statutory basis capital and surplus of Amerin Re was $29.0 million and 
$28.0 million at December 31, 1998 and 1997, respectively.

      Insurance regulations limit the writing of mortgage guaranty insurance to
an aggregate amount of insured risk no greater than 25 times the total of
statutory capital and surplus and the statutory basis contingency reserve. At
December 31, 1998, the Company's insurance subsidiaries' risk-to-capital ratios
were below these limits.

     The payment of dividends from unassigned surplus by the insurance
subsidiaries without prior approval of the Illinois Insurance Department is
subject to certain restrictions principally including those relating to the
greater of 10% of the prior year's statutory basis surplus or net income. The
total amount of dividends that could be paid in 1999 without regulatory approval
is approximately $8.5 million.

    In addition, dividend restrictions have been placed on the Company and its
subsidiaries by Moody's Investors Services, Inc., Fitch Investors Services,
L.P., and Standard & Poor's Corporation (collectively, Rating Agencies) as
embodied in various support agreements (Agreements). Those restrictions require
that no dividend will be declared or paid if the subsidiaries' net risk in force
exceeds the maximum multiple of capital, as specified in the Agreements, or the
subsidiaries' rating is less than the minimum rating allowed.

14.     QUARTERLY FINANCIAL DATA (UNAUDITED)

        A summary of unaudited quarterly results of operations for 1998 and 1997
is as follows:

<TABLE>
<CAPTION>

                                                            1ST              2ND              3RD               4TH
                                                     -----------   --------------   --------------   ---------------
                                                               (in thousands, except per share data)
<S>                                                 <C>            <C>              <C>              <C>   
     1998
     Net premiums earned.........................   $     27,609   $      29,518      $     31,237    $      34,736
     Net investment income and other.............          5,518           5,451             6,832            5,026
     Net income..................................         11,950          12,527            13,984           12,722
     Net income per common share:
           Basic.................................            .46             .48               .53              .48
           Diluted...............................            .45             .47               .52              .48

     1997
     Net premiums earned.........................   $     20,491   $      21,913      $     24,001    $      25,924
     Net investment income and other.............          4,461           4,597             4,775            5,941
     Net income..................................          8,669           9,715            10,529           11,846
     Net income per common share:
           Basic.................................            .33             .37               .40              .45
           Diluted...............................            .33             .37               .40              .45
</TABLE>




                                                        F -20
<PAGE>



                        Amerin Corporation and Subsidiaries
                          Notes to Consolidated Statements

15.  NET INCOME PER COMMON SHARE

     The following table sets forth the computation of net income per common
share (in thousands, except per share data):

<TABLE>
<CAPTION>

                                                                           Years Ended December 31,
                                                              ---------------------------------------------------
                                                                   1998            1997              1996
                                                              ---------------------------------------------------
<S>                                                              <C>              <C>               <C>
Net income applicable to common stockholders                      $   51,183       $    40,759       $    28,229
                                                                -------------    --------------    --------------
                                                                -------------    --------------    --------------
Weighted average number of common shares outstanding                  26,374            26,119            26,038
Dilutive effect of stock options using the treasury stock
  method                                                                 328               364               313
                                                                -------------    --------------    --------------
Weighted average number of common and common equivalent
     shares outstanding                                               26,702            26,483            26,351
                                                                -------------    --------------    --------------
                                                                -------------    --------------    --------------
Net income per common share:
     Basic                                                        $     1.94       $      1.56       $      1.08
     Diluted                                                            1.92              1.54              1.07

</TABLE>





                                                        F -21



<PAGE>



                           Amerin Corporation
                            (Parent Company)

       Schedule II -- Condensed Financial Information of Registrant

                        Condensed Balance Sheets
                                (in thousands)



<TABLE>
<CAPTION>

                                                                                    December 31,
                                                                     -------------------------------------------
                                                                             1998                  1997
                                                                     ---------------------  --------------------
<S>                                                                 <C>                     <C>
ASSETS

