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

                       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, 1997

                                       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 5, 1997 was:

Class of Common Stock                      No. of Shares Outstanding
Common Stock, $.40 Par Value                       15,342,440

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


<PAGE>



                       ACCEPTANCE INSURANCE COMPANIES INC.

                                    FORM 10-Q

TABLE OF CONTENTS

PART I.     FINANCIAL INFORMATION

      Item 1.     Financial Statements:

            Consolidated Balance Sheets
            September 30, 1997 (unaudited) and December 31, 1996
            (audited)

            Consolidated Statements of Operations (unaudited)
            Three Months and Nine Months Ended September 30, 1997
            and 1996

            Consolidated Statements of Cash Flows (unaudited)
            Nine Months Ended September 30, 1997 and 1996

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

                                              September 30,      December 31,

                                                  1997              1996
                                              ------------       -----------   
(unaudited)                                     (audited)
<S>                                           <C>                <C>
ASSETS
Investments:
Fixed maturities available for 
  sale                                        $  329,459         $  268,004
Marketable equity securities -
  preferred stock                                 57,668             62,964
Marketable equity securities -
  common stock                                    30,843             20,873
Mortgage loans and other 
  investments                                     10,513             11,149
Real estate                                        3,332              3,342
Short-term investments, at cost,
  which approximates market                       74,303             39,594
                                              ----------         ----------      
                                                 506,118            405,926

Cash                                               3,171             10,697
Investment in Major
  Realty Corporation                               9,067              8,827
Receivables, net                                 259,652            133,363
Reinsurance recoverable on 
  unpaid loss and loss                        
  adjustment expenses                            191,813            185,421
Prepaid reinsurance premiums                      52,129             36,140
Property and equipment, net                       14,970              8,988
Deferred policy acquisition costs                 29,302             29,437
Excess of cost over acquired net 
  assets                                          35,938             35,783
Deferred income tax                               19,194             21,172
Other assets                                      10,005              8,626
                                              ----------         ----------
      Total assets                            $1,131,359          $ 884,380
                                              ==========         ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Losses and loss adjustment expenses           $  452,694          $432,173
Unearned premiums                                152,799           140,217
Amounts payable to reinsurers                    139,137            10,157
Accounts payable and accrued
  liabilities                                     47,501            25,013
Bank borrowings                                     --              69,000
Company-obligated mandatorily redeemable
  Preferred Securities of AICI Capital 
  Trust, holding solely Junior 
  Subordinated Debentures of 
  the Company                                     94,875             --
                                              ----------         ---------

      Total liabilities                          887,006           676,560

Contingencies                                      --                --

Stockholders' equity:
  Preferred stock, no par value,
  5,000,000 shares authorized, 
  none issued                                      --                --
Common stock, $.40 par value,
  40,000,000 shares authorized;
  15,341,028 and 15,256,507
  shares issued                                    6,137             6,103
Capital in excess of par value                   196,959           196,090
Unrealized gain (loss) on 
  available for sale securities,
  net of tax                                       6,330            (1,476)
Retained earnings                                 38,396            11,432 
                                              ----------         ---------
                                                 247,822           212,149
Less:
Treasury stock, at cost, 181,888
  and 38,680 shares                               (3,240)           (1,629)
Contingent stock, 20,396 
  and 240,000 shares                                (229)           (2,700)
                                              ----------         ---------
Total stockholders' equity                       244,353           207,820
                                              ----------         ---------
Total liabilities and 
  stockholders' equity                        $1,131,359          $884,380
                                              ==========         =========

<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, 1997 and 1996
                      (in thousands, except per share data)
                                   (unaudited)

                               Three Months                 Nine Months
                           --------------------         ------------------
                             1997           1996          1997        1996
                           ---------      --------      --------    --------

<S>                        <C>            <C>           <C>         <C>
Revenues:
Insurance premiums
  earned                   $112,742       $121,374      $256,748     265,774
Net investment             
  income                      7,308          6,588        20,619      19,580
Net realized capital
  gains                       2,042            808         5,373       3,575
                           --------       --------      --------    --------   
                            122,092        128,770       282,740     288,929
                           --------       --------      --------    --------
Costs and expenses:
Cost of revenues:
Insurance losses 
  and loss adjust-
  ment expenses              58,974         73,863       161,369     174,985
Insurance under-
  writing expenses           32,459         27,149        75,962      72,243

