=================================================================

               SECURITIES AND EXCHANGE COMMISSION

                     WASHINGTON, D.C.  20549

                            FORM 10-Q

     [XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF 
          THE SECURITIES EXCHANGE ACT OF 1934
          
          For the Quarterly Period Ended September 30, 1996

                              or

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

                  Commission File Number 1-7461

               ACCEPTANCE INSURANCE COMPANIES INC.
     (Exact name for registrant as specified in its charter)

     Delaware                                     31-0742926
(State or other jurisdiction of                 (I.R.S. Employer
incorporation or organization)               Identification Number)

222 South 15th St., Suite 600 N.
      Omaha, Nebraska                                  68102
(Address of principal executive offices)             (Zip Code)

          Registrant's telephone number, including area code:
                         (402)  344-8800

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   XX                 NO
               -----                  ------

The number of shares of each class of the Registrant's common 
stock outstanding on November 11, 1996 was:

Class of Common Stock              No. of Shares Outstanding
Common Stock, $.40 Par Value              15,246,988

=================================================================






               ACCEPTANCE INSURANCE COMPANIES INC.

                            FORM 10-Q

TABLE OF CONTENTS

PART I.   FINANCIAL INFORMATION

     Item 1.   Financial Statements:

          Consolidated Balance Sheets
          September 30, 1996 (unaudited) and December 31, 1995
            (audited)

          Consolidated Statements of Operations (unaudited)
          Three Months and Nine Months Ended September 30, 1996
            and 1995

          Consolidated Statements of Cash Flows (unaudited)
          Nine Months Ended September 30, 1996 and 1995

          Notes to Interim Consolidated Financial Statements
            (unaudited)

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

PART II.  OTHER INFORMATION

     Item 6.   Exhibits and Reports on Form 8-K

     Signatures<PAGE>
PART I.   FINANCIAL INFORMATION
-------------------------------
Item 1.   Financial Statements
<TABLE>
<CAPTION>
               ACCEPTANCE INSURANCE COMPANIES INC.
                   CONSOLIDATED BALANCE SHEETS
                         (in thousands)

                                     September 30,   December 31, 
                                         1996           1995
                                     ------------    -----------
                                     (unaudited)       (audited)
<S>                                  <C>               <C>
ASSETS
Investments:
Fixed maturities available for 
  sale                               $  242,668        $218,300
Marketable equity securities -
  preferred stock                        63,602          30,608
Marketable equity securities -
  common stock                           20,387          17,929
Mortgage loans and other 
  investments                            11,330          11,290
Real estate                               3,345           3,354
Short-term investments, at cost,
  which approximates market              85,871          86,520
                                     ----------      ----------   
                                        427,203         368,001

Cash                                      9,244           7,648
Equity investment in Major
  Realty Corporation                      9,715           9,878
Receivables, net                        229,396         106,246
Reinsurance recoverable on 
  unpaid loss and loss               
  adjustment expenses                   268,560         167,888
Prepaid reinsurance premiums             35,542          38,341
Property and equipment, net               7,534           5,284
Deferred policy acquisition costs        31,530          24,585
Excess of cost over acquired net 
  assets                                 36,149          37,003
Deferred income tax                      14,842           9,403
Other assets                              7,656           6,757
                                     ----------      ----------
Total assets                         $1,077,371       $ 781,034
                                     ==========      ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Losses and loss adjustment expenses  $  500,902       $369,244
Unearned premiums                       143,874        124,122
Amounts payable to reinsurers           120,106         18,161
Accounts payable and accrued
  liabilities                            43,620         22,720
Bank borrowings                          69,000         69,000
                                     ----------      ---------

      Total liabilities                 877,502        603,247

Contingencies                             --             --

Stockholders' equity:
  Preferred stock, no par value,
  5,000,000 shares authorized, 
  none issued                             --             --
Common stock, $.40 par value,
  20,000,000 shares authorized;
  15,245,988 and 15,141,220
  shares issued                           6,098          6,057
Capital in excess of par value          195,960        194,823
Unrealized gain (loss) on 
  available for sale securities,
  net of tax                             (3,898)            19
Accumulated deficit                       5,973        (18,848)
                                     ----------      ---------
                                        204,133        182,051
Less:
Treasury stock, at cost, 35,559
  shares                                 (1,564)        (1,564)
Contingent stock, 240,000 shares         (2,700)        (2,700)
                                     ----------      ---------
Total stockholders' equity              199,869        177,787
                                     ----------      ---------
Total liabilities and 
  stockholders' equity               $1,077,371       $781,034
                                     ==========      =========

