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, 1999

                                       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 November 10, 1999 was:

         Class of Common Stock                No. of Shares Outstanding
      Common Stock, $.40  Par Value                 14,254,474


<PAGE>

              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES


                                    FORM 10-Q

                                TABLE OF CONTENTS



PART I.  FINANCIAL INFORMATION

         Item 1.  Financial Statements:

                  Consolidated Balance Sheets
                  September 30, 1999  and December 31, 1998

                  Consolidated Statements of Operations
                  Three Months and Nine Months Ended September 30,1999 and 1998

                  Consolidated Statements of Cash Flows
                  Nine Months Ended September  30, 1999 and 1998

                  Notes to Interim Consolidated Financial Statements

         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. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                   (unaudited)

                                                                                  September 30,  December 31,
                                                                                      1999          1998
                                                                                 ______________  ___________

<S>                                                                              <C>             <C>
         ASSETS
Investments:
   Fixed maturities available-for-sale.....................................      $  311,848      $  337,107
   Marketable equity securities - preferred stock..........................          16,943          27,316
   Marketable equity securities - common stock...........................            36,102          44,371
   Mortgage loans and other investments....................................           9,074           9,549
   Real estate.............................................................           3,185           3,300
   Short-term investments, at cost, which approximates
     market................................................................          82,607          67,754
                                                                                 ___________     ____________
                                                                                    459,759         489,397

Cash.......................................................................           1,369           6,897
Receivables, net...........................................................         331,231         185,951
Reinsurance recoverable on unpaid losses and loss
  adjustment expenses......................................................         390,262         238,769
Prepaid reinsurance premiums...............................................          62,986          76,663
Property and equipment, net................................................          19,270          16,425
Deferred policy acquisition costs..........................................          19,458          25,433
Excess of cost over acquired net assets....................................          28,754          33,363
Deferred income tax........................................................          15,323           6,901
Other assets...............................................................           9,932          13,144
                                                                                 ___________     ____________
       Total assets........................................................      $1,338,344      $1,092,943
                                                                                 ===========     ============

         LIABILITIES AND STOCKHOLDERS' EQUITY
Losses and loss adjustment expenses........................................      $  674,912      $  524,744
Unearned premiums..........................................................         128,516         162,037
Amounts payable to reinsurers..............................................         193,355          35,840
Accounts payable and accrued liabilities...................................          40,843          24,293
Bank borrowings............................................................            --            15,000
Company - obligated manditorily redeemable Preferred Securities of
   AICI Capital Trust, holding solely Junior Subordinated Debentures
   of the Company..........................................................          94,875          94,875
                                                                                 ___________     ___________
        Total liabilities..................................................       1,132,501         856,789
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, 15,482,886 and 15,466,860
     shares issued.........................................................           6,193           6,187
   Capital in excess of par value..........................................         198,868         198,657
   Accumulated other comprehensive
       income (loss), net of tax ..........................................          (6,945)          5,305
   Retained earnings.......................................................          34,003          52,281
                                                                                 ___________     ___________
                                                                                    232,119         262,430
Less:
Treasury stock, at cost, 1,209,520 shares..................................         (26,047)        (26,047)
Contingent stock, 20,396 shares............................................            (229)           (229)
                                                                                 ___________     ___________
   Total stockholders' equity..............................................         205,843         236,154
                                                                                 ___________     ___________
   Total liabilities and stockholders' equity..............................      $1,338,344      $1,092,943
                                                                                 ===========     ===========

</TABLE>
               The accompanying notes are an integral part of the
                   interim consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>
              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
     for the three months and nine months ended September 30, 1999 and 1998
                      (in thousands, except per share data)
                                   (unaudited)


                                                                       Three Months                 Nine Months
                                                               ___________________________   __________________________
                                                                  1999             1998         1999            1998
                                                               _________        __________   ___________     __________
<S>                                                            <C>              <C>           <C>            <C>
Revenues:
   Insurance premiums earned...............................    $ 98,857         $ 117,240     $ 210,429      $ 258,327
   Net investment income...................................       6,111             7,217        18,749         21,349
   Net realized capital gains (losses).....................       1,072              (129)        6,414          5,354
                                                               _________        __________     _________     __________
                                                                106,040           124,328       235,592        285,030
                                                               _________        __________     _________     __________
Costs and expenses:
   Costs of revenues:
     Insurance losses and loss adjustment expenses.........      97,502            60,450       176,333        158,233
     Insurance underwriting expenses.......................      45,125            38,970        80,382         81,835
      General and administrative expenses. . . . . . . . . .        525               624         1,715          1,842
                                                               _________        __________     _________     __________
                                                                143,152           100,044       258,430        241,910
                                                               _________        __________     _________     __________
Operating profit (loss)....................................     (37,112)           24,284       (22,838)        43,120
                                                               _________        __________     _________     __________

Other income (expense):
   Interest expense........................................      (2,186)           (2,278)       (6,846)        (6,608)
   Share of net loss of investee...........................          --               --            --            (704)
   Other, net..............................................         (74)                1           (53)           (56)
                                                               _________        __________     _________      __________
                                                                 (2,260)           (2,277)       (6,899)        (7,368)
                                                               _________        __________     _________      __________

Income (loss)  before income taxes and cumulative effect
   of change in accounting principles  ....................     (39,372)           22,007       (29,737)        35,752
Income tax expense (benefit):
     Current...............................................      (7,849)            7,317       (10,154)           303
     Deferred..............................................      (6,320)              (88)       (1,643)        10,111
                                                               _________        __________    ___________    ___________