Investment in subsidiaries......................................      $           401,896    $          340,499
Investments
    Fixed maturities available-for-sale, at fair value
       (amortized cost $391 in 1998 and $779 in 1997)...........                      409                   805
    Short-term investments......................................                       53                     4
                                                                       -------------------    ------------------
        Total investments.......................................                  402,358                   809
Cash............................................................                    2,156                    20
Accrued investment income.......................................                        8                    16
Goodwill, net of accumulated amortization (1998 -- $993;
    1997 --  $844)...........................................                       1,984                 2,133
Due to subsidiaries..........................................                          --                 4,682
Federal income taxes recoverable................................                    3,765                 1,803
Other assets....................................................                      289                   490
                                                                       -------------------    ------------------
    Total assets................................................      $           410,560    $          350,452
                                                                       -------------------    ------------------
                                                                       -------------------    ------------------
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY

Liabilities
Due to subsidiaries.............................................                      942                    --
Accounts payable and other liabilities .........................                      388                   297
                                                                       -------------------    ------------------
    Total liabilities...........................................                    1,330                   297

Common Stockholders' Equity
    Voting Common Stock .................................                             249                   245
    Non-voting Common Stock .............................                              17                    17
    Additional paid-in capital..................................                  321,811               316,642
    Accumulated other comprehensive income......................                   10,948                 8,229
    Retained earnings...........................................                   76,205                25,022
                                                                       -------------------    ------------------
Total common stockholders' equity...............................                  409,230               350,155
                                                                       -------------------
                                                                                              ------------------
Total liabilities and common stockholders' equity...............      $           410,560    $          350,452
                                                                       -------------------    ------------------
                                                                       -------------------    ------------------
</TABLE>



                                 See notes to consolidated financial statements

                                                         S-1
<PAGE>


                                Amerin Corporation
                                 (Parent Company)

      Schedule II -- Condensed Financial Information of Registrant (Continued)

                        Condensed Statements of Operations

<TABLE>
<CAPTION>

                                                                        Years ended December 31,
                                                     ---------------------------------------------------------------
                                                            1998                 1997                  1996
                                                     --------------------  ------------------  ---------------------
                                                                             (in thousands)
<S>                                                        <C>                  <C>                    <C>
REVENUES
        Net investment income.................              $         44         $       80             $      149
        Realized investment gains (losses)........                     7                ( 3)                    --
                                                        -----------------   -----------------     ------------------
               Total revenues.....................                    51                 77                    149
EXPENSES
        Administrative and other..................                 1,798              1,611                  1,084
                                                        -----------------   -----------------     ------------------

Loss before equity in undistributed net income
    of subsidiaries and income-tax benefit .......                (1,747)            (1,534)                  (935)
        Equity in undistributed net
           income of subsidiaries.................                52,423             41,860                 28,906
                                                        -----------------   -----------------     ------------------
Net income before income taxes...................                 50,676             40,326                 27,971
Federal income-tax benefit........................                  (507)              (433)                  (258)
                                                        -----------------   -----------------     ------------------

Net income applicable to common stockholders......          $     51,183         $   40,759             $   28,229
                                                        -----------------   -----------------     ------------------
                                                        -----------------   -----------------     ------------------
</TABLE>

                                 See notes to consolidated financial statements


                                                        S - 2
<PAGE>


                              Amerin Corporation
                               (Parent Company)

    Schedule II -- Condensed Financial Information of Registrant (Continued)

                      Condensed Statements of Cash Flows

<TABLE>
<CAPTION>

                                                                        Years ended December 31,
                                                     ---------------------------------------------------------------
                                                            1998                  1997                 1996
                                                     --------------------  -------------------  --------------------
                                                                              (in thousands)
<S>                                                       <C>                   <C>                    <C>
Net cash used by operating activities.............         $     (3,384)         $     (1,159)             $ (1,778)

Investing activities:
      Capital contribution to subsidiaries........                    --               (1,243)                   --
      Purchase of:                                                                            
           Fixed maturities.......................                (1,205)                  --                    --
           Short-term investments, net............                   (48)                  --                    --
      Sale of:
           Fixed maturities.......................                 1,600                1,198                    --
                   Short-term investments, net....                    --                  346                   945