<FN>
       The accompanying notes are an integral part of the 
           interim consolidated financial statements.
</FN>
/TABLE
<PAGE>
<TABLE>
<CAPTION>
               ACCEPTANCE INSURANCE COMPANIES INC.
              CONSOLIDATED STATEMENTS OF OPERATIONS
           for the three months and nine months ended
                   September 30, 1996 and 1995
              (in thousands, except per share data)
                           (unaudited)

                          Three Months           Nine Months
                      --------------------   ------------------
                        1996        1995       1996      1995
                      ---------   --------   --------  --------

<S>                   <C>         <C>        <C>       <C>
Revenues:
Insurance premiums
  earned              $121,374    $ 90,373   $265,774  $204,062
Insurance agency 
  commissions               83         574      1,005     2,216
Net investment 
  income                 6,588       5,407     19,580    14,645
Net realized capital
  gains                    808         779      3,575     1,812
                      --------    --------   --------  -------- 
                       128,853      97,133    289,934   222,735
                      --------    --------   --------  --------
Costs and expenses:
Cost of revenues:
Insurance losses 
  and loss adjust-
  ment expenses         73,863      85,744    174,985   164,863
Insurance agency
  costs                    129         615      1,003     2,067
Insurance under-
  writing expenses      27,103      19,175     72,245    55,183

General and
  administrative
  expenses                 489         437      1,552     1,685
                      --------    --------   --------  --------
                       101,584     105,971    249,785   223,798
                      --------    --------   --------  --------
Operating profit
  (loss)                27,269      (8,838)    40,149    (1,063)
                      --------    --------   --------  --------

Other income
  (expense):
Interest expense        (1,211)       (563)    (3,706)   (1,607)
Share of net loss
  of investee              (44)        (79)      (161)     (236)
Other, net                  27          (5)       100        76
                      --------    --------   --------  --------
                        (1,228)       (647)    (3,767)   (1,767)
                      --------    --------   --------  --------
Income (loss)
  before income
  taxes                 26,041      (9,485)    36,382    (2,830)
Income tax
  expense (benefit):
Current                 13,038        (344)    14,891     1,346
Deferred                (4,315)     (3,180)    (3,330)   (2,697)

Net income
  (loss)              $ 17,318    $ (5,961)  $ 24,821  $ (1,479)
                      ========    ========   ========  ========
Net income (loss)
  per share:
Primary               $ 1.14      $ (.40)    $ 1.64    $ (.10)
                      ========    ========   ========  ========
Fully diluted         $ 1.12      $ (.40)    $ 1.61    $ (.10)
                      ========    ========   ========  ========
<FN>
         The accompany notes are an integral part of the
           interim consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
               ACCEPTANCE INSURANCE COMPANIES INC.
              CONSOLIDATED STATEMENTS OF CASH FLOWS
      for the nine months ended September 30, 1996 and 1995
                         (in thousands)
                           (unaudited)

                                           1996        1995
                                         ---------   --------
<S>                                      <C>           <C>
Cash flows from operating 
  activities:
Net income (loss)                        $  24,821   $  (1,479)
Net adjustment to reconcile net 
  income to net cash provided by 
  operating activities                      41,337      38,846
                                         ---------   ---------
Net cash provided by operating 
  activities                                66,158      37,367
                                         ---------   ---------
Cash flows from investing 
  activities:
Proceeds from sales of investments
  available for sale                       114,493      82,527
Proceeds from maturities of 
  investments                               15,793      38,228
Proceeds from maturities of 
  investments available for sale             6,302       8,126
Purchases of investment                    (20,377)    (41,092)
Purchases of investments available       
  for sale                                (183,245)   (134,087)
Purchases of property and equipment         (3,931)     (1,748)
                                         ---------   ---------
Net cash used for investing 
  activities                               (70,965)    (48,046)
                                         ---------   ---------
Cash flows from financing activities:
Proceeds from bank borrowings                 --        20,000
Proceeds from issuance of 
  common stock                               1,178          98
                                         ---------   ---------
Net cash provided by financing
  activities                                 1,178      20,098
                                         ---------   ---------
Net increase (decrease) in cash and 
  short-term investments                    (3,629)      9,419
Cash and short-term investments
  at beginning of period                    84,740      50,236
                                         ---------   ---------
Cash and short-term investments
  at end of period                       $  81,111   $  59,655
                                         =========   =========
Supplemental disclosure of cash
  flow information:
Cash paid during the period for 
  interest                               $   3,848   $   1,404
                                         =========   =========
Cash paid during the period for 
  income taxes                           $   3,250   $   4,253
                                         =========   =========
<FN>
       The accompanying notes are an integral part of the 
            interim consolidated financial statements
</FN>
</TABLE>
<PAGE>
               ACCEPTANCE INSURANCE COMPANIES INC.

       NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                           (unaudited)

1.   Summary of Significant Accounting Policies:

     Principles of Consolidation

     The Company's consolidated financial statements include the
     accounts of Acceptance Insurance Companies Inc. and its
     majority owned subsidiaries (the "Company").  All significant
     intercompany transactions have been eliminated.

     Management's Opinion

     The accompanying consolidated financial statements reflect all
     adjustments, consisting only of normal recurring adjustments
     except as otherwise disclosed, which in the opinion of
     management are considered necessary to fairly present the
     Company's financial position as of September 30, 1996 and
     December 31, 1995, and the results of operations for the three
     months and nine months ended September 30, 1996 and 1995 and
     cash flows for the nine months ended September 30, 1996 and
     1995.

     Statements of Cash Flows

     The Company aggregates cash and short-term investments with
     maturity dates of three months or less from the date of
     purchase for purposes of reporting cash flows.  As of
     September 30, 1996 approximately $14,004,000 of short-term
     investments had a maturity date at acquisition of greater 
     than three months.

     Recent Statements of Financial Accounting Standards

     In 1995, the Financial Accounting Standards Board issued
     Statement of Financial Accounting Standards 121, Accounting
     for the Impairment of Long-Lived Assets and for Long-Lived
     Assets to be Disposed Of.  This statement establishes
     accounting standards for the recognition and measurement of
     the impairment of long-lived assets and goodwill and is
     effective in 1996.  The adoption of this statement had no
     material effect on the Company's financial statements.

     In October 1995, the Financial Accounting Standards Board
     issued Statement of Financial Accounting Standards No. 123
     (SFAS No. 123), "Accounting for Stock-Based Compensation,"
     which was effective for the Company on January 1, 1996.  SFAS
     No. 123 requires expanded disclosures of stock-based
     compensation arrangements with employees and encourages (but
     does not require) compensation cost to be measured based on
     the fair value of the equity instrument awarded.  Companies
     are permitted, however, to continue to apply APB Opinion No.
     25, which recognizes compensation cost based on the intrinsic
     value of the equity instruments awarded.  The Company will
     continue to apply APB No. 25 to its stock based compensation
     awards to employees and directors.

     Reclassifications

     Certain prior year accounts have been reclassified to conform
     with current period presentation.

2.   Per Share Data:

     Primary and fully diluted earnings per share are based on the
     weighted average shares outstanding of approximately 15.2
     million and 15.5 million, respectively, for the three months
     ended September 30, 1996 and approximately 14.9 million and
     15.1 million, respectively, for the three months ended
     September 30, 1995.  Primary earnings per share and fully
     diluted earnings per share are based on the weighted average
     shares outstanding of approximately 15.1 million and 15.4
     million, respectively, for the nine months ended September 
     30, 1996 and approximately 14.9 million and 15.1 million,
     respectively, for the nine months ended September 30, 1995.

3.   Investments:

     The amortized cost and related market values of debt and
     equity securities in the accompanying balance sheets are as
     follows (in thousands):

<TABLE>
<CAPTION>

                                   Gross      Gross
                       Amortized Unrealized Unrealized Market
                         Cost      Gains     Losses    Value
                       --------- ---------- ---------- -------

<S>                    <C>       <C>       <C>       <C>
September 30, 1996:
Fixed maturities
  available for sale:
U.S. Treasury and
  government 
  securities           $ 79,076  $   264   $   518   $ 78,822
States, municipalities
  and political sub-
  divisions              82,860    1,732       363     84,229
Mortgage-backed 
  securities             63,850      139     8,822     55,167
Other debt securities    24,757      222       529     24,450
                       --------  -------   -------   --------

                       $250,543  $ 2,357   $10,232   $242,668
                       ========  =======   =======   ========
Marketable equity
  securities - 
  preferred stock      $ 64,529  $   438   $ 1,365   $ 63,602
                       ========  =======   =======   ========
Marketable equity
  securities -
  common stock         $ 17,581  $ 3,828   $ 1,022   $ 20,387
                       ========  =======   =======   ========