Income (loss) before cumulative effect of change in
  accounting principles....................................     (25,203)           14,778       (17,940)        25,338

Cumulative effect of change in accounting principles.......        --                --            (338)          --
                                                               _________        __________    __________     __________
Net income (loss)..........................................    $(25,203)        $  14,778     $ (18,278)     $  25,338
                                                               =========        ==========    ==========     ==========


Earnings (loss) per share:
   Basic:
      Income (loss) before cumulative effect of change in
       accounting principles...............................    $  (1.77)        $    1.01     $   (1.26)     $    1.69
      Cumulative effect of change in accounting principles.        --                 --           (.02)           --
      Net income (loss)....................................       (1.77)             1.01         (1.28)          1.69

   Diluted:
      Income (loss) before cumulative effect of change in
       accounting principles...............................    $  (1.77)        $    1.00     $   (1.26)     $    1.66
      Cumulative effect of change in accounting principles          --                --           (.02)           --
      Net income (loss).....................................      (1.77)             1.00         (1.28)          1.66

</TABLE>


               The accompanying notes are an integral part of the
                   interim consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>

              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              for the nine months ended September 30, 1999 and 1998
                                 (in thousands)
                                   (unaudited)

                                                                                             1999                1998
                                                                                          __________         ___________
<S>                                                                                       <C>                <C>
Cash flows from operating activities:
   Net income (loss).................................................................     $ (18,278)         $   25,338
   Net adjustment to reconcile net income (loss) to net cash from
     operating activities............................................................        24,736              56,494
                                                                                          __________         ___________

       Net cash from operating activities............................................         6,458              81,832
                                                                                          __________         ___________

Cash flows from investing activities:
   Proceeds from sales of investments................................................        10,010               --
   Proceeds from sales of investments available-for-sale.............................       117,754             122,798
   Proceeds from maturities of investments ..........................................         7,993               5,125
   Proceeds from maturities of investments available-for-sale........................        39,847              78,501
   Purchases of investments..........................................................       (26,617)             (4,676)
   Purchases of investments available-for-sale.......................................      (157,829)           (218,719)
   Purchases of property and equipment...............................................        (6,738)             (3,320)
                                                                                          __________         ___________

        Net cash from investing activities...........................................       (15,580)            (20,291)
                                                                                          __________         ___________

Cash flows from financing activities:
   Proceeds from bank borrowings...................................................           --                 13,000
   Repayment of bank borrowings......................................................       (15,000)                --
   Repurchase of common stock........................................................          --               (20,060)
   Proceeds from issuance of common stock............................................           217                 516
   Proceeds from sale of Phoenix Indemnity, net of cash sold.........................        23,591                 --
                                                                                          __________         ___________

        Net cash from financing activities...........................................         8,808              (6,544)
                                                                                          __________         ___________

Net increase (decrease) in cash and short-term investments...........................          (314)             54,997
Cash and short-term investments at beginning of period...............................        72,822              38,316
                                                                                          __________         ___________

Cash and short-term investments at end of period.....................................     $  72,508          $   93,313
                                                                                          ==========         ===========

Supplemental disclosure of cash flow information:
   Cash paid during the period for interest..........................................     $   6,868          $    6,404
                                                                                          ==========         ===========
   Cash paid during the period for income taxes......................................     $    --            $      481
                                                                                          ==========         ===========


</TABLE>

               The accompanying notes are an integral part of the
                   interim consolidated financial statements.










<PAGE>



              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES
               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, 1999 and
   December 31, 1998, and the results of operations for the three months and
   nine months ended September 30, 1999 and 1998 and cash flows for the nine
   months ended September 30, 1999 and 1998.

   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, 1999 approximately $11,468,000 of
   short-term investments had a maturity date at acquisition of greater than
   three months.


   Recent Statements of Financial Accounting Standards

   In June 1998, the Financial Accounting Standards Board (FASB) issued
   Statement of Financial Accounting Standards No. 133 (SFAS No. 133),
   "Accounting for Derivative Instruments and Hedging Activities", which
   establishes accounting and reporting standards for derivative instruments,
   including certain derivative instruments embedded in other contracts, and
   for hedging activities. SFAS No. 133 is effective for all fiscal quarters of
   fiscal years beginning after June 15, 2000. Management does not expect the
   adoption of SFAS No. 133 to have a material impact to the Company's
   consolidated financial statements.

   Change in Accounting Principles

   In December 1997, the Accounting Standards Executive Committee of the
   American Institute of Certified Public Accountants (AcSEC) issued Statement
   of Position 97-3, "Accounting by Insurance and Other Enterprises for
   Insurance-Related Assessments" (SOP 97-3). SOP 97-3 provides guidance for
   determining when an entity should recognize a liability for guaranty-fund
   and other insurance-related assessments, how to measure that liability, and
   when an asset may be recognized for the recovery of such assessments through
   premium tax offsets. The Company adopted SOP 97-3 on January 1, 1999
   resulting in a cumulative effect of change in accounting principles of
   $338,000.