General and
  administrative
  expenses                      525            489         1,622       1,552
                           --------       --------      --------    --------
                             91,958        101,501       238,953     248,780
                           --------       --------      --------    --------
Operating profit             30,134         27,269        43,787      40,149 
                           --------       --------      --------    --------

Other income
  (expense):
Interest expense             (1,960)        (1,211)       (4,364)     (3,706)
Loss on investee                (54)           (44)         (171)       (161)
Other, net                       61             27            73         100
                           --------       --------      --------    --------
                             (1,953)        (1,228)       (4,462)     (3,767)
                           --------       --------      --------    --------
Income before
 income taxes                28,181         26,041        39,325      36,382 
Income tax
  expense (benefit):
Current                      13,618         13,038        14,587      14,891
Deferred                     (4,245)        (4,315)       (2,226)     (3,330)
                           ---------       --------     --------    ---------
Net income                 $ 18,808       $ 17,318      $ 26,964    $ 24,821 
                           ========       ========      ========    ========
Net income 
  per share:
Primary                    $   1.23       $   1.14      $   1.77    $   1.64
                           ========       ========      ========    ========
Fully diluted              $   1.22       $   1.12      $   1.74    $   1.61
                           ========       ========      ========    ========
<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 CASH FLOWS
              for the nine months ended September 30, 1997 and 1996
                                 (in thousands)
                                   (unaudited)

                                                     1997           1996
                                                   ---------     --------
<S>                                                <C>           <C>
Cash flows from operating 
  activities:
Net income                                         $  26,964     $  24,821
Net adjustment to reconcile net 
  income to net cash provided by 
  operating activities                                33,631        41,337
                                                   ---------     ---------
Net cash provided by operating 
  activities                                          60,595        66,158
                                                   ---------     ---------
Cash flows from investing 
  activities:
Proceeds from sales of investments
  available for sale                                 148,526       114,493
Proceeds from maturities of 
  investments                                          8,080        15,793
Proceeds from maturities of 
  investments available for sale                      66,756         6,302
Purchases of investments                             (20,004)      (20,377)
Purchases of investments available                 
  for sale                                          (263,918)     (183,245)
Purchases of property and equipment                   (8,226)       (3,931)
                                                   ---------     ---------
Net cash used for investing 
  activities                                         (68,786)      (70,965)
                                                   ---------     ---------
Cash flows from financing activities:
Proceeds from bank borrowings                         21,000        --
Proceeds from issuance of 
  common stock                                           903         1,178
Net proceeds from issuance of Company
  - obligated mandatorily redeemable 
  Preferred Securities                                90,994         --
Repayments of bank borrowings                        (90,000)        --
                                                   ---------     ---------
Net cash provided by financing
  activities                                          22,897         1,178
                                                   ---------     ---------
Net increase (decrease) in cash and 
  short-term investments                              14,706        (3,629)
Cash and short-term investments
  at beginning of period                              41,627        84,740
                                                   ---------     ---------
Cash and short-term investments
  at end of period                                 $  56,333     $  81,111
                                                   =========     =========
Supplemental disclosure of cash
  flow information:
Cash paid during the period for 
  interest                                         $   4,630     $   3,848
                                                   =========     =========
Cash paid during the period for 
  income taxes                                     $  (1,835)    $   3,250
                                                   =========     =========
<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,
      1997 and December 31, 1996, and the results of operations
      for the three months and nine months ended September 30,
      1997 and 1996 and cash flows for the nine months ended
      September 30, 1997 and 1996.

      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, 1997 approximately $21,141,000 of short-term
      investments had a maturity date at acquisition of greater
      than three months.

      Recent Statements of Financial Accounting Standards

      In October 1995, the Financial Accounting Standards Board
      ("FASB") issued Statement of Financial Accounting Standards
      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 continued to apply APB No. 25 in its
      accounting for stock-based compensation awards to employees
      and directors, while expanding its disclosures as required
      by SFAS No. 123.

