<PAGE>   1

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                   FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

(MARK ONE)
[X]   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 333-7944

                                CGA GROUP, LTD.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<CAPTION>
                         BERMUDA                                                 98-0173536
<S>                                                       <C>
             (STATE OR OTHER JURISDICTION OF                                  (I.R.S. EMPLOYER
             INCORPORATION OR ORGANIZATION)                                  IDENTIFICATION NO.)
                    CRAIG APPIN HOUSE
                     8 WESLEY STREET
                  HAMILTON HM11 BERMUDA                                        NOT APPLICABLE
        (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                                 (ZIP CODE)
</TABLE>

                                 (441) 296-3165
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                 NOT APPLICABLE
             (FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR,
                         IF CHANGED SINCE LAST REPORT)

     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 AND EXCHANGE ACT
OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS:

                              YES [X]      NO [ ]

     INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:

                                   28,005,648
                           (AS OF SEPTEMBER 30, 1999)

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

                                CGA GROUP, LTD.

                            ------------------------

                               TABLE OF CONTENTS

PART I -- FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Item 1. Financial Statements
     Unaudited Consolidated Balance Sheets -- September 30,
      1999 and December 31, 1998............................     1
     Unaudited Consolidated Statements of
      Operations -- Three Months and Nine Months Ended
      September 30, 1999 and 1998...........................     2
     Unaudited Consolidated Statements of Changes in
      Mezzanine Equity -- Nine Months Ended September 30,
      1999 and the Year Ended December 31, 1998.............     3
     Unaudited Consolidated Statements of Changes in
      Shareholders' Equity -- Nine Months Ended September
      30, 1999 and the Year Ended December 31, 1998.........     4
     Unaudited Consolidated Statements of Cash Flows -- Nine
      Months Ended September 30, 1999 and 1998..............     5
     Notes to Unaudited Consolidated Financial Statements...     6
  Item 2. Management's Discussion and Analysis of Financial
     Condition and
     Results of Operations..................................    19

PART II -- OTHER INFORMATION
  Item 6. Exhibits and Reports on Form 8-K..................  II-2
  Signatures................................................  II-3
  Index to Exhibits.........................................  II-4
</TABLE>
<PAGE>   3

PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                                CGA GROUP, LTD.

                          CONSOLIDATED BALANCE SHEETS
                          (EXPRESSED IN U.S. DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                              SEPTEMBER 30,    DECEMBER 31,
                                                                  1999             1998
                                                              -------------    ------------
<S>                                                           <C>              <C>
ASSETS
Fixed maturity securities available for sale at fair value
(amortized cost: $150,277,816 and $99,560,861)..............  $145,450,928     $100,488,537
  Other investments.........................................     5,000,000       30,000,000
  Cash and short-term investments...........................     4,975,944        2,598,140
  Premiums receivable.......................................     2,295,762        3,228,497
  Management fees receivable................................       383,559        1,093,411
  Accrued investment income.................................     4,926,081        3,679,763
  Deferred acquisition costs................................     4,291,281        3,202,557
  Prepaid reinsurance premiums..............................       332,032        1,286,782
  Deferred premiums.........................................       300,305               --
  Reinsurance recoverable...................................            --       67,400,000
  Other assets..............................................     3,110,434        2,926,246
                                                              ------------     ------------
  Total assets..............................................  $171,066,326     $215,903,933
                                                              ============     ============
LIABILITIES
  Unearned premiums.........................................  $  1,234,036     $    821,124
  Reserve for losses and loss adjustment expenses...........     3,019,268       90,200,000
  Reinsurance balances payable..............................       149,432          420,660
  Accrued costs and expenses................................     4,073,711        4,355,767
                                                              ------------     ------------
  Total liabilities.........................................     8,476,447       95,797,551
                                                              ------------     ------------
MEZZANINE EQUITY
  Preferred stock, $.01 par value:
  Series A, 10,000,000 shares authorized....................    84,303,397       75,291,100
  Series B, 10,000,000 shares authorized....................            --       51,317,149
                                                              ------------     ------------
  Total mezzanine equity....................................    84,303,397      126,608,249
                                                              ------------     ------------
SHAREHOLDERS' EQUITY
  Common stock, $.01 par value, 268,000,000 and 20,000,000
     shares authorized, 28,005,648 and 9,100,000 issued and
     outstanding............................................       280,057           91,000
  Additional paid-in-capital -- common stock................    95,871,046       42,486,057
  Series C preferred stock, $.01 par value, 52,000,000
     shares authorized, 44,971,346 issued and outstanding...       449,713               --
  Additional paid-in capital -- Series C preferred stock....    49,466,298               --
  Accumulated other comprehensive income (loss).............    (4,826,888)         927,676
  Deficit...................................................   (62,953,744)     (50,006,600)
                                                              ------------     ------------
  Total shareholders' equity (deficit)......................    78,286,482       (6,501,867)
                                                              ------------     ------------
  Total liabilities and shareholders' equity................  $171,066,326     $215,903,933
                                                              ============     ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                        1
<PAGE>   4