   Reclassifications

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







<PAGE>





              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (unaudited)




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, 1999:
   Fixed maturities available-for- sale:
   U.S. Treasury and government
     securities.............................     $ 124,586           $      280          $  2,089          $  122,777
   States, municipalities and political
     subdivisions...........................       137,386                  866             4,336             133,916
   Mortgage-backed securities...............        23,493                  --              1,016              22,477
   Other debt securities....................        35,736                   63             3,121              32,678
                                                 __________          ___________         _________         ___________
                                                 $ 321,201           $    1,209          $ 10,562          $  311,848
                                                 ==========          ===========         =========         ===========

   Marketable equity securities -
     preferred stock........................     $  17,610           $      130          $    797          $   16,943
                                                 ==========          ===========         =========         ===========

   Marketable equity securities -
     common stock...........................     $  36,767           $    5,934          $  6,599          $   36,102
                                                 ==========          ===========         =========         ===========

December 31, 1998:
   Fixed maturities available-for-sale:
   U.S. Treasury and government
     securities.............................     $  77,671           $    1,228          $    114          $   78,785
    States, municipalities and political
     subdivisions...........................       161,017                6,278                93             167,202
   Mortgage-backed securities...............        38,475                   42               590              37,927
   Other debt securities....................        56,786                1,795             5,388              53,193
                                                 __________          ___________         _________         ___________

                                                 $ 333,949           $    9,343          $  6,185          $  337,107
                                                 ==========          ===========         =========         ===========

   Marketable equity securities -
     preferred stock........................     $  27,246           $      494          $    424          $   27,316
                                                 ==========          ===========          =========         ===========

   Marketable equity securities -
     common stock...........................     $  39,438           $    9,718          $  4,785          $   44,371
                                                 ==========          ===========         ==========        ============


</TABLE>



<PAGE>



              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (unaudited)



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,
         1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>

                                                                      Three Months                      Nine Months
                                                              ___________________________      ___________________________

                                                                  1999             1998           1999            1998
                                                              ____________      _________      _________        __________
         <S>                                                  <C>               <C>            <C>              <C>
         Direct premiums written..........................    $   246,227       $ 219,541      $ 526,751        $ 504,926
         Assumed premiums written.........................         58,326          58,811         70,783           78,868
         Ceded premiums written...........................       (206,723)       (163,346)      (391,671)        (324,895)
                                                              ____________      __________     __________       ___________

              Net premiums written........................    $    97,830       $ 115,006      $ 205,863        $ 258,899
                                                              ============      ==========     =========        ===========

         Direct premiums earned...........................    $   254,747       $ 224,251      $ 540,639        $ 500,720
         Assumed premiums earned..........................         58,326          57,180         75,038           75,135
         Ceded premiums earned............................       (214,216)       (164,191)      (405,248)        (317,528)
                                                              ____________      __________     __________       __________

              Net premiums earned.........................    $    98,857       $ 117,240      $ 210,429        $ 258,327
                                                              ============      ==========     ==========       ==========
</TABLE>


         Insurance loss and loss adjustment expenses have been reduced by
         recoveries recognized under reinsurance contracts of approximately
         $228.9 million and $163.7 million for the three months ended September
         30, 1999 and 1998, respectively.  Insurance loss and loss adjustment
         expenses have been reduced by recoveries recognized under reinsurance
         contracts of approximately $419.0 million and $314.4 million for the
         nine months ended September 30, 1999 and 1998, respectively.


4.       Bank Borrowings:

         The Company's $65 million Revolving Credit Facility with its bank
         lenders is subject to automatic reductions on a quarterly basis
         beginning March 31, 1999. At September 30, 1999 the Revolving Credit
         Facility was reduced to $60.5 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 September 30, 1999, 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:

         In 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 1997 in an
         amount equal to the total of the Preferred Securities and the Common
         Securities.







<PAGE>





              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (unaudited)


         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 September  30, 1999, the Company had $94.875 million
         outstanding at a weighted average interest cost of 9.2%.

6.       Income Taxes:

         As of September 30, 1999, 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, 1999 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,
                                                                                           1999               1998
                                                                                         ____________      _____________

             <S>                                                                         <C>               <C>
             Unpaid losses and loss adjustment expenses.......................           $ 11,415          $ 12,512
             Unearned premiums................................................              4,587             5,976
             Allowances for doubtful accounts.................................              2,176             1,822
             Other............................................................              2,848             2,344
             Unrealized loss on fixed maturities available-for-sale...........              3,274               --
             Unrealized loss on marketable equity securities ............... . .              467               --
                                                                                         _________         _________
             Deferred tax asset...............................................             24,767            22,654
                                                                                         _________         _________

             Deferred policy acquisition costs................................             (6,810)           (8,902)
             Other.............................................................            (2,559)           (2,051)
             Unrealized gain on fixed maturities available-for-sale............               --             (1,105)
             Unrealized gain on marketable equity securities...................               --             (1,751)
             Unrealized gain on consolidated subsidiaries held for sale.......                --             (1,869)
                                                                                         _________         _________
             Deferred tax liability   ..........................................           (9,369)          (15,678)
                                                                                         _________         _________
                                                                                           15,398             6,976

             Valuation allowance..............................................                (75)              (75)
                                                                                         _________         _________
             Net deferred tax asset   ........................................           $ 15,323          $  6,901
                                                                                         =========         =========

</TABLE>

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

 <TABLE>
<CAPTION>
                                                                                                September 30,
                                                                                         ____________________________
                                                                                           1999               1998
                                                                                        _________         _________
            <S>                                                                          <C>               <C>
            Computed U.S. federal income taxes.....................................      $(10,408)         $ 12,513
            Nondeductible amortization of goodwill and other intangibles...........           299               333
            Tax-exempt interest income.............................................        (1,845)           (1,553)
            Dividends received deduction...........................................          (459)             (780)
            Recognition of a portion of the deferred tax asset.....................           --             (1,037)
            Other..................................................................           616               938
                                                                                         _________         _________
                   Income taxes provided...........................................      $(11,797)         $ 10,414
                                                                                         =========         =========