      In June 1997, FASB issued SFAS No. 130, "Reporting
      Comprehensive Income."  SFAS No. 130 establishes standards
      for the reporting and display of comprehensive income.  The
      purpose of reporting comprehensive income is to present a
      measure of all changes in shareholders' equity that result
      from recognized transactions and other economic events of
      the period, other than transactions with owners in their
      capacity as owners.  SFAS No. 130 is effective for financial
      statements issued for periods beginning after December 15,
      1997.  Adoption of SFAS No. 130 will result in additional
      disclosures in the Company's financial statements but will
      not impact the Company's reported net income or net income
      per share.

      In June 1997, the FASB issued SFAS No. 131, "Disclosures
      About Segments of an Enterprise and Related Information." 
      SFAS No. 131 specifies revised guidelines for determining an
      entity's operating segments and the type and level of
      financial information to be disclosed.  SFAS No. 131 is
      effective for fiscal years beginning after December 15,
      1997.  The Company is in the process of evaluating the
      impact of this statement to its financial statements
      disclosures.

      Reclassifications

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

                         
2.    Investments:

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

<TABLE>
<CAPTION>

                                   Gross      Gross   Estimated
                       Amortized Unrealized Unrealized   Fair
                         Cost      Gains     Losses     Value
                       --------- ---------- ---------- -------

<S>                    <C>       <C>       <C>       <C> 
September 30, 1997:
Fixed maturities
  available for sale:
U.S. Treasury and
  government 
  securities                $111,066     $   276     $    95     $111,247
States, municipalities
  and political sub-
  divisions                  128,111       3,573         152      131,532
Mortgage-backed 
  securities                  53,072         146       3,854       49,364
Other debt securities         36,954         754         392       37,316
                            --------     -------     -------     --------
                            $329,203     $ 4,749     $ 4,493     $329,459
                            ========     =======     =======     ========
Marketable equity
  securities - 
  preferred stock           $ 55,735     $ 2,150     $   217     $ 57,668
                            ========     =======     =======     ========
Marketable equity
  securities -
  common stock              $ 23,292     $ 8,292     $   741     $ 30,843
                            ========     =======     =======     ========

December 31, 1996:
Fixed maturities 
  available for sale:       
U.S. Treasury and 
  government 
  securities                $ 86,359     $   154     $   260     $ 86,253
States, municipalities
  and political sub-
  divisions                   93,293       1,620         306       94,607
Mortgage-backed 
  securities                  60,138         205       7,508       52,835
Other debt securities         34,581         685         957       34,309
                            --------     -------     -------     --------
                            $274,371     $ 2,664     $ 9,031     $268,004
                            ========     =======     =======     ========
Marketable equity
  securities -
  preferred stock           $ 62,628     $   932     $   596     $ 62,964
                            ========     =======     =======     ========
Marketable equity
  securities -
  common stock              $ 17,112     $ 4,641     $   880     $ 20,873
                            ========     =======     =======     ========
</TABLE>

3.    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, 1997 and 1996 are as follows (in
      thousands):
<TABLE>
<CAPTION>
                                   Three Months             Nine Months
                                -------------------      -----------------  
                                  1997        1996         1997        1996
                                --------    ---------    --------    -------
<S>                             <C>         <C>          <C>         <C>

Direct premiums written         $229,906    $247,371     $488,794    $496,567
Assumed premiums written          45,291      33,448       57,575      53,032
Ceded premiums written          (165,048)   (158,652)    (293,030)   (261,274)
                                --------    --------     --------    --------
Net premiums written            $110,149    $122,167     $253,339    $288,325
                                ========    ========     ========    ========

Direct premiums earned          $228,544    $245,957     $478,380    $478,143
Assumed premiums earned           45,399      33,381       55,408      51,704
Ceded premiums earned           (161,201)   (157,964)    (277,040)   (264,073)
                                ========    ========     ========    ========
Net premiums earned             $112,742    $121,374     $256,748    $265,774
                                ========    ========     ========    ========

</TABLE>

      Insurance loss and loss adjustment expenses have been
      reduced by recoveries recognized under reinsurance contracts
      of approximately $187,309,000 and $195,625,000 for the three
      months ended September 30, 1997 and 1996, respectively. 
      Insurance loss and loss adjustment expenses have been
      reduced by recoveries recognized under reinsurance contracts
      of approximately $277,040,000 and $320,962,000 for the nine
      months ended September 30, 1997 and 1996, respectively.