December 31, 1995:
Fixed maturities 
  available for sale:  
U.S. Treasury and 
  government 
  securities           $ 51,022  $   684   $    17   $ 51,689
States, municipalities
  and political sub-
  divisions              69,433    1,991       230     71,194
Mortgage-backed 
  securities             72,359      407     5,546     67,220
Other debt securities    27,484    1,060       347     28,197
                       --------  -------   -------   --------
                       $220,298  $ 4,142   $ 6,140   $218,300
                       ========  =======   =======   ========
Marketable equity
  securities -
  preferred stock      $ 31,299  $   266   $   957   $ 30,608
                       ========  =======   =======   ========
Marketable equity
  securities -
  common stock         $ 15,211  $ 3,302   $   584   $ 17,929
                       ========  =======   =======   ========
</TABLE>

4.   Insurance Premiums and Claims

     Insurance premiums written and earned by the Company's
     insurance subsidiaries for the three months and nine months
     ended September 30, 1996 and 1995 are as follows (in
     thousands):
<TABLE>
<CAPTION>
                              Three Months        Nine Months
                          -------------------  -----------------  
                         1996      1995       1996      1995
                          --------  ---------  --------  -------
<S>                       <C>       <C>       <C>       <C>

Direct premiums written   $247,371  $205,982  $496,567  $419,081
Assumed premiums written    33,448    12,343    53,032    12,888
Ceded premiums written    (158,652) (124,065) (261,274) (212,588)
                          --------  --------  --------  --------

Net premiums written      $122,167  $ 94,260  $288,325  $219,381
                          ========  ========  ========  ========

Direct premiums earned    $245,957  $200,355  $478,143  $392,470
Assumed premiums earned     33,381    10,577    51,704    12,375
Ceded premiums earned     (157,964) (120,559) (264,073) (200,783)
                          ========  ========  ========  ========
Net premiums earned       $121,374  $ 90,373  $265,774  $204,062
                          ========  ========  ========  ========

</TABLE>

     Insurance loss and loss adjustment expenses have been reduced
     by recoveries recognized under reinsurance contracts of
     approximately $195,625,000 and $140,754,000 for the three
     months ended September 30, 1996 and 1995, respectively. 
     Insurance loss and loss adjustment expenses have been reduced
     by recoveries recognized under reinsurance contracts of
     approximately $320,962,000 and $219,584,000 for the nine
     months ended September 30, 1996 and 1995, respectively.

5.   Bank Borrowings, Term Debt and Other Borrowings:

     On July 26, 1995, the Company amended its borrowing
     arrangements with its bank lenders providing a $75 million
     three year Revolving Credit Facility which, with the consent
     of the banks, can be renewed annually for three years and a
     $15 million Term Loan Facility with a maturity of the earlier
     of July 1996 or one year from the date of the borrowing.  The
     Term Loan Facility expired on July 26, 1996 as the Company had
     not drawn upon this facility as of that date.  The Company is
     currently negotiating with its banks to restructure the credit
     facility to incorporate the previous Term Loan Facility and
     Revolving Credit Facility into one credit facility.  Further,
     the Company selects its interest rate as either the prime rate
     or LIBOR plus a margin of .75% to 1.5% depending on the
     Company's debt to equity ratio.  Interest is payable
     quarterly.  At September 30, 1996, the Company had $69 million
     outstanding under this arrangement at a weighted average
     interest cost of 7.0%.

6.   Income Taxes:

     As of September 30, 1996, management believes it is more
     likely than not that the Company will realize a portion of 
     the deferred tax asset.  The valuation allowance at September
     30, 1996 primarily relates to capital loss items whose
     realization is uncertain.  The net deferred tax asset is as
     follows (in thousands):
<TABLE>
<CAPTION>



                                     September 30,   December 31,
                                         1996            1995
                                    --------------   ----------
<S>                                      <C>           <C>

Unpaid losses and loss adjustment
  expenses                               12,745        10,701
Unearned premiums                         7,583         6,004
Allowances for doubtful accounts          1,611           869
Other                                     2,894         1,443
Unrealized loss on fixed maturities
  available for sale                      2,756           699
Major Realty basis difference             8,007         7,950
                                        -------       -------
Deferred tax asset                       35,596        27,666
                                        -------       -------

Deferred policy acquisition costs       (11,036)       (8,605)
Other                                      (943)         (888)
Unrealized gain on marketable
  equity securities                        (658)         (710)
                                        -------       -------
Deferred tax liability                  (12,637)      (10,203)
                                        -------       -------
                                         22,959        17,463
Valuation allowance                      (8,117)       (8,060)
                                        -------       -------
Net deferred tax asset                  $14,842       $ 9,403
                                        =======       =======
</TABLE>

Income taxes computed by applying statutory rates to income before
income taxes are reconciled to the provision for income taxes set
forth in the consolidated financial statements as follows (in
thousands):

<TABLE>
<CAPTION>
                                              September 30,
                                           1996         1995
                                        ----------    ---------

<S>                                     <C>           <C>
Computed U.S. federal income taxes      $ 12,750      $  (990)
Nondeductible amortization of
  goodwill and other intangibles             426          404
Tax-exempt interest income                (1,008)        (752)
Dividends received deduction                (781)        (257)
Other                                        174          244 
                                        --------      -------
  Income taxes provided                 $ 11,561      $(1,351)
                                        ========      =======

</TABLE>

PART 1.
-------
ITEM 2.