</TABLE>

<PAGE>





              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (unaudited)


7.       Net Income (Loss) Per Share:

         Basic and diluted net income (loss) per share for the three months
         and nine months ended September 30, 1999, and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                                       Three Months               Nine Months
                                                                                _______________________     _______________________

                                                                                   1999         1998           1999        1998
                                                                                _________    __________     __________  ___________
         <S>                                                                    <C>          <C>            <C>         <C>

        Income (loss) before cumulative effect of change in
                accounting principles                                           $ (25,203)   $  14,778      $ (17,940)  $   25,338
        Cumulative effect of change in accounting principles                         --          --              (338)        --
                                                                                __________   __________     ___________ ___________
        Net income (loss)                                                       $ (25,203)   $  14,778      $ (18,278)  $   25,338
                                                                                ==========   ==========     =========== ===========

        Weighted average common shares outstanding                                 14,252       14,642         14,246       15,025
                Dilutive effect of contingent shares                                 --             20           --             20
                Dilutive effect of stock options                                     --            172           --            197
                                                                                _________    __________     ___________  __________

        Diluted weighted average common and equivalent
             shares outstanding                                                    14,252       14,834         14,246       15,242
                                                                                ==========   ==========     ===========   =========

        Earnings (loss) per share:
             Basic:
                Income (loss) before cumulative effect of change
                  in accounting principles                                      $  (1.77)    $    1.01      $   (1.26)  $     1.69
                Cumulative effect of change in accounting
                        principles                                                  --            --             (.02)         --
                Net income (loss)                                                  (1.77)         1.01          (1.28)        1.69

             Diluted:
                Income (loss) before cumulative effect of change
                    in accounting principles                                    $  (1.77)    $    1.00      $   (1.26)  $     1.66
                Cumulative effect of change in accounting
                        principles                                                  --            --             (.02)          --
                Net income (loss)                                                  (1.77)         1.00          (1.28)        1.66

</TABLE>

8.      Comprehensive Income (Loss):

        Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
        Comprehensive Income."  The comprehensive income (loss) for the three
        months and nine months ended September 30, 1999, and 1998 are as
        follows:
<TABLE>
<CAPTION>

                                                                                     Three Months                 Nine Months
                                                                                ______________________     ________________________

                                                                                  1999         1998           1999          1998
                                                                                _________    __________    ___________  ___________

        <S>                                                                     <C>          <C>            <C>         <C>
        Net income (loss)                                                       $(25,203)    $  14,778      $ (18,278)  $   25,338

        Other comprehensive income (loss):
            Unrealized gains (losses) of investments,
                 net of reclassification adjustments                              (9,414)       (3,462)       (18,846)      (1,231)
            Deferred income tax expense (benefits) on changes                     (3,295)       (1,212)        (6,596)        (431)
                                                                                __________   __________     ___________  __________
            Other comprehensive income (loss)                                     (6,119)       (2,250)       (12,250)        (800)
                                                                                __________   __________     ___________ ___________
            Comprehensive income (loss)                                         $(31,322)    $  12,528      $ (30,528)  $   24,538
                                                                                ==========   ==========     =========== ===========

</TABLE>


<PAGE>



              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES
          NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, Continued
                                   (unaudited)

9.      Business Segments:

        The Company is engaged in the specialty property and casualty and the
        crop insurance business. The Property and Casualty Insurance segment
        consists of excess and surplus lines liability and property,
        substandard property, specialty automobile, workers' compensation,
        professional liability, and specialty coverages for transportation
        risks, temporary help agencies, condominiums, rural markets, and fine
        arts. The principal lines of the Crop Insurance segment are MPCI and
        crop hail insurance.

        The accounting policies of the segments are the same as those described
        in the summary of significant accounting policies. Management evaluates
        the performance of and allocates its resources to its operating
        segments based on income before income taxes. Interest income and
        interest expense are primarily allocated to segments based upon
        estimated investments and capital, respectively. Under a stop loss
        reinsurance treaty, the Property and Casualty Insurance segment assumed
        premiums of $3.5 million for the three and nine months ended September
        30, 1998 from the Crop Insurance segment, utilizing the excess capacity
        of the Property and Casualty Insurance segment. Management does
        not utilize assets as a significant measurement tool for evaluating
        segments.

        Segment revenues and segment operating profit (loss) for the three
        months and nine months ended September 30 are as follows:
<TABLE>
<CAPTION>

                                                           Three Months                               Nine Months
                                          __________________________________________    ______________________________________
                                            Property and                                Property and
                                              Casualty            Crop                   Casualty         Crop
                                              Insurance        Insurance     Total       Insurance      Insurance     Total
                                           ______________    ____________  _________    ___________     _________   __________
        <S>                                <C>               <C>           <C>          <C>             <C>         <C>
                      1999
        Revenues                           $     53,912      $    52,128   $106,040     $  177,918      $ 57,674    $235,592
                                           ==============    ============  =========    ===========     =========   =========
        Operating profit (loss)            $    (47,561)     $    10,449   $(37,112)    $  (35,932)     $ 13,094    $(22,838)
        Interest expense and other                1,367              893      2,260          4,169         2,730       6,899
                                           ______________    ____________  __________   ___________     _________   __________
        Income (loss) before
           income taxes                    $    (48,928)     $     9,556   $(39,372)    $  (40,101)     $ 10,364    $(29,737)
                                           ==============    ============  ==========   ============    =========   ==========

                      1998
        Revenues                           $     73,638      $    50,690   $124,328     $  224,451      $ 60,579    $285,030
                                           ==============    ============  =========   ============     =========   ==========
        Operating profit                   $        515      $    23,769   $ 24,284     $   13,833      $ 29,287    $ 43,120
        Interest expense and other                1,439              838      2,277          4,939         2,429       7,368
                                           ______________    ____________  _________    ___________     _________   __________
        Income (loss) before
           income taxes                    $       (924)     $    22,931   $ 22,007     $    8,894      $ 26,858    $ 35,752
                                           ==============    ============  =========    ===========     =========   ==========

</TABLE>

        The Company does not have a single customer which represents 10% or
        more of its consolidated revenues. In addition, substantially all
        revenue of the Company's reportable segments are attributed to or
        located in the United States.