4.    Bank Borrowings, Term Debt and Other Borrowings:

      On June 6, 1997, the Company amended its borrowing
      arrangements with its bank lenders providing a $100 million
      five year Revolving Credit Facility.  Further the Company
      selects its interest rate as either the prime rate or LIBOR
      plus a margin of .50% to 1.25% depending on the Company's
      debt to equity ratio.  Interest is payable quarterly.  

      On August 4, 1997, the Company used the net proceeds of
      $79.6 million from the issuance of Junior Subordinated
      Debentures to repay a portion of the Company's outstanding
      indebtedness under the Revolving Credit Facility.  As of
      that date, the outstanding indebtedness under the Revolving
      Credit Facility was reduced from $90.0 million to $10.4
      million. The net proceeds received on August 18, 1997 from
      the additional issuance of Junior Subordinated Debentures in
      connection with the underwriters exercise of the Option was
      primarily used to pay down the remaining $10.4 million in
      outstanding indebtedness under the Revolving Credit
      Facility.  As a result of the issuance of the Junior
      Subordinated Debentures, the Revolving Credit Facility was
      reduced from $100 million to approximately $63.6 million.
      (See Note 7).  At September 30, 1997, the Company had no
      outstanding borrowings under the Revolving Credit Facility.
 
5.    Income Taxes:

      As of September 30, 1997, 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, 1997 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,
                                                   1997            1996
                                              --------------   -------------
<S>                                           <C>               <C>
Unpaid losses and loss adjustment
  expenses                                     13,334            13,322
Unearned premiums                               7,045             7,283
Allowances for doubtful accounts                1,632             1,213
Other                                           4,923             2,689
Unrealized loss on fixed maturities
  available for sale                             --               2,229
Major Realty basis difference                   8,377             8,317
                                              -------           -------
      Deferred tax asset                       35,311            35,053
                                              -------           -------

Deferred policy acquisition costs             (10,256)          (10,303)
Other                                          (1,274)           (1,071)
Unrealized gain on fixed maturities
  available for sale                              (89)             --
Unrealized gain on marketable
  equity securities                            (3,319)           (1,434)
                                              -------           -------
     Deferred tax liability                   (14,938)          (12,808)
                                              -------           -------
                                               20,373            22,245
Valuation allowance                            (1,179)           (1,073)
                                              -------           -------
     Net deferred tax asset                   $19,194           $21,172
                                              =======           =======
</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>
                                                      Nine Months Ended
                                                        September 30,
                                                    1997             1996
                                                 ----------        ---------

<S>                                              <C>               <C>
Computed U.S. federal income taxes               $ 13,782          $ 12,750
Nondeductible amortization of
  goodwill and other intangibles                      404               426
Tax-exempt interest income                         (1,403)           (1,008)
Dividends received deduction                         (952)             (781)
Other                                                 530               174 
                                                 --------          --------
  Income taxes provided                          $ 12,361          $ 11,561 
                                                 ========          ========

</TABLE>


6.   Per Share Data:

      Primary and fully diluted earnings per share are based on
      the weighted average shares outstanding of approximately
      15.3 million and 15.4 million, respectively, for the three
      months ended September 30, 1997 and approximately 15.2
      million and 15.5 million, respectively, for the three months
      ended September 30, 1996.  Primary and fully diluted
      earnings per share are based on the weighted average shares
      outstanding of approximately 15.3 million and 15.5 million,
      respectively, for the nine months ended September 30, 1997
      and approximately 15.1 million and 15.4 million,
      respectively, for the nine months ended September 30, 1996.