                                CGA GROUP, LTD.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                          (EXPRESSED IN U.S. DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED              NINE MONTHS ENDED
                                           SEPTEMBER 30                    SEPTEMBER 30
                                    ---------------------------    ----------------------------
                                       1999            1998            1999            1998
                                    -----------    ------------    ------------    ------------
<S>                                 <C>            <C>             <C>             <C>
REVENUES
Gross premiums written............  $ 3,255,423    $  3,163,321    $ 11,110,516    $  6,893,540
  Ceded premiums..................   (1,071,914)       (280,847)     (1,879,393)       (453,314)
                                    -----------    ------------    ------------    ------------
  Net premiums written............    2,183,509       2,882,474       9,231,123       6,440,226
  Change in unearned premiums.....      156,610         145,062        (343,461)       (692,214)
                                    -----------    ------------    ------------    ------------
  Net premiums earned.............    2,340,119       3,027,536       8,887,662       5,748,012
  Net investment income...........    2,379,160       1,746,653       6,399,479       5,959,548
  Net realized gains (losses).....     (132,986)        239,175          (2,106)        791,556
  Management fees.................      506,894       1,472,589       2,130,353       2,154,584
                                    -----------    ------------    ------------    ------------
  Total Revenues..................    5,093,187       6,485,953      17,415,388      14,653,700
                                    -----------    ------------    ------------    ------------
EXPENSES
  Operating expenses..............    3,424,867       4,043,755       9,940,048      11,481,292
  Policy acquisition costs........      186,802         129,944         502,056         275,531
  Commitment fees.................      151,233         151,233         451,233         448,767
  Excess of loss facility.........       50,000          50,000         150,000         150,000
  Losses and loss adjustment
     expenses.....................      300,000         700,000       8,050,000       1,300,000
                                    -----------    ------------    ------------    ------------
  Total expenses..................    4,112,902       5,074,932      19,093,337      13,655,590
                                    -----------    ------------    ------------    ------------
Income (loss) before cumulative
  effect of change in accounting
  principle.......................      980,285       1,411,021      (1,677,949)        998,110
Cumulative effect of change in
  accounting principle............           --      (3,928,238)             --      (3,928,238)
                                    -----------    ------------    ------------    ------------
NET INCOME (LOSS).................      980,285      (2,517,217)     (1,677,949)     (2,930,128)
  Pay-in-kind
     dividends -- preferred
     stock........................   (2,953,150)     (5,275,763)    (11,269,195)    (14,720,165)
  Accretion -- preferred stock....     (147,966)       (198,103)       (494,034)       (749,495)
                                    -----------    ------------    ------------    ------------
NET LOSS AVAILABLE TO COMMON
  SHAREHOLDERS....................  $(2,120,831)   $ (7,991,083)   $(13,441,178)   $(18,399,788)
Basic and diluted loss per common
  share...........................  $     (0.08)   $      (0.88)   $      (0.54)   $      (2.02)
                                    ===========    ============    ============    ============
Weighted average shares
  outstanding.....................   28,005,648       9,100,000      24,908,935       9,100,000
                                    ===========    ============    ============    ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                        2
<PAGE>   5

                                CGA GROUP, LTD.