10.     Sale of Phoenix Indemnity Insurance Company:

        On May 11, 1999, the Company entered into a definitive agreement with
        Millers American Group, Inc. ("Millers") for the sale of the Company's
        non-standard automobile business, including Phoenix Indemnity Insurance
        Company ("Phoenix Indemnity ") to Millers. Under this agreement, the
        Company  transfered all of its non-standard automobile business and all
        outstanding stock of Phoenix Indemnity to Millers in exchange for
        approximately $25 million in cash in September 1999. The proceeds of
        $25 million is subject to certain post closing adjustments.


<PAGE>





PART 1.
ITEM 2.

              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES
                      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,
within the meaning of the Private Securities Litigation Reform Act of 1995.
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 remainder of the 1999
crop season, or the various other factors noted above which may affect crop
and non-crop operating results.

              Three months and nine months ended September 30, 1999
        Compared to three months and nine months ended September 30, 1998

 The Company's net income decreased from $14.8 million and $25.3 million for
the three and nine months ended September 30, 1998 to a net loss of $25.2
million and $18.3 million for the three and nine months ended September 30,
1999.  The three and nine month results for 1999 were impacted by a
strengthening of the Company's reserves for loss and loss adjustment expense, a
reduction in net premiums written in the Company's property and casualty
segment, an increase in net operating expenses as well as an increase in
reinsurance costs in the Company's crop segment and a decline in investment
income.  Certain nonrecurring events also affect the comparison of results for
the three and nine months ended September 30, 1999 with results for the same
periods in 1998.  During the first nine months of 1998, the Company benefited
from additional profit sharing earned in the previous year under the Company's
Multi-Peril Crop Insurance program.  Results in the first nine months of 1999
also were negatively impacted by charges associated with the previously
announced restructuring of the Company's property and casualty segment as well
as the cumulative effect of a change in accounting principles adopted on
January 1, 1999.

The Company historically has performed an actuarial study in conjunction with
its independent actuary as of September 30 of each year.  This study indicated
a significant increase in the number of claims incurred by the Company but not
previously reported (IBNR) at September 30, 1999.  The increase in previously
unreported claims was principally under policies covering the 1990 through 1995
accident years, and primarily were new construction defect claims reported
under general liability policies insuring contractors in the state of
California. To a lessor extent, the Company also experienced an increase in
IBNR claims for the 1998 year in its commercial automobile lines.

<PAGE>
California construction defect claims increased as a result of the 1995
California Supreme Court decision in Montrose Chemical Corporation vs. Admiral
Insurance Company.  In that decision, the Court adopted the "continuous
trigger" theory of insurance coverage for third party cases involving claims of
continuous, progressive or deteriorating bodily injury or property damage.
Under this theory, the timing of the insured's act which allegedly caused the
accident, event or condition resulting in a claim is largely immaterial.  As
long as the potential damages remain outstanding, all of the contractor's or
subcontractor's successive policies potentially may provide coverage.  Thus,
the Court's Montrose decision created a whole new basis for coverage under
years of previously issued policies.  Beginning in 1995, the Company altered
its underwriting criteria for construction risks and began endorsing policies
exposed to these types of continuous exposures in order to avoid coverage for
conditions which existed prior to the inception of Company policies.

As a result of the unexpected increase in claims from the 1990 through 1995
accident years, the Company set its best point estimate for loss and loss
adjustment expense reserves at the top of the independent actuary's range,
and consequently increased its loss reserves for 1998 and prior years
by approximately $44.0 million.  The Company also applied the more conservative
assumptions to the 1999 accident year results, contributing, in part, to an
increase in its loss ratio from June 30, 1999 of 3.7%. Also contributing to
this increase were $1.7 million in losses from hurricane Floyd.

The Company previously announced a restructuring of its property and casualty
segment in which approximately one-third of its property and casualty gross
written premiums for 1998 were discontinued. As a part of this restructuring,
the Company ceded the unearned premium from its discontinued lines, as well
as new premiums written during the run-off of the discontinued lines, to an
independent reinsurer. Accordingly, during the three months and nine months
ended September 30, 1999, the Company's net premiums earned in its property and
casualty segment declined by 29.0% and 22.1% respectively as compared to the
same periods during 1998.  While the Company reduced operating expenditures in
consideration of the reduced premium writings, the Company's property and
casualty underwriting expense ratio increased in both the three months and nine
months ended September 30, 1999 as compared to a year earlier, from 32.3% and
32.6% in 1998 to 36.7% and 33.7% in 1999.  As part of the restructuring, the
Company also sold its non-standard automobile operations.  The sale of the
Company's non-standard automobile business, including Phoenix Indemnity
Insurance Company, was closed in September of 1999 and, therefore, the Company
expects further reductions in its net written premiums and operating
expenditures in the fourth quarter of 1999.