               ACCEPTANCE INSURANCE COMPANIES INC.
              MANAGEMENT'S DISCUSSION AND ANALYSIS
        OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion and analysis of financial condition and
results of operations of the Company and its consolidated
subsidiaries is based upon the Company's interim consolidated
financial statements and the notes thereto included in this report.

RESULTS OF OPERATIONS

Forward-Looking Information

Except for the historical information contained in this Quarterly
Report of Form 10-Q, matters discussed herein may constitute
forward-looking information.  Such forward-looking information
reflects the Company's current best estimates regarding future
operations, but, since these are only estimates, actual results may
differ materially from such estimates.

A variety of events, most of which are outside the Company's
control, cannot be accurately predicted and may materially impact
estimates of future operations.  Important among such factors are
weather conditions, natural disasters, changes in state and federal
regulations, price competition impacting premium levels, changes in
tax laws, financial market performance, changes in court decisions
effecting coverages, and general economic conditions.

The Company's results are significantly impacted by its crop
business, particularly its MPCI line.  Results from the crop lines
are not generally known until the third and fourth quarters of the
year, after crops are harvested.  Crop results are particularly
dependent on events beyond the Company's control, notably weather
conditions during the crop growing season in the states where the
Company writes a substantial amount of its crop insurance, and,
with the introduction of the Company's new Crop Revenue Coverage,
the market price of grains on various commodity exchanges. 
Additionally, federal regulations governing aspects of crop
insurance are frequently modified, and any such changes may impact
crop insurance results.

Forward-looking information set forth herein does not take into
account any impact from any adverse weather conditions during the
final stages of the 1996 crop season, or the various other factors
noted above which may affect crop and non-crop operating results.

      Three months and nine months ended September 30, 1996
Compared to three months and nine months ended September 30, 1995

The Company's net income increased from a loss of $6.0 million and
$1.5 million respectively for the three months and nine months
ended September 30, 1995 to a profit of $17.3 million and $24.8
million respectively during the three and nine months ended
September 30, 1996.  The largest single factor effecting this
improvement was the charge for strengthening prior year loss
reserves of $17.5 million and $22.3 million respectively in the
three and nine months ended September 30, 1995, and the lack of a
similar charge during the 1996 periods.  Additionally, the net
income of the Company improved from 1995 to 1996 for the periods
being compared due to improvements in the MPCI program results
within the Crop Division and an increase in the Company's
investment income.  Offsetting these positive influences was a
decrease in the profitability of the Company's property and
casualty operations, excluding the aforementioned charge, and
higher interest expense.

During 1995, the Company noticed deviations from the loss
development patterns expected at December 31, 1994.  This adverse
development for prior year losses resulted in charges of $17.5
million during the three months ended September 30, 1995 and $22.3
million during the nine months ended September 30, 1995.  There
were no similar charges during the three and nine months ended
September 30, 1996.  Excluding these additions to prior year losses
in 1995, the Company's net income increased 221.5% from $5.4
million during the three months ended September 30, 1995 to $17.3
million during the same period in 1996, and 91.0% from $13.0
million during the first nine months of 1995 to $24.8 million
during the same period in 1996.  

The Company's net income during the three and nine months ended
September 30, 1996 was also positively impacted by improved results
within the Company's Crop Division.  The Company's crop insurance
operations, other than the federal MPCI program, improved from a
loss of $500,000 for the nine months ended September 30, 1995 to a
profit of $1.4 million during the nine months ended September 30,
1996.  While the crop hail results during the periods being
compared were quite similar, the Company's results were impaired
during 1995 by losses in the Company's named peril crop programs
resulting principally from an active storm season in California
during 1995.  