             CONSOLIDATED STATEMENTS OF CHANGES IN MEZZANINE EQUITY
                          (EXPRESSED IN U.S. DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                NINE MONTHS
                                                                   ENDED              YEAR ENDED
                                                             SEPTEMBER 30, 1999    DECEMBER 31, 1998
                                                             ------------------    -----------------
<S>                                                          <C>                   <C>
MEZZANINE EQUITY
SERIES A PREFERRED STOCK
Balance -- beginning of period.............................     $     32,119         $     27,965
Stock issued...............................................               --                   --
Pay-in-kind dividends paid.................................            3,427                4,154
                                                                ------------         ------------
Balance -- end of period...................................           35,546               32,119
                                                                ------------         ------------
ADDITIONAL PAID-IN-CAPITAL -- SERIES A PREFERRED
Balance -- beginning of period.............................       75,258,981           65,504,534
Fair value of warrants.....................................               --           (1,347,300)
Pay-in-kind dividends paid.................................        8,564,973           10,379,765
Accretion to redemption value..............................          342,849              514,273
Accretion on warrants......................................          101,048              207,709
                                                                ------------         ------------
Balance -- end of period...................................       84,267,851           75,258,981
                                                                ------------         ------------
TOTAL SERIES A PREFERRED STOCK.............................     $ 84,303,397         $ 75,291,100
                                                                ============         ============
SERIES B PREFERRED STOCK
Balance -- beginning of period.............................     $     16,000         $     16,000
Pay-in-kind dividends paid.................................            6,687                   --
Stock exchanged for common stock...........................          (22,687)                  --
                                                                ------------         ------------
Balance -- end of period...................................               --               16,000
                                                                ------------         ------------
ADDITIONAL PAID-IN-CAPITAL -- SERIES B PREFERRED
Balance -- beginning of period.............................       37,284,985           37,059,371
Pay-in-kind dividends paid.................................       16,710,271                   --
Accretion to redemption value..............................           50,137              225,614
Unaccreted issuance costs..................................        2,648,879                   --
Stock exchanged for common stock...........................      (56,694,272)                  --
                                                                ------------         ------------
Balance -- end of period...................................               --           37,284,985
                                                                ------------         ------------
PAY-IN-KIND DIVIDENDS ACCRUED -- SERIES B
Balance -- beginning of period.............................       14,016,164            4,439,231
Dividends accrued..........................................        2,700,795            9,576,933
Dividends paid.............................................      (16,716,959)                  --
                                                                ------------         ------------
Balance -- end of period...................................               --           14,016,164
                                                                ------------         ------------
TOTAL SERIES B PREFERRED STOCK.............................     $         --         $ 51,317,149
                                                                ============         ============
TOTAL MEZZANINE EQUITY.....................................     $ 84,303,397         $126,608,249
                                                                ============         ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                        3
<PAGE>   6

                                CGA GROUP, LTD.

           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                          (EXPRESSED IN U.S. DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                NINE MONTHS
                                                                   ENDED               YEAR ENDED
                                                             SEPTEMBER 30, 1999    DECEMBER 31, 1998
                                                             ------------------    ------------------
<S>                                                          <C>                   <C>
SHAREHOLDERS' EQUITY
COMMON STOCK
Balance -- beginning of period.............................     $     91,000          $     91,000
Stock issued (18,905,648 shares)...........................          189,057                    --
                                                                ------------          ------------
Balance -- end of period...................................          280,057                91,000
                                                                ------------          ------------
ADDITIONAL PAID-IN-CAPITAL -- COMMON STOCK
Balance -- beginning of period.............................       42,486,057            42,086,353
Stock issued...............................................       56,527,902                    --
Fair value of warrants.....................................               --             1,347,300
Accretion of Series A preferred stock to redemption
  value....................................................         (342,849)             (514,273)
Accretion of Series B preferred stock to redemption
  value....................................................          (50,137)             (225,614)
Accretion on warrants......................................         (101,048)             (207,709)
Unaccreted issuance costs (Series B).......................       (2,648,879)                   --
                                                                ------------          ------------
Balance -- end of period...................................       95,871,046            42,486,057
                                                                ------------          ------------
SERIES C CONVERTIBLE PREFERRED STOCK
Balance -- beginning of period.............................     $         --          $         --
Stock issued (44,971,346 shares)...........................          449,713                    --
                                                                ------------          ------------
Balance -- end of period...................................          449,713                    --
                                                                ------------          ------------
ADDITIONAL PAID-IN-CAPITAL -- SERIES C PREFERRED
Balance -- beginning of period.............................               --                    --
Stock issued...............................................       51,715,259                    --
Employee loans.............................................       (1,045,961)                   --
Issuance costs.............................................       (1,203,000)                   --
                                                                ------------          ------------
Balance -- end of period...................................       49,466,298                    --
                                                                ------------          ------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance -- beginning of period.............................          927,676             1,638,092
Decrease during the period.................................       (5,754,564)             (710,416)
                                                                ------------          ------------
Balance -- end of period...................................       (4,826,888)              927,676
                                                                ------------          ------------
DEFICIT
Balance -- beginning of period.............................      (50,006,600)          (12,057,969)
Net loss...................................................       (1,677,949)          (17,987,779)
Series A pay-in-kind dividends.............................       (8,568,400)          (10,383,919)
Series B pay-in-kind dividends.............................       (2,700,795)           (9,576,933)
                                                                ------------          ------------
Balance -- end of period...................................      (62,953,744)          (50,006,600)
                                                                ------------          ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT).......................     $ 78,286,482          $ (6,501,867)
                                                                ============          ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                        4
<PAGE>   7