The Company experienced increased demand for its crop segment products during
the first nine months of 1999 as compared to the first nine months of 1998,
particularly products sold under the federally subsidized Multi-Peril Crop
Insurance (MPCI) program and the Company's proprietary CropRevenue
CoveragePlus(TM)(CRCPlus) product.  During 1999, the Company's MPCI premiums
increased to approximately $366 million from $274 million in 1998.  At the same
time,  however, the Company's net expenses as a percentage of written premiums
increased from 1998 to 1999 due to a decrease in the rate at which the Company
is reimbursed by the federal government for the expenses of operating its MPCI
program.  In 1998 the Company's reimbursement rate was approximately 24.7%,
while in 1999 this reimbursement rate fell to 21.7%.  Due to competitive
pressures, the Company was unable to pass any of this expense reduction along
to its agents as agents' commissions remained relatively constant at 15.5% in
both years.  The Company does not expect a similar reduction in its expense
reimbursements from the federal government during the 2000 crop year, but a
change in the Company's mix of  business could result in a small reduction in
its total reimbursement rate for the 2000 crop season.

The increased demand for the Company's proprietary CRCPlus product exceeded the
Company's traditional reinsurance program.  Five factors generally contributed
to this demand: steadily declining commodity prices during the primary sales
season, increased federal subsidies for purchasers of crop insurance, rapid
market acceptance of this product for newly offered specialty crops, a
technical error in the quoting software for one specialty crop which
understated the applicable premium for that crop, and disproportionately high
coverage levels for certain crops. As a result, the Company elected to close
its sales season early and limit available coverage for some crops.  In order
to maintain its aggregate retained risk near historic levels, the Company's
excess reinsurance costs increased by $8.2 million during 1999 as compared to
1998.  The Company expects $7.5 million of these additional excess reinsurance
costs to continue in the future. The Company also experienced additional costs
in 1999 of $1.5 million in the placement of its quota share reinsurance program
for CRCPlus. In addition, the Company ceded a portion of the profit share
related to approximately $35.0 million of its retained premiums under the MPCI
program to reinsurers participating in its overall crop reinsurance program.
The Company expects similar cessions to continue in the future in order to
secure the required reinsurance capacity for its crop segment.

As a result of these developments, the Company's retained MPCI pool increased
7.7% from 1998 to 1999 as compared to a 33.6% increase in the Company's total
MPCI premium.  The Company also experienced higher operating expenses
associated with the early sales closing for its CRCPlus product. These
expenses totaled $4.1 million for the first nine months of 1999.  The overall
effect was to reduce crop insurance operating income by $18.4 million for the
first nine months of 1999 as compared to the first nine months of 1998. While
the Company may not continue to offer certain proprietary crop products for
some specialty crops, the Company expects the profits resulting from increased
revenues in the Company's total crop segment associated with CRCPlus, to exceed
the additional costs of the Company's crop segment reinsurance program.

<PAGE>
The Company's net investment income declined from approximately $7.2 million
and $21.3 million for the three and nine months ended September 30, 1998 to
$6.1 million and $18.7 million for the three and nine months ended September
30, 1999.  This decline in the investment income of the Company was affected
by a decline in the size of the average outstanding portfolio of the Company
from $515.2 million and $496.5 million during the three and nine months ended
September 30, 1998 to $467.4 million and $479.0 million for the three and nine
months ended September 30, 1999.  In addition, the yield on the portfolio
declined from 5.6% and 5.7% during the three and nine months ended September
30, 1998 to 5.2% for the three and nine months ended September 30, 1999.  This
decrease in yield resulted from several of the Company's higher yielding
preferred stock investments being called and the Company increasing its
holdings in tax advantaged municipal securities, as well as a decrease in
overall interest rates in the Company's fixed income portfolio and short term
cash equivalent portfolio from the first nine months of 1998 to the first nine
months of 1999.  In addition,  the Company's mortgage backed security portfolio
was, on average, $23 million less for the first nine months of 1999 versus 1998
as the Company reduced both the interest rate risk and the investment yield on
its mortgage backed portfolio through the elimination of substantially all of
its inverse floating rate collateralized mortgage obligations.  As the Company
discontinued nearly one-third of its property and casualty business, the
duration of the portfolio was shortened and the overall credit quality of the
portfolio improved in order to maintain needed liquidity.  Net realized gains
approximated $1.1 million and $6.4 million for the three and nine months ended
September 30, 1999 as compared to a realized loss of $.1 million and realized
gains of $5.4 million for the three and nine months ended September 30, 1998.

A comparison of the Company's results for the first nine months of 1999 to the
first nine months of 1998 also was affected by certain nonrecurring events.  As
part of the previously announced restructuring of the Company's property and
casualty segment, the Company recorded a restructuring charge of approximately
$1.4 million in the first nine months of 1999, principally associated with
severance benefits paid to employees in the discontinued areas.  During the
first nine months of 1998 the Company recognized underwriting profits of $3.3
million in its crop segment, as compared to a profit of $.1 million during the
first nine months of 1999, both resulting from the recording of additional
profit sharing from the previous year under the Company's MPCI program.  In
addition, the Company adopted SOP 97-3 on January 1, 1999 resulting in a
cumulative effect of a change in accounting principles of $338,000.  (See
"Recent Accounting Standards").

Recent Accounting Standards

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and Hedging Activities", which establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000. Management does not expect the adoption of SFAS No. 133 to
have a material impact to the Company's consolidated financial statements.

