============================================================
                                         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 March 31, 1998

                                                         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 of 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 May 11, 1998 was:

         Class of Common Stock                     No. of Shares Outstanding
  Common Stock, $.40 Par Value                        15,451,149


================================================================= 
                                                                  
                                                                  
                                                                  
                                         ACCEPTANCE INSURANCE COMPANIES INC.


                                                      FORM 10-Q

TABLE OF CONTENTS

PART I.           FINANCIAL INFORMATION

         Item 1.           Financial Statements:

                  Consolidated Balance Sheets March 31, 1998  (unaudited)
                  and December 31, 1997 (audited)

                  Consolidated Statements of Operations (unaudited) Three
                  Months Ended March 31, 1998 and 1997  

                  Consolidated Statements of Cash Flows (unaudited) Three 
                  Months Ended March 31, 1998 and 1997

                  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)
                                                                 March 31,                    December 31,
                                                                   1998                          1997      
                                                                 ---------                    ------------
                                                                 (unaudited)                    (audited)
<S>                                                              <C>                          <C>
ASSETS
Investments:
Fixed maturities available-for-sale                              $ 387,881                    $ 322,799
Marketable equity securities - 
  preferred stock                                                   48,427                       53,309
Marketable equity securities - 
  common stock                                                      34,769                       30,847       
Mortgage loans and other investments                                10,068                       10,248
Real estate                                                          3,325                        3,329
Short-term investments, at cost, 
  which approximates market                                         29,686                       32,185
                                                                 ---------                    ---------       
                                                                   514,156                      452,717

Cash                                                                 7,143                        8,048
Investment in Major Realty 
  Corporation                                                        5,422                        9,183
Receivables, net                                                   142,300                      180,793
Reinsurance recoverable on unpaid 
  loss and loss adjustment expenses                                143,920                      165,547
Prepaid reinsurance premiums                                        52,664                       53,208
Property and equipment, net                                         15,550                       15,588
Deferred policy acquisition costs                                   32,235                       30,328
Excess of cost over acquired net 
  assets                                                            35,300                       35,567
Deferred income tax                                                 14,335                       15,842
Other assets                                                        17,532                       12,632
                                                                 ---------                    ---------
       Total assets                                              $ 980,557                    $ 979,453
                                                                 =========                    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Losses and loss adjustment expenses                              $ 409,765                    $ 428,653
Unearned premiums                                                  163,179                      157,134
Amounts payable to reinsurers                                       29,241                       17,955
Accounts payable and accrued 
  liabilities                                                       20,985                       27,166
Company - obligated mandatorily 
  redeemable Preferred Securities of
  AICI  Capital Trust, holding 
  solely Junior Subordinated Debentures
  of the Company                                                    94,875                       94,875       
                                                                 ---------                    ---------
 Total liabilities                                                 718,045                      725,783

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, 
  15,448,654 and 15,421,247 
  shares issued                                                      6,180                        6,168
Capital in excess of par value                                     198,336                      198,080       
Unrealized gain on available- 
  for-sale securities, net of tax                                    9,302                        6,885
Retained earnings                                                   52,902                       46,745
                                                                 ---------                    ---------
                                                                   266,720                      257,878
Less: 
Treasury stock, at cost, 209,519 
  shares                                                            (3,979)                      (3,979)
Contingent stock, 20,396 shares                                     (  229)                      (  229)
                                                                 ---------                    ---------
Total stockholders' equity                                         262,512                      253,670
                                                                 ---------                    ---------
Total liabilities and 
  stockholders' equity                                           $ 980,557                    $ 979,453
                                                                 =========                    =========
<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 ended March 31, 1998 and 1997 
                                        (in thousands, except per share data)
                                                     (unaudited)

                                                                   1998                         1997    
                                                                 --------                     --------
<S>                                                              <C>                          <C>
Revenues:
Insurance premiums earned                                        $ 69,003                     $ 71,062      
Net investment income                                               6,920                        6,520
Net realized capital gains                                          2,841                        1,311
                                                                 --------                     --------
                                                                   78,764                       78,893