      In March 1997, the Financial Accounting Standards Board
      issued Statement of Financial Accounting Standards No. 128
      (SFAS No. 128), "Earnings Per Share".  This statement
      establishes accounting standards for the presentation of
      basic and diluted earnings per share.  This statement is
      effective for periods ending after December 15, 1997.  While
      early adoption of this statement is prohibited, disclosure
      of pro forma data prior to adoption is permitted.  For the
      three months and nine months ended September 30, 1997 and
      1996 pro forma earnings per share, based upon applying SFAS
      No. 128 are as follows:

<TABLE>
<CAPTION>
                                 Three Months        Nine Months
                                1997      1996      1997      1996
                               ------    ------    ------    ------
                               
<S>                            <C>       <C>       <C>       <C>
      Pro forma earnings
       per share:     
            Basic              $ 1.25    $ 1.16    $ 1.79    $ 1.66
            Diluted            $ 1.23    $ 1.13    $ 1.76    $ 1.64

</TABLE> 


7.    Company - obligated mandatorily redeemable Preferred
      Securities of AICI Capital Trust, holding solely Junior
      Subordinated Debentures of the Company:

      On August 4, 1997, AICI Capital Trust, a Delaware business
      trust organized by the Company (the "Issuer Trust") issued
      3.3 million shares or $82.5 million aggregate liquidation
      amount of its 9% Preferred Securities (liquidation amount
      $25 per Preferred Security). In addition, the Company 
      granted the underwriters an option, exercisable within 30
      days of July 29, 1997, (the "Option") to purchase up to an
      additional 495,000 shares or $12.375 million aggregate
      liquidation amount of Preferred Securities on the same terms
      as the Preferred Securities previously issued, solely to
      cover over-allotments, if any.  On August 18, 1997, the
      Company issued the additional 495,000 shares or $12.375
      million aggregate liquidation amount of the Issuer Trust's
      9% Preferred Securities.                    

      The Company owns all of the common securities (the "Common
      Securities") of the Issuer Trust.  The Preferred Securities
      represent preferred undivided beneficial interests in the
      Issuer Trust's assets.  The assets of the Issuer Trust
      consist solely of the Company's 9% Junior Subordinated
      Debentures due 2027 which were issued August 4, 1997 and
      August 18, 1997 in an amount equal to the total of the
      Preferred Securities and the Common Securities.  The Company
      primarily used the net proceeds in the amount of $91.0
      million from the sale of the Junior Subordinated Debentures
      to pay down the $90.0 million of borrowings under its
      Revolving Credit Facility.  

      Distributions on the Preferred Securities and Junior
      Subordinate Debentures are cumulative, accrue from the date
      of issuance and are payable quarterly in arrears.  The
      Junior Subordinated Debentures are subordinate and junior in
      right of payment to all senior indebtedness of the Company
      and are subject to certain events of default and redemption
      provisions, all as described in the Junior Debenture
      Indenture.<PAGE>
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 on 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 affecting 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.  Additionally, federal regulations governing aspects
of crop insurance are frequently modified, and any such changes
may impact crop insurance results.

              Three months and nine months ended September 30, 1997
        Compared to three months and nine months ended September 30, 1996

The Company's net income for the three months and nine months
ended September 30, 1997 increased by 8.6% as compared to the
same periods in 1996.  The first nine months of 1997 were
positively impacted by an improvement in the profitability of the
Property and Casualty operations of the Company, an increase in
the Company's net investment income and net realized capital
gains, and an increase in the Company's profit sharing income
under its Multi-Peril Crop Insurance (MPCI) program. These
positive factors were partially offset by lower net premiums
earned, an increase in the net expenses in the Company's MPCI
crop program, and an increase in interest expense.  Reduced
income realized in the Company's Crop Division during the first
three months of 1997 as compared to the first three months of
1996 also negatively impacted the Company's net income.

The underwriting loss and expense ratios of the Company's
Property and Casualty operations improved during the three and
nine month periods ended September 30, 1997 from 106.4% and
104.7% in the three and nine months ended September 30, 1996 to
104.5% and 102.9% during the same periods in 1997.  This
improvement in operating margin was offset by somewhat lower net
premiums earned.  Net premiums earned declined 7.1% and 3.4%
during the three and nine months ended September 30, 1997 from
the same periods in 1996.  This decrease was attributable to both
a decrease in direct premiums written and an increase in premiums
ceded to reinsurers.   The decrease in direct premiums written
was a result of the Company's curtailment of premium writings in
areas not meeting the Company's profitability goals, and the
increase in cessions to reinsurers resulted from a change in the
mix of the Company's business as well as an increase in cessions
to reinsurers in lines where the Company was seeking to improve
its underwriting margins.  Additionally, the Company increased
its cessions to reinsurers in its crop hail business in order to
lessen the volatility of results in this line of business.