                                CGA GROUP, LTD.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (EXPRESSED IN U.S. DOLLARS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                NINE MONTHS           NINE MONTHS
                                                                   ENDED                 ENDED
                                                             SEPTEMBER 30, 1999    SEPTEMBER 30, 1998
                                                             ------------------    ------------------
<S>                                                          <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss...................................................     $ (1,677,949)         $ (2,930,128)
Adjustments to reconcile loss to net cash used in operating
  activities:
  Amortization of investments..............................          300,469               112,386
  Depreciation expense.....................................          380,468               259,470
  Realized loss (gain) on sale of investments..............            2,106              (791,556)
  Realized loss on sale of fixed assets....................               --                26,282
Changes in assets and liabilities:
  Premiums receivable......................................          932,735            (2,525,657)
  Management fees receivable...............................          709,852                    --
  Accrued investment income................................       (1,246,318)              718,730
  Deferred acquisition costs...............................       (1,088,724)           (2,115,018)
  Prepaid reinsurance premiums.............................          954,750                    --
  Deferred premiums........................................         (300,305)                   --
  Reinsurance recoverable..................................       67,400,000                    --
  Other assets.............................................         (413,577)           (1,114,608)
  Organization costs.......................................               --             4,421,353
  Unearned premiums........................................          412,912               692,215
  Reserve for losses and loss adjustment expenses..........      (87,180,732)            1,300,000
  Reinsurance balances payable.............................         (271,228)              280,847
  Accrued costs and expenses...............................         (282,056)            1,135,387
                                                                ------------          ------------
Net cash provided by (used in) operating activities........      (21,367,597)             (530,297)
                                                                ------------          ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cost of fixed maturity investments acquired................      (82,438,781)          (91,550,302)
Proceeds from sale of fixed maturity investments...........       56,419,250            88,549,931
Purchases of fixed assets..................................         (151,079)             (624,187)
Note receivable............................................               --               250,000
                                                                ------------          ------------
Net cash used in investing activities......................      (26,170,610)           (3,374,558)
                                                                ------------          ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on issuance of Series C preferred stock...........       52,164,972                    --
Employee loans.............................................       (1,045,961)                   --
Issuance costs of Series C preferred stock.................       (1,203,000)                   --
                                                                ------------          ------------
Net cash provided by financing activities..................       49,916,011                    --
                                                                ------------          ------------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM
  INVESTMENTS..............................................        2,377,804            (3,904,855)
CASH AND SHORT-TERM INVESTMENTS -- BEGINNING OF PERIOD.....        2,598,140             7,199,106
                                                                ------------          ------------
CASH AND SHORT-TERM INVESTMENTS -- END OF PERIOD...........     $  4,975,944          $  3,294,251
                                                                ============          ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                        5
<PAGE>   8

                                CGA GROUP, LTD.

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
                          (EXPRESSED IN U.S. DOLLARS)

1. GENERAL

     The interim consolidated financial statements, which include the accounts
of CGA Group, Ltd. and its subsidiaries, have been prepared on the basis of
accounting principles generally accepted in the United States of America and, in
the opinion of management, reflect all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of results for such
periods. The results of operations and cash flows for any interim period are not
necessarily indicative of results for the full year. These financial statements
should be read in conjunction with the consolidated financial statements, and
related notes thereto, included in CGA Group's 1998 Annual Report on Form 10-K.

     CGA Group is a holding company which was incorporated in Bermuda on June
21, 1996. CGA Group has two wholly owned subsidiaries. Commercial Guaranty
Assurance, Ltd. was incorporated in Bermuda on October 22, 1996. Commercial
Guaranty Assurance is licensed as a class 3 insurer under the Insurance Act 1978
of Bermuda which authorizes it to carry on insurance business of all classes in
or from within Bermuda subject to its compliance with the solvency margin,
liquidity ratio and other requirements imposed on it by the Act. Commercial
Guaranty Assurance has a "Triple-A" "claims paying ability" rating from Duff &
Phelps Credit Rating Company and has also been rated in the highest rating
category assigned by each of the two Canadian rating agencies, Dominion Bond
Ratings Service and Canadian Bond Ratings Service. Commercial Guaranty Assurance
issues financial guaranty insurance policies, which are the functional
equivalent of direct-pay letters of credit, to insure payment of interest,
principal and other amounts payable in respect of notes, securities, and other
financial obligations. CGA Investment Management, Inc. was incorporated in the
state of Delaware in July 1996 by the founders of CGA Group and was acquired at
nominal cost to CGA Group on June 9, 1997. CGA Investment Management did not
commence operations until after its acquisition by CGA Group. CGA Investment
Management is registered as an investment advisor with the United States
Securities and Exchange Commission under the Investment Advisors Act of 1940, as
amended. CGA Investment Management provides investment management and financial
advisory services primarily to specialized investment vehicles and for the U.S.
and international structured finance markets. CGA Investment Management and its
employees are based in New York City, New York.