Costs and expenses:
Costs of revenues:
Insurance losses and loss 
  adjustment expenses                                              46,301                       49,807      
Insurance underwriting expenses                                    21,200                       22,044      
General and administrative expenses                                   656                          524
                                                                 --------                     --------
                                                                   68,157                       72,375
                                                                 --------                     --------
Operating profit                                                   10,607                        6,518
                                                                 --------                     --------

Other income (expense):
Interest expense                                                   (2,165)                      (1,157)
Share of net loss of investee                                        (704)                         (54) 
Other, net                                                             34                           16
                                                                 --------                     --------
                                                                   (2,835)                      (1,195)
                                                                 --------                     --------
Income before income taxes                                          7,772                        5,323
Income tax expense (benefit):
Current                                                             1,409                       (1,421)
Deferred                                                              205                        2,830
                                                                 --------                     --------
Net income                                                       $  6,158                     $  3,914
                                                                 ========                     ========
Net income per share:
Basic                                                            $    .40                     $    .26
                                                                 ========                     ========
Diluted                                                          $    .40                     $    .26
                                                                 ========                     ========
<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 three months ended March 31, 1998 and 1997
                                                   (in thousands)
                                                     (unaudited)

                                                                   1998                         1997
                                                                 --------                     --------
<S>                                                              <C>                          <C>
Cash flows from operating activities:
Net income                                                       $  6,158                     $  3,914
Net adjustment to reconcile net 
  income to net cash provided by
  operating activities                                             48,457                       21,250
                                                                 --------                     --------
Net cash provided by operating 
  activities                                                       54,615                       25,164
                                                                 --------                     --------
Cash flows from investing activities:
Proceeds from sales of investments 
  available-for-sale                                               31,308                       11,877
Proceeds from maturities of 
  investments                                                       1,223                        2,712
Proceeds from maturities of 
  investments available-for-sale                                   19,138                       17,096
Purchases of investments                                             (985)                      (1,819)
Purchases of investments available- 
  for-sale                                                       (107,804)                     (64,519)
Purchases of property and equipment                                (1,075)                      (1,773)
                                                                 --------                     --------
Net cash used for investing 
  activities                                                      (58,195)                     (36,426)
                                                                 --------                     --------
Cash flows from financing activities:
Proceeds from issuance of common 
  stock                                                               268                          175
                                                                 --------                     --------
Net cash provided by financing 
  activities                                                          268                          175
                                                                 --------                     --------
Net increase (decrease) in cash and 
  short-term investments                                           (3,312)                     (11,087)
Cash and short-term investments at 
  beginning of period                                              38,316                       41,627
                                                                 --------                     --------
Cash and short-term investments at 
  end of period                                                  $ 35,004                     $ 30,540
                                                                 ========                     ========
Supplemental disclosure of cash 
  flow information:
Cash paid during the period for 
  interest                                                       $  2,135                     $  1,134
                                                                 ========                     ========
Cash paid during the period for 
  income taxes                                                   $      4                     $      0
                                                                 ========                     ========

<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 March 31,
         1998 and December 31, 1997, and the results of operations
         for the three months ended March 31, 1998 and 1997 and cash
         flows for the three months ended March 31, 1998 and 1997.

         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 March
         31, 1998 approximately $1,825,000 of short-term investments
         had a maturity date at acquisition of greater than three
         months.
 

         Recent Statements of Financial Accounting Standards

         
         In February 1997, the Financial Accounting Standards Board
         (FASB) 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.  In
         addition, SFAS No. 128 requires a reconciliation of the
         numerator and denominator of the basic and diluted EPS
         computations. The Company adopted SFAS No. 128 in 1997 and
         accordingly, earnings per share has been restated for all
         periods presented.

         In February 1997, the FASB issued SFAS No. 129," Disclosure
         of Information about Capital Structure".  This statement
         establishes standards for disclosing information about an
         entity's capital structure.  The Company adopted SFAS No.
         129 in 1997.  SFAS No. 129 contains no change in disclosure
         requirements for entities that were previously subject to
         the requirements of Accounting Principles Board Opinions
         Nos. 10 and 15 and SFAS No. 47 and as such the adoption of
         SFAS No. 129 did not have any effect on the Company's
         reporting.

         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.  See Note 8.

         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.  Adoption of SFAS No. 131 may 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.