                                                        -----------------     ----------------     -----------------
           Net cash provided by investing
               activities.........................                   348                  301                   945

Financing activities:
        Issuance of common stock..................                 5,173                  750                   713
                                                        -----------------     ----------------     -----------------

         Net cash provided by financing
               activities.........................                 5,173                  750                   713
                                                        -----------------     ----------------     -----------------

           Increase (decrease) in cash............                 2,136                 (108)                 (120)

Cash at beginning of year.........................                    20                  128                   248
                                                        -----------------     ----------------     -----------------

Cash at end of year...............................         $       2,156         $         20           $       128
                                                        -----------------     ----------------     -----------------
                                                        -----------------     ----------------     -----------------

</TABLE>

                                 See notes to consolidated financial statements

                                                        S - 3
<PAGE>


                     Amerin Corporation and Subsidiaries

              Schedule III -- Supplementary Insurance Information

<TABLE>
<CAPTION>

                                       Year Ended December 31,
                         -------------------------------------------------------
                                                                                
                                      Loss and                                  
                          Deferred      Loss                                    
                           Policy    Adjustment   Unearned    Future            
                         Acquisition  Expense     Premium     Policy   Premium  
                           Costs      Reserves    Reserves   Benefits  Revenues 
                         -------------------------------------------------------
<S>                      <C>         <C>         <C>         <C>      <C>       
 
1998 Mortgage Guaranty    $16,839     $43,849     $  26,114  $  --    $123,100  

1997 Mortgage Guaranty    $ 7,776     $31,280     $  23,352  $  --    $ 92,329  

1996 Mortgage Guaranty    $ 5,569     $18,730     $  20,525  $  --    $ 62,349  




                                                  Year Ended December 31,
                         -----------------------------------------------------------------------
                             Net                                                                  
                          Investment  Benefits,  Amortization                                     
                          Income and   Claims,    of Deferred                                     
                           Realized   Losses and    Policy                                        
                          Investment  Settlement  Acquisition  Other Operating   Net Premiums     
                             Gain      Expenses      Costs        Expenses         Written        
                         -----------------------------------------------------------------------  
<S>                        <C>        <C>         <C>          <C>                                
                                                                                                  
1998 Mortgage Guaranty     $ 22,827    $  34,354    $   8,469    $   31,015      $ 125,383        
                                                                                                  
1997 Mortgage Guaranty     $ 19,774    $  30,272    $   7,102    $   18,061      $  94,740        
                                                                                                      
1996 Mortgage Guaranty     $ 17,032    $  20,681    $   7,937    $   11,171      $  70,000        
</TABLE>


                                         S-4

<PAGE>


                    Amerin Corporation and Subsidiaries

            Schedule V -- Valuation and Qualifying Accounts

<TABLE>
<CAPTION>

                                                                  Balance at
                                                                 Beginning of                                      Balance at
                                                                     Year          Additions       Deductions      End of Year
                                                                ---------------   -------------   --------------  --------------
<S>                                                            <C>              <C>              <C>             <C>
Year Ended December 31, 1998:
    Accumulated amortization of goodwill.............          $       844       $    149        $      --       $     993
    Accumulated amortization of furniture and        
        equipment....................................                2,775          2,479               --           5,255
    Accumulated amortization of other intangibles....                1,616             --               --           1,616

Year Ended December 31, 1997
    Accumulated amortization of goodwill.............          $       695       $    149        $      --       $     844
    Accumulated amortization of furniture and        
        equipment....................................                1,625          1,211               61           2,775
    Accumulated amortization of other intangibles....                1,460            156               --           1,616

Year Ended December 31, 1996
    Accumulated amortization of goodwill.............          $       546       $    149        $      --       $     695
    Accumulated amortization of furniture and        
        equipment....................................                  939            718               32           1,625
    Accumulated amortization of other intangibles....                1,137            323               --           1,460

</TABLE>




                                                        S - 5