In December 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants (AcSEC) issued Statement of Position
97-3, "Accounting by Insurance and Other Enterprises for  Insurance-Related
Assessments" (SOP 97-3). SOP 97-3 provides guidance for determining when an
entity should recognize a liability for guaranty-fund and other
insurance-related assessments, how to measure that liability, and when an
asset may be recognized for the recovery of such assessments through premium
tax offsets. The Company adopted SOP 97-3 on January 1, 1999 resulting in a
cumulative effect of change in accounting principles of $338,000.


                         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, make investments in
subsidiaries, and repurchase shares of the Company's stock.

<PAGE>

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.

Under the American Agrisurance profit sharing agreement, American Agrisurance
receives up to 50% of the crop insurance profit after expenses and a margin
retained by the Insurance Companies based upon a formula established by the
Company and approved by the Nebraska Department of Insurance. If the calculated
profit share is negative, such negative amounts are carried forward and offset
future profit sharing payments. These amounts are distributed in the form of a
dividend to the Company.

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 1999, the
statutory limitation on dividends from insurance company subsidiaries to the
parent without further insurance departmental approval is approximately $15.9
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 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 1997 in an amount equal
to the Preferred Securities and the Common Securities.  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
September 30, 1999, the Company had $94.875 million outstanding at a weighted
annual interest cost of 9.2%.

As of September 30, 1999, the Company maintains a five-year revolving credit
facility (the "Revolving Credit Facility") with its bank lenders in the amount
of $60.5 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.   As of September 30, 1999,
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 September 30, 1999, the Company held cash and invested assets, excluding
investment in subsidiaries, of $10.6 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.

<PAGE>
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 year, 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 received $51.5 million in payments under the MPCI
program in March of 1999.


Changes in Financial Condition

The Company's stockholders' equity decreased by approximately $30.3 million at
September 30, 1999 as compared to December 31, 1998.  The principal components
of this decrease were a net loss of $18.3 million during the first nine months
of 1999 and a decrease in the value of the Company's investment portfolio
causing the unrealized gain on available-for-sale securities, net of tax, to
decrease from $5.3 million at December 31, 1998 to a $6.9 million unrealized
loss at September 30, 1999.  This change in the unrealized gain on
available-for-sale securities was attributable to a decline in the unrealized
gain in the Company's fixed maturity and equity securities.

Consolidated Cash Flows

Cash provided by operating activities was $6.5 million for the nine months
ended September 30, 1999 compared to cash provided from operations for the same
period in 1998 of  $81.8 million.  The major components of this decrease in
cash flow from period to period were profit sharing payments received from the
federal government under the Company's MPCI crop insurance program of $57.0
million in the first nine months of 1998 compared to $51.5 million in the first
nine months of 1999, $21.3 million in payments made in the first nine months of
1999 related to reinsurance on the Company's discontinued lines of business,
and declining premium volume in the Company's property and casualty segment.

Inflation

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


Quantitative and Qualitative Disclosure about Market Risk

The Company's balance sheet includes a significant amount of assets and
liabilities whose fair value are subject to market risk. Market risk is the
risk of loss arising from adverse changes in market interest rates or prices.
The Company currently has interest rate risk as it relates to its fixed
maturity securities and mortgage loans and equity price risk as it relates to
its marketable equity securities. In addition, the Company is also subject to
interest rate risk at the time of refinancing as it relates to its mandatorily
redeemable Preferred Securities. The Company's market risk sensitive
instruments are entered into for purposes other than trading.

At September 30, 1999, the Company had $320.9 million of fixed maturity
securities and mortgage loans and $53.0 million of marketable equity securities
that were subject to market risk. The Company's investment strategy is to
manage the duration of the portfolio relative to the duration of the
liabilities while managing interest rate risk. In addition, the Company has the
ability to hold its maturity investments until maturity and therefore would not
expect to recognize a material adverse impact on income or cash flows.

<PAGE>
The Company's Preferred Securities of $94.875 million at September 30, 1999,
mature in August 2027 and are redeemable at the Company's option in
August 2002. The Company will continue to monitor the interest rate environment
and evaluate refinancing opportunities as the redemption and maturity date
approaches.

The Company uses two models to analyze the sensitivity of its market risk
assets and liabilities. For its fixed maturity securities, mortgage loans and
mandatorily redeemable Preferred Securities, the Company uses duration modeling
to calculate changes in fair value. For its marketable equity securities, the
Company uses a hypothetical 20% decrease in the fair value of these securities.
Actual results may differ from the hypothetical results assumed in this
disclosure due to possible actions taken by management to mitigate adverse
changes in fair value and because fair values of securities may be affected by
credit concerns of the issuer, prepayment speeds, liquidity of the security
and other general market conditions. The sensitivity analysis duration model
used by the Company produces a loss in fair value of $17.4 million on its fixed
maturity securities and mortgage loans and a gain in fair value of $8.9 million
on its mandatorily redeemable Preferred Securities, based on a 100 basis point
increase in interest rates. The  hypothetical 20% decrease in fair value of the
Company's marketable equity securities produces a loss in fair value of
$10.6 million.

Year 2000

The Year 2000 issue is the result of computer programs and microcontrollers
which recognize only two digits rather than four to identify the year. Any
computer program or microcontroller that has a date sensitive function may
recognize a date of "00" as the year 1900 rather than the year 2000. If not
corrected, this could cause computers and other devices dependent upon
microcontrollers to fail or perform miscalculations.