         Reclassifications

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


2.       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> 
March 31, 1998:
Fixed maturities 
 available-for-sale:
U.S. Treasury and 
 government 
 securities                              $138,642         $    532          $     48          $139,126
States, municipalities 
 and political
 subdivisions                             142,380            3,783               182           145,981
Mortgage-backed 
 securities                                56,276               35             2,420            53,891
Other debt securities                      49,336            1,082             1,535            48,883
                                         --------         --------          --------          --------
                                         $386,634         $  5,432          $  4,185          $387,881
                                         ========         ========          ========          ======== 
Marketable equity 
 securities - 
 preferred stock                         $ 46,405         $  2,131          $    109          $ 48,427
                                         ========         ========          ========          ========
Marketable equity 
 securities -
 common stock                            $ 23,727         $ 11,799          $    757          $ 34,769
                                         ========         ========          ========          ========

December 31, 1997:
Fixed maturities 
 available-for-sale:
U.S. Treasury and 
 government 
 securities                              $104,039         $    536          $     41           104,534
States, municipalities 
 and political
 subdivisions                             129,378            4,520                38           133,860
Mortgage-backed 
 securities                                48,056              132             3,381            44,807
Other debt securities                      40,131              792             1,325            39,598
                                         --------         --------          --------          --------
                                         $321,604         $  5,980          $  4,785          $322,799
                                         ========         ========          ========          ========
Marketable equity 
 securities - 
 preferred stock                         $ 51,185         $  2,291          $    167          $ 53,309
                                         ========         ========          ========          ========      
Marketable equity 
 securities -
 common stock                            $ 23,574         $  8,439          $  1,166          $ 30,847
                                         ========         ========          ========          ========
</TABLE>


3.       Insurance Premiums and Claims:

         Insurance premiums written and earned by the Company's
         insurance subsidiaries for the three months ended  March 31,
         1998 and 1997 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                   1998                         1997
                                                                 --------                     --------
<S>                                                              <C>                          <C>
Direct premiums written                                          $128,328                     $120,376
Assumed premiums written                                            9,032                        4,969
Ceded premiums written                                            (61,768)                     (54,030)
                                                                 --------                     --------
Net premiums written                                             $ 75,592                     $ 71,315
                                                                 ========                     ========
Direct premiums earned                                           $121,671                     $115,905
Assumed premiums earned                                             9,644                        3,956
Ceded premiums earned                                             (62,312)                     (48,799)
                                                                 --------                     --------      
Net premiums earned                                              $ 69,003                     $ 71,062
                                                                 ========                     ========
</TABLE>

         Insurance loss and loss adjustment expenses have been
         reduced by recoveries recognized under reinsurance contracts
         of approximately $23,417,000 and $15,021,000 for the three
         months ended March 31, 1998 and 1997, respectively.  


4.       Bank Borrowings: 

         On June 6, 1997, the Company amended its borrowing
         arrangements with its bank lenders providing a $100 million
         five-year Revolving Credit Facility.  In August 1997, the
         Company used the net proceeds from the issuance of Junior
         Subordinated Debentures to repay the Company's outstanding
         indebtedness of $90 million 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 $65 million.  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.  At
         March 31, 1998, the Company had no outstanding indebtedness
         under this arrangement.

5.       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
         approximately $90.9 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
         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.  At March 31, 1998, the Company had $94.875
         million outstanding at a weighted average interest cost of
         9.1%.

6.       Income Taxes:

         As of March 31, 1998, management believes it is more likely
         than not that the Company will realize a portion of the
         deferred tax asset.  The valuation allowance at March 31,
         1998 primarily relates to capital loss items whose
         realization is uncertain.  The net deferred tax asset is as
         follows (in thousands):