The Company's net income was also positively impacted during the
three and nine months ended September 30, 1997 by an increase in
the Company's net investment income and net realized capital
gains.  The Company's net investment income increased 10.9% and
5.3% respectively in the three and nine months ended September
30, 1997 as compared to the same periods in 1996, while the
Company's net realized capital gains increased 152.7% and 50.3%
in the three and nine months ended September 30, 1997 as compared
to the same periods a year earlier.  The increase in the
Company's net investment income resulted from an increase in the
average size of the Company's portfolio from $395.7 million
during the nine months ended September 30, 1996 to $448.0 million
during the nine months ended September 30, 1997.  This increase
in the size of the portfolio was offset by a decrease in the
annualized investment yield of the portfolio from 6.4% and 6.6%
during the three and nine months ended September 30, 1996 to 6.1%
during the  same periods in 1997.  This decrease in annual
investment yield was principally a result of an increase in the
average amount of tax advantaged securities within the Company's
portfolio during the first nine months of 1997 as demonstrated by
a relatively stable tax-effected return of 4.9% during the nine
months ended September 30, 1996 and 4.7% during the nine months
ended September 30, 1997.

During the first quarter of 1996, the Company's operating income
benefited from a $2.8 million  profit in the Company's Crop
Division.  The principal component of this $2.8 million was the
recording of an additional $3.8 million in profit sharing under
the Company's MPCI program.  The Company's estimate of its profit
sharing under the MPCI program at December 31, 1995 was affected
by a volatile crop growing season during which many of the rules
pertaining to preventive planting payments were changed and a
combination of unusual weather conditions manifested themselves
in an unusually late harvest.  As claims were closed during the
first quarter of 1996 and the final preventive planting rules
applied to these losses, the Company was able to earn additional
profit sharing.  The 1996 growing year did not experience this
same degree of volatility, and the harvest was not delayed by
unusual weather conditions.  Consequently, the MPCI profit
sharing income recorded at December 31, 1996 more accurately
estimated actual results than had the profit sharing recorded at
December 31, 1995.  During the first quarter of 1997, the Company
experienced operating income of approximately $900,000 from the
operations of its Crop Division. The Company believes that the
crop results for the first quarter of 1997 were more typical of a
normal year than those experienced in the first quarter of 1996. 


During the third quarter of 1997, the Company recognized MPCI
profit sharing income of approximately $38.0 million based upon a
retained MPCI pool of $155.3 million and a profit sharing
percentage of 24.5%.  During the third quarter of 1996, the
Company recognized MPCI profit sharing income of $28.8 million
based upon a retained MPCI pool of $160 million and a profit
sharing percentage of 18%.  The size of the Company's retained
pool decreased slightly from the 1996 year to the 1997 year
despite a slight increase in the overall MPCI premium from $248
million in 1996 to $252 million in 1997.  This was a result of
the Company's strategy to reduce its retentions in the upper
Midwest in order to protect the Company from the adverse effects
of spring flooding. The increase in the Company's MPCI profit
sharing income was offset by an increase in the Company's net
operating expenses under the MPCI program.  This increase in net
expenses was due to a decrease in expense reimbursement from the
federal government under the MPCI program from 31% for both MPCI
and Crop Revenue Coverage (CRC) policies in 1996 to 29% and 25%
respectively for MPCI and CRC policies in 1997.  This resulted in
an approximately $7.2 million decrease in expense reimbursements
from 1996 to 1997.  The Company was unable to pass along any of
this expense reduction to its producing agents due to the
competitive environment for commissions paid to agents for MPCI
business during 1997.