The Company identified its information technology ("IT") systems requiring
modification to be Year 2000 compliant. The Company developed and implemented
a corrective plan utilizing both internal and external resources to make
necessary modifications to, and to test, the Company's IT systems for Year 2000
compliance. The Company has addressed the Year 2000 issue with respect to the
Company's IT systems and believes that they are Year 2000 compliant.

Additionally, the Company has reviewed and believes its Non-IT systems which
rely on microprocessors, such as copiers, fax machines, telephone equipment and
mail room equipment, are Year 2000 compliant. The Company has also communicated
with the lessors and other providers and believes their Non-IT systems are Year
2000 compliant.

The Company relies on various third parties in the normal course of its
operations and has identified certain third parties with which it has material
relationships. These include insurance producers, reinsurers, government
agencies, banks and providers of telecommunication and utility. The Company has
communicated with and received responses that these material third parties
are Year 2000 compliant.

One of the more significant third parties is the Risk Management Agency ("RMA")
which, along with the Federal Crop Insurance Corporation ("FCIC"), administers
the federal crop insurance program. The RMA calculates and settles the
Company's MPCI profit share and expense reimbursement. The RMA has publicly
stated that all RMA and FCIC systems will be Year 2000 compliant as of the
filing date of this 10-Q.

The Company has conducted a comprehensive review of potential claims related to
Year 2000 issues which might be submitted in conjunction with policies of
insurance it currently underwrites. Although the Company has concluded Year
2000 exposures are not covered under its existing insurance policies, the
Company is acting to eliminate, reduce or mitigate potential claims for
coverage of Year 2000 exposures through the use of exclusionary language, new
underwriting procedures and pricing practices, withdrawal from certain classes
of business, and establishment of a specialized unit within its claims
department to respond to such claims.

<PAGE>

The Company has expensed costs of approximately $2.9 million relating to the
year 2000 issue since inception of the project, and did not incur any expenses
during the nine months ended September 30, 1999. The Company does not
anticipate any additional expenses related to the Year 2000 project.

Although the Company has addressed the Year 2000 issues, it currently is
assessing the need to develop contingency plans, particularly with respect to
certain third parties with whom it has material relationships. The Company
anticipates this assessment will be complete by December 1999.

Particularly because of the potentially wide-scale disruption of general
infrastructure and business systems, and despite the Company's activities in
regards to the Year 2000 issue, there can be no assurance that computer and
microcontroller failures related to the Year 2000 will not interfere with the
Company's normal business operations, result in unintended and unexpected
claims under policies of insurance written by the Company, or otherwise have a
material adverse affect upon the Company's business, financial condition and
results of operations.


Sale of Phoenix Indemnity Insurance Company


On May 11, 1999, the Company entered into a definitive agreement with Millers
American Group, Inc. ("Millers") for the sale of the Company's non-standard
automobile business, including Phoenix Indemnity Insurance Company
("Phoenix Indemnity ") to Millers. Under this agreement, the Company
transfered all of its non-standard  automobile business and all outstanding
stock of Phoenix Indemnity to Millers in exchange for approximately $25 million
in cash in September 1999. The proceeds of $25 million is subject to certain
post closing adjustments.


Class Action Suit

On August 17, 1999 James M. Wallace, III filed suit in Lonoke County, Arkansas
Circuit Court against the Company and its American Agrisurance, Inc. and
American Growers Insurance Company subsidiaries. The suit seeks recognition
as a class action on behalf of all persons who submitted applications for
CRCPlus coverage for rice during 1999. The plaintiff alleges defendants
breached a contract of insurance and acted in bad faith by offering to accept
his application at a maximum coverage level of $0.015 per pound rather than
$0.03 per pound, and that he withdrew his application. The suit seeks damages,
interest and attorneys fees.

Defendants removed the action to the United States District Court for the
Eastern District of Arkansas, Little Rock Division on September 16, 1999 and
filed an answer denying the plaintiff's claims and raising various defenses.
The plaintiff has initiated discovery and defendants have moved to dismiss
portions of the Complaint. While the case remains in an early procedural stage
the Company continues to believe it is without merit.


<PAGE>






              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES


PART II.      OTHER INFORMATION


Item 6.       Exhibits and Reports on Form 8-K

     (a)      Exhibits

              See Exhibit Index.

     (b)      Reports on Form 8-K:

              Report on Form 8-K for an event (the issuance of a press release
              announcing that a class action suit regarding CRCPlus(TM) and
              seeking damages and attorney fees has been filed against the
              Company and its subsidiaries in Lonoke County, Arkansas Circuit
              Court) which occurred on August 26, 1999.

              Report on Form 8-K for an event (the issuance of a press release
              announcing the Company had completed the sale of the Company's
              non-standard automobile business, including Phoenix Indemnity
              Insurance Company, to Millers American Group, Inc.) which
              occurred on September 20, 1999.


































<PAGE>



                                   SIGNATURES

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



                                       ACCEPTANCE INSURANCE COMPANIES INC.



November  12, 1999                 /S/KENNETH C COON

                                      Kenneth C. Coon
                                      Chairman and Chief Executive Officer


November  12, 1999                /S/ GEORGIA M MACE

                                      Georgia M. Mace
                                      Chief Financial Officer and Treasurer


<PAGE>



              ACCEPTANCE INSURANCE COMPANIES INC. AND SUBSIDIARIES
                          QUARTERLY REPORT ON FORM 10-Q
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999

                                  EXHIBIT INDEX

NUMBER        EXHIBIT DESCRIPTION


21            Subsidiaries of the Registrant

27            Financial Data Schedule.