<TABLE>
<CAPTION>
                                                                 March 31,                    December 31,
                                                                   1998                           1997 
                                                                 ---------                    ------------
<S>                                                              <C>                          <C>
Unpaid losses and loss adjustment 
  expenses                                                        11,636                       12,311
Unearned premiums                                                  7,736                        7,275
Allowances for doubtful accounts                                   1,789                        1,745
Other                                                              2,859                        2,618
Major Realty basis difference                                      8,637                        8,391
                                                                 -------                      -------
Deferred tax asset                                                32,657                       32,340
                                                                 -------                      -------
Deferred policy acquisition costs                                (11,282)                     (10,615)
Other                                                             (1,955)                      (1,064)      
Unrealized gain on fixed maturities 
  available-for-sale                                                (437)                        (418)
Unrealized gain on marketable 
  equity securities                                               (4,573)                      (3,289)
                                                                 -------                      -------
Deferred tax liability                                           (18,247)                     (15,386)
                                                                 -------                      -------
                                                                  14,410                       16,954
Valuation allowance                                                  (75)                      (1,112)
                                                                 -------                      -------
Net deferred tax asset                                           $14,335                      $15,842
                                                                 =======                      =======

</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>
                                                                         March 31,
                                                                 ------------------------
                                                                   1998                         1997
                                                                 --------                     --------
<S>                                                              <C>                          <C>
Computed U.S. federal income taxes                               $  2,721                     $  1,873
Nondeductible amortization of 
  goodwill and other intangibles                                      109                          142
Tax-exempt interest income                                           (570)                        (410)
Dividends received deduction                                         (239)                        (296)
Recognition of a portion of the 
  deferred tax asset                                               (1,036)                        --
Other                                                                 629                          100
                                                                 --------                     --------
Income taxes provided                                            $  1,614                     $  1,409
                                                                 ========                     ========
</TABLE>


7.       Net Income Per Share:

         Basic and diluted net income per share for the three months
         ended March 31, 1998, and 1997 are as follows:

<TABLE>
<CAPTION>
                                                                         March 31,
                                                                 ------------------------
                                                                   1998                         1997
                                                                 --------                     --------
<S>                                                              <C>                          <C>
Net income                                                       $  6,158                     $  3,914
                                                                 ========                     ========
Weighted average common shares 
  outstanding                                                      15,210                       14,990
Dilutive effect of contingent 
  shares                                                               21                           75
Dilutive effect of stock options                                      224                          229
                                                                 --------                     --------
Diluted weighted average common 
  and equivalent shares outstanding                                15,455                       15,294
                                                                 ========                     ========
Basic net income per share                                          $0.40                        $0.26
                                                                 ========                     ========
Diluted net income per share                                        $0.40                        $0.26
                                                                 ========                     ========
</TABLE>

8.       Comprehensive Income:

         Effective January 1, 1998, the Company adopted SFAS No. 130,
         "Reporting Comprehensive Income."  The comprehensive income,
         with the associated per share data, for the three months
         ended March 31, 1998, and 1997 are as follows:

<TABLE>
<CAPTION>

                                                                         March 31,
                                                                 -------------------------
                                                                   1998                         1997
                                                                 ---------                    ---------
<S>                                                              <C>                          <C>
Net income                                                       $ 6,158                      $ 3,914
Other Comprehensive income (loss):
Net unrealized gains (losses) on 
  securities                                                       2,417                         (847)
                                                                 -------                      -------
Comprehensive income                                             $ 8,575                      $ 3,067
                                                                 =======                      =======

Shares - Basic                                                    15,210                       14,990
Shares - Diluted                                                  15,455                       15,294

Net income per share - Basic                                        0.40                         0.26
Comprehensive income per share 
  - Basic                                                           0.56                         0.20

Net income per share - Diluted                                      0.40                         0.26
Comprehensive income per share 
  - Diluted                                                         0.55                         0.20
</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 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 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 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
1998 crop season, or the various other factors noted above which
may affect crop and non-crop operating results.

Three months ended March 31, 1998
Compared to three months ended March 31, 1997

The Company's operating profit and net income increased 62.7% and
57.3% respectively during the three months ended March 31, 1998
as compared to the same period in 1997.  These improved results
were principally a result of an improved loss and loss adjustment
expense ratio and an increase in investment income and realized
gains.  These positive factors were partially offset by lower net
premiums earned and an increase in interest expense. 