The Company's interest expense during the three and nine months
ended September 30, 1997 increased by 61.8% and 17.8%
respectively from the same periods a year earlier.  This increase
in interest expense resulted from both an increase in the
Company's average borrowings and the average interest rate paid
by the Company.  During the three and nine months ended September
30, 1997, the Company's average borrowings were $92.8 million and
$77.1 million respectively while the Company's average borrowings
were $69 million for both the three and nine month periods ended
September 30, 1996.  The increased borrowings during 1997 were
used to add statutory surplus to the Company's insurance company
subsidiaries.  The increase in the Company's average interest
rate paid resulted from the issuance of $94.875 million in Trust
Preferred Securities and the retirement of the Company's
outstanding bank debt during the third quarter of 1997 (see
discussion under Liquidity and Capital Resources).

Recent Statement of Financial Accounting Standards

In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards 123,
(SFAS No. 123), "Accounting for Stock-Based Compensation," which
is 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 continued to apply APB No. 25
in its accounting for stock-based compensation awards to
employees and directors, while expanding its disclosures as
required by SFAS No. 123.

In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income."  SFAS No. 130 establishes standards for
the reporting and display of comprehensive income.  The purpose
of reporting comprehensive income is to present a measure of all
changes in shareholders' equity that result from recognized
transactions and other economic events of the period, other than
transactions with owners in their capacity as owners.  SFAS No.
130 is effective for financial statements issued for periods
beginning after December 15, 1997.  Adoption of SFAS No. 130 will
result in additional disclosures in the Company's financial
statements but will not impact the Company's reported net income
or net income per share.

In June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information."  SFAS No. 131
specifies revised guidelines for determining an entity's
operating segments and the type and level of financial
information to be disclosed.  SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997.  The Company is
in the process of evaluating the impact of this statement to its
financial statements disclosures.

LIQUIDITY AND CAPITAL RESOURCES

The Company has included a discussion of the liquidity and
capital resources requirements 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, three surplus
notes issued by 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, 1997, the statutory limitation on dividends from
insurance company subsidiaries to the parent without further
insurance departmental approval was approximately $10.4 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 three surplus notes, each in the
amount of $20.0 million, issued by two of its insurance company
subsidiaries, bearing interest at the rate of 9% per annum,
payable semi-annually and quarterly.  Although repayment of all
or part of the principal of this surplus note requires insurance
department approval, no prior approval of interest payment is
currently required.

The Company is currently a 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.

On August 4, 1997, AICI Capital Trust, a Delaware business trust
organized by the Company (the "Issuer Trust") issued 3.3 million
shares or $82.5 million aggregate liquidation amount of its 9%
Preferred Securities (liquidation amount $25 per Preferred
Security).  In addition, the Company granted the underwriters an
option, exercisable within 30 days of July 29, 1997, (the
"Option") to purchase up to an additional 495,000 shares or
$12.375 million aggregate liquidation amount of Preferred
Securities on the same terms as the Preferred Securities
previously issued, solely to cover over-allotments, if any.  On
August 18, 1997, the Company issued the additional 495,000 shares
or $12.375 million aggregate liquidation amount of the Issuer
Trust's 9% Preferred Securities.

The Company owns all of the common securities (the "Common
Securities") of the Issuer Trust.  The Preferred Securities
represent preferred undivided beneficial interests in the Issuer
Trust's assets.  The assets of the Issuer Trust consist solely of
the Company's 9% Junior Subordinated Debentures due 2027 which
were issued August 4, 1997 and August 18, 1997 in an amount equal
to the total of the Preferred Securities and the Common
Securities.  The Company primarily used the net proceeds in the
amount of $91.0 million from the sale of the Junior Subordinated
Debentures to pay down $90.0 million of borrowings under its
Revolving Credit Facility.  As a result of the issuance of the
Junior Subordinated Debentures, the Revolving Credit Facility was
reduced from $100 million to approximately $63.6 million.  At
September 30, 1997, the Company had no outstanding borrowings
under the Revolving Credit Facility.

Distributions on the Preferred Securities and Junior Subordinated
Debentures are cumulative, accrue from the date of issuance and
are payable quarterly in arrears.  The Junior Subordinated
Debentures are subordinate and junior in right of payment to all
senior indebtedness of the Company and are subject to certain
events of default and redemption provisions, all as described in
the Junior Debenture Indenture.