In the Company's MPCI business, results improved from an
underwriting profit of $10.1 million during the nine months ended
September 30, 1995 to $27.2 million during the same period in 1996. 
This increase in profitability was due to both an increase in the
size of the book of business as well as its underwriting
profitability.  During the first nine months of 1995, the Company's
MPCI gross premiums were approximately $182 million and the
Company's retained pool subject to profit sharing payments was
approximately $105 million.  For the first nine months of 1996,
gross MPCI premiums increased to approximately $248 million and the
Company's retained pool increased to approximately $160 million. 
In addition, during the first nine months of 1995, the Company
realized profit sharing income of approximately 8% on its retained
pool while during the first nine months of 1996, the Company
realized profit sharing income of approximately 18% on its retained
pool.  The 1995 season was effected by a wet spring causing delayed
planting as well as an early frost in September.  These factors
combined with changes in the federal MPCI regulations concerning
prevented planting coverage resulted in delayed reporting of much
of the Company's ultimate profit sharing income for the 1995 crop
year.  Subsequent to September 30, 1995, the Company reported
additional profit sharing income in the fourth quarter of 1995 as
well as the first and second quarters of 1996.  A similar delay is
not anticipated during the 1996 crop year, and therefore, the
Company does not expect to record  proportionally similar additions
to its profit sharing income in subsequent quarters.  However, the
harvest of grain is not yet completed and the Company continues to
adjust in excess of 16,000 open claims under its MPCI program, and
therefore, additional adjustments to MPCI profit sharing income are
anticipated in the fourth quarter of 1996.  

The Company's investment income increased 21.8% and 33.7%
respectively in the three and nine months ended September 30, 1996
from the same periods during 1995.  This increase in investment
income was attributable primarily to an increase in the average
size of the investment portfolio while the average yield on the
portfolio remained fairly constant at between 6.3% and 6.6% for the
periods being compared.  For the three months ended September 30,
1996, the average size of the portfolio increased to $414 million
as compared to an average portfolio size of $330 million during the
three months ended September 30, 1995.  The size of the investment
portfolio increased principally from retained earnings and positive
cash flow from operations.  

The Company's net realized capital gains also increased 3.7% and
97.3% respectively in the three and nine months ended September 30,
1996 as compared to the similar periods a year earlier.  These
increases in realized gains were attributable principally to gains
realized in the Company's equity portfolio with approximately 58%
and 68% of the gains attributable to the equity portfolio in the
three and nine months ended September 30, 1996 respectively.  

The improvements in the Company's net income between the three and
nine months ended September 30, 1996 and the similar periods in
1995 were offset to a small degree by an increase in the loss and
expense ratio of the Property and Casualty Division as well as
higher interest expense in 1996 versus 1995.  The loss and loss
adjustment expense ratio of the Company's property and casualty
operations, exclusive of the charge for increasing prior year loss
reserves, increased from 69.9% during the first nine months of 1995
to 71.8% for the same period in 1996 and the Company's expense
ratio for the same periods increased from 32.2% to 33.0%.  This
increase in the expense ratio was principally attributable to an
increase in the Company's expenses associated with development
costs for new programs in the Property and Casualty Program
Division during the 1996 year.  The increase in interest expense
was the result of additional borrowing under the Company's bank
credit facility with average borrowings increasing from $29 million
during the first nine months of 1995 to $69 million during the
first nine months of 1996.  The average interest rate under the
bank facility fell during the three and nine months ended September
30, 1996 to 7.0% and 7.2% respectively compared to 7.7% and 7.3%
during the three and nine months ended September 30, 1995.

Recent Statement of Financial Accounting Standards

In 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of.  This statement established accounting standards for
the recognition and measurement of the impairment of long-lived
assets and goodwill and is effective in 1996.  The adoption of this
statement had no material effect on the Company's financial
statements.

In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 (SFAS No. 123),
"Accounting for Stock-Based Compensation," which was effective for
the Company on January 1, 1996.  SFAS No. 123 requires expanded
disclosures of stock-based compensation arrangements with employees
and encourages (but does not require) compensation cost to be
measured based on the fair value of the equity instrument awarded. 
Companies are permitted, however, to continue to apply APB Opinion
No. 25, which recognizes compensation cost based on the intrinsic
value of the equity instruments awarded.  The Company will continue
to apply APB Opinion No. 25 to its stock based compensation awards
to employees and directors.

LIQUIDITY AND CAPITAL RESOURCES

The Company has included a discussion of the liquidity and capital
resources requirement of the Company and the Company's insurance
subsidiaries.

The Company - Parent Only

As an insurance holding company, the Company's assets consist
primarily of the capital stock of its subsidiaries, two surplus
notes issued by one of its insurance company subsidiaries and
investments held at the holding company level.  The Company's
primary sources of liquidity are dividends and other distributions
from subsidiaries, interest payments on the surplus notes, tax
sharing payments from its subsidiaries and net investment income
from, and proceeds from the sale of holding company investments. 
The Company's liquidity needs are primarily to service debt, pay
operating expenses and taxes and make investments in subsidiaries.