The Company's loss and loss adjustment expense ratio declined
from 70.1% during the three months ended March 31, 1997 to 67.1%
during the three months ended March 31, 1998.  This reduction in
loss ratio resulted from improved results in the Company's Crop
Division during the first quarter of 1998 versus the first
quarter of 1997.  During the first quarter of 1998, the Company
recognized underwriting income of $3.2 million in its Crop
Division as compared with $0.9 million during the first quarter
of 1997.  In both periods, the profit was derived from the
recording of additional profit sharing from the previous year
under the Company's Multi-Peril Crop Insurance (MPCI) program. 
The Company's estimate of its profit sharing under the MPCI
program at December 31, 1997 was effected by a severe early
winter snow storm which effected geographic areas where the
Company had a high concentration of crop insurance.  As the crops
were harvested, the effect of this snow storm was minimal, and
therefore, the Company made a larger adjustment during the first
quarter of 1998 for its previous year's results than had occurred
in 1997.  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 1998.  

The underwriting results for the Company's Property and Casualty
Divisions remained relatively constant at combined loss and
expense ratios of 102.4% and 102.6% respectively in the first
quarter of 1997 and the first quarter of 1998, as a slight
reduction in the Company's loss and loss adjustment expense ratio
from 70.4% during the first quarter of 1997 to 69.7% during the
first quarter of 1998 was offset by an increase in the
underwriting expense ratio from 32.0% during the first quarter of
1997 to 32.9% during the first quarter of 1998.  In addition, the
Company also experienced a decline in the net premiums earned of
its Property and Casualty operations from $70.6 million during
the three months ended March 31, 1997 to $66.0 million during the
first three months of 1998.  This decrease in net premiums earned
was a result of lower premium writings in the nine months
preceding the quarter ended March 31, 1998 as opposed to the
quarter ended March 31, 1997.  During the three months ended
March 31, 1998, however, net written premiums did increase to
$72.6 million from $70.8 million during the same period in 1997. 
Therefore, the Company expects earned premiums to begin to
increase during subsequent quarters in 1998 in line with the
increases in net written premium during the first quarter of
1998.  

While the Company's underwriting loss and expense ratios in its
Property and Casualty Divisions for the quarters ending March 31,
1998 and March 31, 1997 were quite similar, the loss ratios for
the twelve months ended March 31, 1998 did improve considerably
from those recorded in the twelve months ended March 31, 1997. 
The Company believes that this is indicative of the continued
improvement in its Property and Casualty Divisions over the last
year, but that the relatively level results of the most recent
three months indicates that the degree of improvement in the
Company's Property and Casualty Divisions is slowing.  

The Company's operating profit was also positively impacted
during the first quarter of 1998 as compared with the first
quarter of 1997 by an increase in the Company's investment income
of 6.1% and an increase in net realized capital gains of 116.7%. 
The increase in the Company's net investment income resulted from
an increase in the average size of the Company's portfolio from
$423.7 million during the three months ended March 31, 1997 to
$471.8 million during the three months ended March 31, 1998. 
This increase in the size of the portfolio was offset somewhat by
a decrease in the annualized investment yield of the portfolio
from 6.2% during the three months ended March 31, 1997 to 5.9%
during the three months ended March 31, 1998.  This decrease in
annualized investment yield was principally a result of an
increase in the amount of tax advantaged securities within the
Company's portfolio during the first quarter of 1998 as compared
to the first quarter of 1997, an overall lower interest rate
environment, and to a lessor extent, an increase in the size of
the Company's investments in common stock.  A lower interest rate
environment and positive results in the stock market provided the
Company with additional opportunities to realize gains in the
Company's investment portfolio during the first quarter of 1998. 

The Company's net income during the first three months of 1998 as
compared to the same period a year earlier was adversely effected
by an increase in the interest expense of approximately $1.0
million or 87.1%.  This increase in interest expense was a result
of both an increase in the Company's outstanding debt from $69.0
million during the three months ended March 31, 1997 to $94.9
million during the three months ended March 31, 1998, and an
increase in the average interest rate from 6.7% for the three
months ended March 31, 1997 to 9.1% during the three months ended
March 31, 1998.  The increased borrowings during the second
quarter of 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 Liquidity and Capital Resources).