     Operations commenced following the completion of CGA Group's private
placement offering which occurred on June 17, 1997. The initial capitalization
of CGA Group consisted of 12,000 common shares with a par value of $1.00 per
share. All 12,000 shares were redeemed on June 17, 1997 at which time CGA Group
completed its recapitalization.

     As part of the recapitalization on June 17, 1997, CGA Group issued 2.6
million shares of Series A preferred stock with a par value of $.01 per share
for a price of $25 per share. The shares of Series A preferred stock are
entitled to a 13.75% quarterly compounding dividend paid in additional shares of
Series A preferred stock. The Series A preferred stockholders also received
warrants, which are transferable separately from the Series A preferred stock,
which represent the right to purchase on or prior to June 17, 2007 a total of
270,000 shares of common stock at an exercise price of $.01 per share. The
warrants were valued at $4.99 per share and were accounted for as additional
paid-in-capital to the common stock.

     As part of the recapitalization on June 17, 1997, CGA Group issued 1.6
million shares of Series B preferred stock with a par value of $.01 per share
for a price of $25 per share. The shares of Series B preferred stock were
entitled to a 20% quarterly compounding dividend paid in additional shares of
Series B preferred stock. The shares of Series B preferred stock were sold to
investors as part of investment units which also included commitments to
purchase an additional $60 million of Series B preferred stock in the aggregate
upon the occurrence of certain funding events, in order to maintain Commercial
Guaranty Assurance's "Triple-A" rating from Duff & Phelps. CGA Group pays a
$600,000 annual fee to the holders of the investment units for their
commitments. The investment units also included an aggregate of 7,827,957 shares
of common stock out
                                        6
<PAGE>   9
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of a total of 9,100,000 million shares of common stock issued pursuant to the
recapitalization at a price of $5 per share.

     The remaining 1,272,043 shares of common stock were sold to the sponsoring
investors and certain members of management who also received 847,729 warrants,
which each represent the right to purchase one share of common stock on or prior
to June 17, 2007 at an exercise price of $5 per share. The exercise price on
these warrants is subject to reduction based on the sales price of additional
common stock or equivalents. A reduction in the exercise price occurred on March
31, 1999 from $5.00 to $2.12 as a result of the Series B preferred stock
conversion and Series C preferred stock issuance described below. An additional
1,494,771 warrants have been authorized for issuance to certain employees, which
each represent the right to purchase one share of common stock on or prior to
June 17, 2007 at an exercise price of $5 per share.

     On March 31, 1999, CGA Group sold 43,997,863 shares of Series C preferred
stock, par value $.01 per share, to existing shareholders for an aggregate sales
price of $50,996,795. Concurrent with the sale of the Series C preferred stock,
the outstanding 1,600,000 of Series B preferred stock and the 668,678 shares of
Series B preferred stock declared as pay-in-kind dividends thereon, totaling
2,268,678 shares valued at $56,716,950, were exchanged for 18,905,648 shares of
common stock based on an exchange price of $3 per share of common stock.

     On April 26, 1999, CGA Group sold 973,483 shares of Series C preferred
stock to employees of CGA Group and its subsidiaries. The shares were sold for
$1.20 each for an aggregate sales price of $1,168,179. CGA Group received cash
proceeds of $122,218 and the remaining $1,045,961 was financed by CGA Group by
granting employee loans up to a maximum of 90% of the purchase price of the
shares. The employee loans were granted in the form of promissory notes which
bear interest at a rate of 7% per annum and are repayable in three equal
installments on April 26, 2000, April 26, 2001 and April 26, 2002.

2. SIGNIFICANT ACCOUNTING POLICIES

     The consolidated financial statements have been prepared on the basis of
accounting principles generally accepted in the United States of America (GAAP)
and include the accounts of CGA Group, Commercial Guaranty Assurance, and CGA
Investment Management. All significant intercompany accounts and transactions
have been eliminated in consolidation. The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

  a) Premiums

     Commercial Guaranty Assurance's insurance contracts are classified as
long-duration contracts for accounting purposes, as the contracts are expected
to remain in force for an extended period. The contracts generally are not
subject to unilateral changes in their provisions and require insurance
protection for extended periods. Premium rates generally are level throughout
the period of coverage. Premiums are recognized as written upon inception of
multi-year policies. Up-front premiums are earned pro-rata over the period of
risk. Installment premiums are earned over each installment period.

  b) Deferred premiums

     The collection of premiums owed to Commercial Guaranty Assurance related to
certain insured securities are deferred. Certain securities that were purchased
by clients at significant discounts from their par values generate cash flows
that are insufficient to cover the related insurance premiums. The premiums are

                                        7
<PAGE>   10
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

earned over the period of risk and are recorded at the present value of premiums
that will be received upon the maturity of such securities.