Dividends from the insurance subsidiaries of the Company are
regulated by the state regulatory authorities of the states in
which each subsidiary is domiciled.  The laws of such states
generally restrict dividends from insurance companies to parent
companies to certain statutorily approved limits.  As of September
30, 1996, the statutory limitation on dividends from insurance
company subsidiaries to the parent without further insurance
departmental approval was approximately $10.5 million.  In addition
to dividends from the insurance companies, the Company also may
receive distributions from its non-insurance subsidiaries which are
engaged in agency, premium finance and claim service operations.

The Company currently holds two surplus notes, each in the amount
of $20 million, issued by one of its insurance company
subsidiaries, bearing interest at the rate of 9% per annum, payable
quarterly.  Although repayment of all or part of the principal of
this surplus note requires prior insurance department approval, no
prior approval of interest payment is currently required.

The Company is currently party to a tax sharing agreement with its
subsidiaries, under which such subsidiaries pay the Company amounts
in general equal to the federal income tax that would be payable by
such subsidiaries on a stand-alone basis.

The Company is also a party to a Credit Agreement which provides a
three-year revolving credit facility in amounts not to exceed $75
million.  Until July 26, 1996, the Credit Facility also included a
one-year Term Loan Facility not to exceed $15 million.  This Term
Loan Facility expired on July 26, 1996, as the Company had not
drawn upon this facility as of that date.  Under the Revolving
Credit Facility, interest is payable quarterly at a rate selected
by the Company equal to either the prime rate or LIBOR plus a
margin which varies depending on the Company's debt to equity
ratio.  At September 30, 1996, the outstanding balance under the
facility was $69 million, bearing interest at 7.0%.  Borrowings
under the facility were used to provide capital for the insurance
companies and to repay other debt.  The Revolving Credit Facility
expires on July 26, 1998, and may be extended annually by
additional one-year periods with the consent of the lenders.  The
Company is currently negotiating with its banks to restructure the
Credit Facility to incorporate the previous Term Loan Facility and
current Revolving Credit Facility into one Credit Facility.

Insurance Companies

The principal liquidity needs of the Insurance Companies are to
fund losses and loss adjustment expense payments, to pay
underwriting expenses, including commissions to agents, to pay
interest under the surplus notes described above and to make tax
payments.  Available sources for these requirements are premiums
received and cash flows from investment activities.  Together,
these sources historically have been adequate to meet the described
requirements on a timely basis.  The Company monitors the cash
flows of its insurance company subsidiaries and attempts to
maintain sufficient cash to meet the current operating expenses,
and to structure its investment portfolio at a duration which
approximates the estimated cash requirements for the payment of
loss and loss adjustment expenses.

Changes in Financial Condition

The Company's stockholders' equity increased by approximately $22.1
million at September 30, 1996 as compared to December 31, 1995. 
The components of the increase were net income of $24.8 million and
$1.2 million in proceeds from the exercise of stock options and
employee stock purchases under the Employee Stock Purchase Plan
which were partially offset by an increase in the unrealized loss
of available for sale securities, net of tax, in the Company's
investment portfolio of $3.9 million.

Consolidated Cash Flow

Cash provided from operating activities was positive during both
the nine months ended September 30, 1995 and 1996, however,
positive cash flows during 1996 increased over 1995 by
approximately 77% or $28.8 million to $66.2 million during the nine
months ended September 30, 1996.  The major component of the
increase in positive cash flow was the Company's MPCI crop program
including profit sharing payments received from the federal
government and expense reimbursements from the federal government
and receipt of premium from farmers. During the 1996 year,
processing proceeded at a more rapid pace than in 1995 due to the
lack of prevented planting issues and regulation changes which were
present and delayed the process of premiums during 1995.

Cash flows for the Company's MPCI and crop hail businesses differ
in certain respects from cash flows associated with more
traditional property and casualty lines.  MPCI premiums are not
received from farmers until the covered crops are harvested, and
when received are promptly remitted by the Company in full to the
government.  Covered losses are paid by the Company during the
growing season as incurred, with such expenditures reimbursed by
the government within three business days.  Policy acquisition and
administration expenses are paid by the Company as incurred during
the year.  The Company periodically throughout the year receives a
payment in reimbursement of its policy administration expenses.

In the crop hail insurance business, premiums are generally not
received until after the harvest, while losses and other expenses
are paid throughout the year.

Inflation

The Company does not believe that inflation has had a material
impact on its financial condition or the results of operation.

<PAGE>
               ACCEPTANCE INSURANCE COMPANIES INC.