As of March 31, 1998 and 1997, the Company held an approximate
33% equity investment in Major Realty Corporation, a publicly
traded real estate company engaged in the ownership and
development of its undeveloped land in Orlando, Florida.  On
March 6, 1998, the Company, with certain stockholders of Major
Realty who together hold a majority interest in Major Realty,
entered into a Stockholder Agreement with an outside party
whereby Major Realty will be merged with this outside party and
all shares of Major Realty will be converted into the right to
receive cash.  During the first quarter of 1998, this transaction
was recorded as a net loss from investee of approximately $.7
million and a tax benefit to income tax expense of approximately
$.7 million.  Thus, this transaction, net of tax, did not have a
material effect on the results of the three months ended March
31, 1998.  The Company anticipates the closing of the merger to
occur in the second quarter of 1998 without further impact on its
earnings.

Recent Statement of Financial Accounting Standards

In February 1997, the Financial Accounting Standards board (FASB)
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.  In addition, SFAS No. 128 requires a
reconciliation of the numerator and denominator of the basic and
diluted EPS computations. The Company adopted SFAS No. 128 in
1997 and accordingly, earnings per share has been restated for
all periods presented.

In February 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure."  This statement establishes
standards for disclosing information about an entity's capital
structure.  The Company adopted SFAS No. 129 in 1997.  SFAS No.
129 contains no change in disclosure requirements for entities
that were previously subject to the requirements of Accounting
Principles Board Opinions Nos. 10 and 15 and SFAS No. 47 and as
such the adoption of SFAS No. 129 did not have any effect on the
Company's reporting.

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.

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.  Adoption of SFAS
No. 131 may result in additional disclosures in the Company's
financial statements.  

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, surplus notes
issued by two of its insurance company subsidiaries and
investments held at the holding company level.  The Company's
primary sources of liquidity are receipts from interest payments
on the surplus notes, payments from the profit sharing agreement
with American Agrisurance, the Company's wholly owned subsidiary
which operates as the general agent for the Company's crop
insurance programs, tax sharing payments from its subsidiaries,
investment income from, and proceeds from the sale of, holding
company investments, and dividends and other distributions from
subsidiaries of the Company.  The Company's liquidity needs are
primarily to service debt, pay operating expenses and taxes, and
make investments in subsidiaries.

The Company currently holds three surplus notes, each in the
amount of $20 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 these surplus notes requires prior
insurance department approval, no prior approval of interest
payment is currently required.  

Dividends from the insurance subsidiaries of the Company are
regulated by the 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.  In 1998, the statutory
limitation on dividends from insurance company subsidiaries to
the parent without further insurance departmental approval is
approximately $21.7 million.

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.

In August 1997, AICI Capital Trust, a Delaware business trust
organized by the Company (the "Issuer Trust") issued 3.795
million shares or $94.875 million aggregate liquidation amount of
its 9% Preferred Securities (liquidation amount $25 per Preferred
Security).  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 in August of 1997 in an amount equal
to the Preferred Securities and the Common Securities.  The
Company primarily used the net proceeds in the amount of $90.9
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 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 redemptive
provisions, all described in the Junior Debenture Indenture.  At
March 31, 1998, the Company had $94.875 million outstanding at a
weighted annual interest cost of 9.1%.

As of March 31, 1998, the Company maintains a five-year revolving
credit facility (the "Revolving Credit Facility") with its bank
lenders in the amount of $65 million.  The Company selects its
interest rate at either the prime rate or LIBOR plus a margin
which varies depending on the Company's funded debt to equity
ratio.  Interest is payable quarterly.  During the first quarter
of 1998, the Company had no outstanding indebtedness under this
arrangement.  The Revolving Credit Facility contains covenants
which do not permit the payment of dividends by the Company,
requires the Company to maintain certain operating and debt
service coverage ratios, requires maintenance of specific levels
of surplus and requires the Company to meet certain tests
established by the regulatory authorities.

As of March 31, 1998, the Company held cash and invested assets,
excluding investment in subsidiaries, of $11.9 million.

Insurance Companies

The principal liquidity needs of the Insurance Companies are to
fund losses and loss adjustment expense payments and to pay
underwriting expenses, including commissions and other expenses. 
The available sources to fund these requirements are net premiums
received and, to a lesser extent, cash flows from the Company's
investment activities, which together have been adequate to meet
such requirements on a timely basis.  The Company monitors the
cash flows of the Insurance Companies 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 payments of
loss and loss adjustment expenses.