  c) Deferred acquisition costs

     Deferred acquisition costs are expenses that vary with and are primarily
related to the production of business. These costs include compensation,
underwriting, certain rating agency fees, legal and other expenses. Deferred
acquisition costs are amortized on a straight-line basis over the estimated term
of the related insured risks. Commercial Guaranty Assurance evaluates the
recoverability of deferred acquisition costs whenever changes in circumstances
warrant. If it is determined that an impairment exists, the excess of the
unamortized balance over deferred acquisition costs will be charged to earnings.

  d) Reinsurance

     In the ordinary course of business, Commercial Guaranty Assurance cedes
exposures under various reinsurance contracts designed to limit losses from
certain risks and to protect capital and surplus. The reinsurance of risk does
not relieve Commercial Guaranty Assurance of its original liability to its
policyholders. In the event that a reinsurer were unable to meet its obligations
under the existing reinsurance contracts, Commercial Guaranty Assurance would be
liable for such defaulted amounts.

     Prepaid reinsurance premiums represent the portion of premiums ceded to
reinsurers applicable to the unexpired terms of the reinsurance contracts in
force.

  e) Reserve for losses and loss adjustment expenses

     A case basis reserve for unpaid losses and loss adjustment expenses may be
recorded at the present value of the estimated loss when, in management's
opinion, the likelihood of a future loss is probable and determinable at the
balance sheet date. A general reserve is calculated by applying a loss factor to
the total net par amount outstanding of Commercial Guaranty Assurance's insured
obligations over the expected term of such insured obligations.

     Management believes that the current level of the provision is adequate to
cover the ultimate net cost of claims. The provision is necessarily an estimate
and there can be no assurance that the ultimate liability will not differ from
such estimates. Commercial Guaranty Assurance will monitor the provision on an
ongoing basis and may periodically adjust the provision based on actual loss
experience, the future mix of business and economic conditions.

     The provision for losses is reflected on the balance sheet gross of any
losses recoverable from reinsurers.

  f) Investments

     In accordance with the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," investments in debt securities are designated as available-for-sale
and are recorded at fair value, being quoted market value. Any resulting
unrealized gains or losses are reflected as a separate component of
shareholder's equity as accumulated other comprehensive income and as a separate
component of the statement of operations as other comprehensive income. Short-
term investments, which are those investments with a maturity of less than one
year at time of purchase, are carried at cost, which approximates fair value.
Other investments are carried at cost, which approximates fair value.

     Bond discounts and premiums are accreted or amortized on the effective
interest method over the term of the related securities. Realized gains or
losses on sale of investments are determined on the basis of specific

                                        8
<PAGE>   11
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

identification. Net investment income is recognized when earned and includes
interest and amortization of market premiums and discounts and is net of
investment management and custody fees.

  g) Statement of cash flows

     For purposes of the statements of cash flows, short-term deposits are
composed of deposits with original maturities which are less than three months.

  h) Loss per common share

     CGA Group computes loss per share in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings per share". Loss per common share is
calculated using the loss for the period adjusted for preference dividends,
accretion of preference stock to redemption value, and accretion on warrants
divided by the weighted average number of common shares outstanding and, if
dilutive, shares issuable under outstanding warrants and convertible securities.

  i) Comprehensive Income

     The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 130, "Reporting Comprehensive Income", effective for
fiscal years beginning after December 15, 1997. This statement requires CGA
Group to report in the financial statements, in addition to net income,
comprehensive income and its components. Comprehensive income for CGA Group is
comprised solely of changes in unrealized appreciation or depreciation on
marketable investments. CGA Group adopted this statement in 1998.

  j) Start-up activities

     The Accounting Standards Executive Committee issued Statement of Position
98-5, "Reporting on Costs of Start-Up Activities", effective for fiscal years
beginning after December 15, 1998. This statement requires CGA Group to expense
organization costs as incurred. On July 1, 1998, CGA Group expensed the
remaining unamortized organization costs, which is reflected in the financial
statements as a change in accounting principle.

3. OTHER INVESTMENTS

     Other investments are comprised of a $5 million note from Cobalt Holdings
LLC, a Delaware limited liability corporation which is also the parent company
of certain clients of CGA Investment Management. The note is carried at its
original cost, which approximates fair value. The note bears interest of 3 month
LIBOR plus 1% per annum payable quarterly. The Cobalt Holdings note matures in
July, 2013 and was prepaid without penalty on November 4, 1999.