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 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
$36.5 million at September 30, 1997 as compared to December 31,
1996.  The principal components of this increase were net income
of $27.0 million during the first nine months of 1997 and an
increase in the value of the Company's investment portfolio
causing the unrealized gain (loss) on available for sale
securities net of tax to improve from a loss of $1.5 million to a
gain of $6.3 million.  This change in the unrealized gain (loss)
on available for sale securities was comprised of a improvement
in the unrealized gain (loss) in the Company's fixed maturity
portfolio of $4.3 million net of tax and an increase of $3.5
million net of tax in the unrealized gain in the Company's equity
portfolio.

Consolidated Cash Flow

Cash provided by operating activities was positive during both
the nine months ended September 30, 1996 and 1997, with $66.2
million and $60.6 million of positive cash flow during the two
periods respectively.  The major component of this positive cash
flow during both periods was the Company's MPCI crop program
including profit sharing payments received from the federal
government, expense reimbursements from the federal government
and receipt of premium from farmers.  The decrease in cash flow
from the nine months ended September 30, 1996 to the same period
in 1997 was a result of a decrease in the Company's gross written
premium as well as an increase in the premium ceded to reinsurers
by the Company.

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 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>
 

                            SIGNATURE

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

                                     ACCEPTANCE INSURANCE COMPANIES INC.

November 14, 1997                    /s/   KENNETH C. COON
                                     ---------------------------------
                                     Kenneth C. Coon
                                     Chief Executive Officer

November 14, 1997                    /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, 1997

                                  EXHIBIT INDEX

NUMBER      EXHIBIT DESCRIPTION

3.1         Registrant's Restated Certificate of
            Incorporation, incorporated by reference to
            Registrant's Annual Report of Form 10-K for the
            period ending December 31, 1993, and Amendment
            thereto, incorporated by reference to 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.

4.3         Form of Preferred Security (included in Exhibit 4.8). 
            Incorporated by reference to Form S-3 Registration
            No.33-28749, filed July 29, 1997.

4.4         Form of Guarantee Agreement Between Acceptance
            Insurance Companies Inc. and Bankers Trust Company. 
            Incorporated by reference to Form S-3 Registration
            No.33-28749, filed July 29, 1997.

4.5         Form of Junior Subordinated Indentures Between
            Acceptance Insurance Companies Inc. and Bankers Trust
            Company.  Incorporated by reference to Form S-3
            Registration No. 33-28749, filed July 29, 1997.

4.6         Certification of Trust of AICI Capital Trust.
            Incorporated by reference to Form S-3 Registration No.
            33-28749, filed July 29, 1997.

4.7         Trust Agreement between Acceptance Insurance Companies 
            Inc. and Bankers Trust (Delaware).  Incorporated by
            reference to Form S-3 Registration No. 33-28749, filed
            July 29, 1997.

4.8         Form of Amended and Restated Trust Agreement among
            Acceptance Insurance Companies Inc., Bankers Trust
            Company and Bankers Trust (Delaware).  Incorporated by
            reference to Form S-3 Registration No.33.28749, filed
            July 29, 1997.

4.9         Form of Stock Certificate representing shares of
            Acceptance Insurance Companies Inc., Common Stock, $.40
            par value.  Incorporated by reference to Exhibit 4.1 to
            Registrant's Annual Report on Form 10-K for the fiscal
            year ended December 31, 1992.

10.1        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.

10.2        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.

10.3        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.

10.4        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.

10.5        $100,000,000 Amended and Restated Credit Agreement by
            and Among the Registrant, The First National Bank of
            Chicago, Comerica Bank, First National Bank of Omaha,
            First Bank, N.A., Wells Fargo Bank, National
            Association and Mercantile Bank, N.A. and The First
            National Bank of Chicago, As Agent, and Comerica Bank,
            First National Bank of Omaha, and First Bank, N.A., As
            Co-Agents, dated as of June 6, 1997.

11          Computation of Income per share.

27          Financial Data Schedule.

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

99.2        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.

99.3        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.

99.4        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.

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