Cash flows from 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 acquisition and
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.

The Company's profit or loss from its MPCI business is determined
after the crop season ends on the basis of a profit sharing
formula established by law and the RMA.  Commencing with the 1997
years, the Company receives a profit share in cash, with 60% of
the amount in excess of 17.5% of its MPCI Retention (as defined
in the profit sharing agreement) in any year carried forward to
future years, or it must pay its share of losses.  Prior to the
1997 year, the amount carried forward to future years was any
amount in excess of 15% of its MPCI retention.  The Company
recognized $52.6 million during 1997 and the first quarter of
1998 in profit sharing earned on 1997 MPCI business.  With the
change in profit sharing payment rules including amounts payable
for the 1997 crop year, the Company received $57.0 million in
payments under the MPCI program in February of 1998.

Changes in Financial Condition

The Company's stockholders' equity increased by approximately
$8.8 million at March 31, 1998 as compared to December 31, 1997. 
The principal components of this increase were net income of $6.2
million during the first three months of 1998 and an increase in
the value of the Company's investment portfolio causing the
unrealized gain on available-for-sale securities, net of tax, to
improve from $6.9 million at December 31, 1997 to $9.3 million at
March 31, 1998.  This change in the unrealized gain on available-
for-sale securities was almost entirely attributable to an
improvement in the unrealized gain in the Company's equity
portfolio.


Consolidated Cash Flows

Cash provided by operating activities was positive during the
three months ended March 31, 1998 and 1997, with $54.6 million
and $25.2 million in positive cash flow during the two periods
respectively.  The major component of this cash flow during both
periods was profit sharing payments received from the federal
government under the Company's MPCI crop insurance program. 
During the first three months of 1997, this component of
operating cash flows was $25.5 million while in the first three
months of 1998, it was $57.0 million.  
 
Inflation

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

Year 2000

The Year 2000 issue is the result of computer programs which
recognize only two digits rather than four to identify the year. 
Any of the Company's computer programs that have time sensitive
software may recognize a date of "00" as the year 1900 rather
than the year 2000.  If not corrected, this could cause computer
systems to fail or perform miscalculations.

The Company has identified the computer system applications that
require modification to be Year 2000 compliant.  The Company has
developed a corrective plan whereby internal and external
resources are being utilized to make the necessary modifications
to and testing of the Company's computer systems.  While some of
the Company's computer systems are currently Year 2000 compliant,
management expects the remaining systems to be Year 2000
compliant by December 31, 1998.  The Company expensed costs
relating to the Year 2000 issue of approximately $0.5 million
during the three months ended March 31, 1998, and anticipates an
additional $1.3 to $2.0 million of expenses to complete the
project.  The estimated costs and estimated date of completion of
the Year 2000 project is based on management's best estimates. 
However, there can be no guarantee that these estimates will be
achieved and actual results could differ from the Company's plan.

In addition, the Company is communicating with others with which
it does business to determine if they are Year 2000 compliant. 
However, there can be no guarantee that the systems of these
companies will achieve Year 2000 compliance in a timely manner.



PART II.  OTHER INFORMATION
---------------------------
ACCEPTANCE INSURANCE COMPANIES INC.

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.

May 11, 1998                                         /s/      KENNETH C. COON
                                            ---------------------------------
                                                     Kenneth C. Coon
                                                     Chief Executive Officer

May 11, 1998                                         /s/      GEORGIA M. MACE
                                                --------------------------------
                                                     Georgia M. Mace
                                               Treasurer and Chief Financial
                                                       Officer

<PAGE>
                                         ACCEPTANCE INSURANCE COMPANIES INC.
                                            QUARTERLY REPORT ON FORM 10-Q
                                      FOR THE THREE MONTHS ENDED MARCH 31, 1998

                                                    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, 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. Incorporated by
                  reference to Exhibit 10.5 to the Registrant's Quarterly
                  Report on Form 10-Q for the period ended June 30,1997. 

27                Financial Data Schedule.

99.1              The Registrant's 1997 Employee Stock Purchase
                  Plan. Incorporated by reference to the
                  Registrant's Proxy Statement filed on or about
                  April 29,1997.
                                                          
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.