                                        9
<PAGE>   12
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS

<TABLE>
<CAPTION>
                                                             SEPTEMBER 30,    DECEMBER 31,
                                                                 1999             1998
                                                             -------------    ------------
<S>                                                          <C>              <C>
Other Assets
Other prepaid expenses.....................................   $  513,191       $  222,752
  Prepaid commitment fees..................................      424,931          276,164
  Fixed assets, net of depreciation........................    1,374,211        1,603,600
  Deposits.................................................      338,580          280,000
  Accounts receivable......................................      458,784          368,730
  Other....................................................          737          175,000
                                                              ----------       ----------
  Total Other Assets.......................................   $3,110,434       $2,926,246
                                                              ==========       ==========
</TABLE>

5. LOSSES AND LOSS EXPENSES

     The reserve for losses and loss adjustment expenses is established in an
amount equal to Commercial Guaranty Assurance's estimate of general and case
basis reserves on the obligations it has insured. Case basis reserves are
established when specific insured issues are identified as currently or likely
to be in default. Such a reserve is based on the present value of the expected
loss and loss adjustment expenses. The general reserve for losses and loss
adjustment expenses is calculated by applying a loss factor, determined based on
an independent rating agency study of bond defaults, to net par amount
outstanding of the insured obligations.

     The reserve for losses and loss adjustment expenses is comprised of the
following at September 30, 1999 and December 31, 1998:

<TABLE>
<CAPTION>
                                                            SEPTEMBER 30,    DECEMBER 31,
                                                                1999             1998
                                                            -------------    ------------
<S>                                                         <C>              <C>
Case basis reserve........................................   $   69,268      $88,200,000
General reserve...........................................    2,950,000        2,000,000
                                                             ----------      -----------
          Total reserve for losses and loss adjustment
            expenses......................................   $3,019,268      $90,200,000
</TABLE>

     The activity in the reserve for losses and loss adjustment expenses is as
follows:

<TABLE>
<CAPTION>
                                                        NINE MONTHS ENDED     YEAR ENDED
                                                          SEPTEMBER 30,      DECEMBER 31,
                                                              1999               1998
                                                        -----------------    ------------
<S>                                                     <C>                  <C>
Balance at January 1..................................    $ 90,200,000       $    55,000
Less reinsurance recoverables.........................      67,400,000                --
                                                          ------------       -----------
Net balance at beginning of period....................      22,800,000            55,000
Net losses and loss expenses incurred.................       8,050,000        22,745,000
Net losses and loss expenses paid.....................     (27,830,732)               --
                                                          ------------       -----------
Net reserve for losses and loss adjustment expenses
  Balance at end of period............................       3,019,268        22,800,000
Reinsurance recoverable...............................              --        67,400,000
                                                          ------------       -----------
Reserve for losses and loss adjustment expenses, gross
  of reinsurance recoverable
Balance at end of period..............................    $  3,019,268       $90,200,000
                                                          ============       ===========
</TABLE>

     In October, 1998, the credit ratings on asset-backed securities which
clients of Commercial Guaranty Assurance had purchased, and that were originated
and serviced by Commercial Financial Services Inc., a

                                       10
<PAGE>   13
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

credit-card debt collection company, were withdrawn by the three credit rating
companies that rated the most recently issued Commercial Financial Services
securities. The withdrawal of the ratings was in response to allegations of
accounting irregularities at Commercial Financial Services. The rating agencies,
investors and insurers commenced investigations into the allegations. On
December 11, 1998, Commercial Financial Services filed a petition for relief
under Chapter 11 of the United States Bankruptcy Code with the Bankruptcy Court
for the Northern District of Oklahoma (the "Bankruptcy Court"). The Bankruptcy
Court approved Commercial Financial Services' rejection of the servicing
contracts and other agreements relating to Commercial Financial Services'
servicing of the receivables underlying the Commercial Financial Services
securities, effective as of June 23, 1999. As a result, servicing in respect of
the Commercial Financial Services securities was transferred to the trustees of
the respective trusts which issued such securities (Bankers Trust Company, in
the case of the Commercial Financial Services securities guaranteed by
Commercial Guaranty Assurance), as backup servicers, and their designated
sub-servicers.

     Clients of Commercial Guaranty Assurance had previously purchased
approximately $212 million face amount of Commercial Financial Services
securities, which exposure was guaranteed by Commercial Guaranty Assurance.
Commercial Guaranty Assurance had obtained reinsurance for about $162 million
face amount of such exposure. In December 1998, Commercial Guaranty Assurance
established a $20.8 million case basis reserve in respect of its exposure on
Commercial Financial Services securities, representing management's estimate of
probable losses on such exposure. In June 1999, Commercial Guaranty Assurance
added an additional $7.1 million to its case basis reserve for Commercial
Financial Services. In June and September 1999, Commercial Guaranty Assurance
made claim payments on its guarantees in respect of Commercial Financial
Services securities in the aggregate amount of approximately $117.8 million, of
which $90 million consisted of payments from its reinsurer and $27.8 million
consisted of Commercial Guaranty Assurance's own funds, paid out of such case
basis reserve. In connection with this claim payment, Commercial Guaranty
Assurance and its reinsurer received approximately $119.1 million par value of
Commercial Financial Services bonds. The bonds have no readily determinable
market value and have not been recorded on the books of Commercial Guaranty
Assurance. Until Commercial Guaranty Assurance's exposure on Commercial
Financial Services securities reaches zero, any future interest payments
received on these securities are intended to be used to purchase additional
Commercial Financial Services securities from Commercial Guaranty Assurance's
clients, thereby further reducing Commercial Guaranty Assurance's exposure.