PART II.  OTHER INFORMATION
---------------------------

Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits
     
     See Exhibit Index.

(b)  No reports on Form 8-K were filed by the registrant during 
     the quarter for which this report is filed.<PAGE>
                           

                          SIGNATURES

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

                              ACCEPTANCE INSURANCE COMPANIES INC.

November 13, 1996             /s/  KENNETH C. COON
                              ---------------------------------
                              Kenneth C. Coon
                              Chief Executive Officer

November 13, 1996             /s/  GEORGIA M. MACE
                              ---------------------------------
                              Georgia M. Mace
                              Treasurer and Chief Accounting
                                Officer

<PAGE>
               ACCEPTANCE INSURANCE COMPANIES INC.
                  QUARTERLY REPORT ON FORM 10-Q
          FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996

                          EXHIBIT INDEX

NUMBER    EXHIBIT DESCRIPTION

3.1       Amendment to the Registrant's Restated Certificate
          of Incorporation.  Incorporated by reference to
          Exhibit 3.(i) to the Registrant's Quarterly Report
          on Form 10-Q for the period ended June 30, 1995.

3.2       Restated By-laws of Acceptance Insurance Companies
          Inc.  Incorporated by reference to Registrant's
          Annual Report on Form 10-K for the fiscal year
          ended December 31, 1993.

10.1      $90,000,000 Credit Agreement By and Among the
          Registrant, NBD Bank, N.A., First National Bank of
          Omaha, FirsTier Bank, N.A., Comerica Bank, First
          Interstate Bank of Arizona and NBD Bank, N.A., As
          Agent, dated as of July 26, 1995.  Incorporated by
          reference to Exhibit 10.1 to the Registrant's
          Quarterly Report on Form 10-Q for the period ended
          June 30, 1995.

10.2      Intercompany Federal Income Tax allocation
          Agreement between Acceptance Insurance Holdings
          Inc. and its subsidiaries and the Registrant dated
          April 12, 1990, and related agreements. 
          Incorporated by reference to Exhibit 10i to the
          Registrant's Annual Report on Form 10-K for the
          fiscal year ended August 31, 1990.

10.3      Warrants to purchase a total of 389,507 shares of
          common stock ($.10 par value) of the Registrant
          dated April 10, 1992, issued by the Registrant to
          the various purchasers of the Floating Rate Secured
          Subordinated Notes, due 1993, Series A and B. 
          Incorporated by reference to Exhibit 10.41 to the
          Registrant's Annual Report of Form 10-K for the
          fiscal year ended December 31, 1991.

10.4      Employment Agreement dated February 19, 1990
          between Acceptance Insurance Holdings Inc., the
          Registrant and Kenneth C. Coon.  Incorporated by
          reference to Exhibit 10.65 to the Registrant's
          Annual Report on Form 10-K for the fiscal year
          ended December 31, 1991.

10.5      Employment Agreement dated July 2, 1993 between the
          Registrant and John P. Nelson.  Incorporated by
          reference to Exhibit 10.6 to the Registrant's
          Quarterly Report on Form 10-Q for the period ended
          September 30, 1994.

10.6      Employment Agreement dated July 2, 1993 between the
          Registrant and Richard C. Gibson.  Incorporated by
          reference to Exhibit 10.6 to the Registrant's
          Quarterly Report on Form 10-Q for the period ended
          September 30, 1994.

11        Computation of Income per share.

27        Financial Data Schedule.

99.1      The Registrant's Amended 1992 Incentive Stock
          Option Plan.  Incorporated by reference to the
          Registrant's Proxy Statement filed on or about May
          2, 1995.

99.2      The Registrant's Amended Employee Stock Purchase
          Plan.  Incorporated by reference to the
          Registrant's Proxy Statement filed on or about
          April 29, 1994.

99.3      The Registrant's Employee Stock Ownership and Tax
          Deferred Savings Plan as merged, amended and
          restated effective October 1, 1990.  Incorporated
          by reference to Exhibit 10.4 to the Registrant's
          Quarterly Report on Form 10-Q for the quarter ended
          November 30, 1990.

99.4      First Amendment to the Registrant's Employee Stock
          Ownership and Tax Deferred Savings Plan. 
          Incorporated by reference to Exhibit 99.4 to the
          Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1993.

99.5      Second Amendment to the Registrant's Employee Stock
          Ownership and Tax Deferred Savings Plan. 
          Incorporated by reference to Exhibit 99.5 to the
          Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1993.

99.6      The Registrant's 1996 Incentive Stock Option Plan. 
          Incorporated by reference to the Registrant's Proxy
          Statement filed on or about May 3, 1996.