     As a result of these claim payments and interim principal repayments on the
Commercial Financial Services Securities, Commercial Guaranty Assurance's gross
exposure in respect of Commercial Financial Services Securities has been reduced
to approximately $78.3 million as of September 30, 1999. Of this exposure,
approximately $59.9 million is covered by reinsurance, leaving Commercial
Guaranty Assurance with a remaining net exposure of approximately $18.4 million.
Aggregate incurred losses for Commercial Financial Services securities total
$27.9 million (of which $27.8 million has been paid) against par exposure of
approximately $46.6 million.

6. REINSURANCE

     In the ordinary course of business, Commercial Guaranty Assurance cedes
exposures under various reinsurance contracts primarily designed to minimize
losses from large risks and to protect capital and surplus. The reinsurance of
risk does not relieve the ceding insurer of its original liability to its
policyholders. In the event that all or any of the reinsurers are unable to meet
their obligations to Commercial Guaranty Assurance under the existing
reinsurance agreements, Commercial Guaranty Assurance would be liable for such
defaulted amounts. Commercial Guaranty Assurance also has a $20 million excess
of loss reinsurance facility. As stated above, Commercial Guaranty Assurance has
reinsured a portion of its exposure to asset-backed securities originated and
serviced by Commercial Financial Services.

                                       11
<PAGE>   14
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In October 1998, Commercial Guaranty Assurance provided credit support on
approximately $382 million of securities within two insured portfolios, which
was further supported by a "Triple-A" rated reinsurer, using documentation that
would permit the insured to proceed directly against the reinsurer. The effect
of the described credit support arrangements was to substantially increase the
market value of the subject securities. Commercial Guaranty Assurance received a
premium of $38.95 million from its clients in connection with these credit
support arrangements, and ceded $38.7 million to the aforementioned reinsurer.
On April 14, 1999, these credit support arrangements were cancelled and
approximately $29.5 million of premium was refunded to the clients.

7. MEZZANINE EQUITY

<TABLE>
<CAPTION>
                                                            SEPTEMBER 30,    DECEMBER 31,
                                                                1999             1998
                                                            -------------    ------------
<S>                                                         <C>              <C>
Series A: 3,436,501 and 3,211,890 shares issued and
  outstanding.............................................   $    35,546     $    32,119
Additional paid-in-capital................................    84,267,851      75,258,981
                                                             -----------     -----------
Total Series A preferred stock............................   $84,303,397     $75,291,100
                                                             ===========     ===========
Series B: nil and 1,600,000 shares issued and
  outstanding.............................................   $        --     $    16,000
Additional paid-in-capital and pay-in-kind dividends......            --      51,301,149
                                                             -----------     -----------
Total Series B preferred stock............................   $        --     $51,317,149
                                                             ===========     ===========
</TABLE>

     CGA Group's Series A preferred stock is subject to mandatory redemption
including all accrued and unpaid dividends thereon, on June 17, 2007. The Series
A preferred stock is also redeemable at the election of CGA Group at any time.

     The dividends on the Series A preferred stock are declared quarterly by the
Board of Directors and paid in additional shares of Series A preferred stock.

     The Series A and Series B preferred stock were each recorded at fair value.
The difference between fair value and the redemption value (excluding
pay-in-kind dividends) is being accreted over the mandatory redemption period by
a charge to shareholders' equity.

     The Series A preferred stock and the Series B preferred stock are voting
securities, and are entitled to 7 votes per share and 5 votes per share,
respectively, on all matters presented to the security holders of CGA Group for
their approval. The Series A preferred stock ranks senior in liquidation
preference to all other classes of capital stock of CGA Group, followed by the
Series C preferred stock, the Series B preferred stock and the common stock of
CGA Group, respectively.

     On March 31, 1999, all issued and outstanding shares of Series B preferred
stock were converted into shares of common stock, at a conversion ratio of
11.816 shares of common stock per share of Series B preferred stock. The
conversion ratio was based on an assumed value of $3.00 per share of common
stock. As a result of the conversion, 18,905,648 new shares of common stock were
issued. No shares of Series B preferred stock are currently issued and
outstanding. If the $60 million of Series B preferred commitments are called,
new shares will be issued with pay-in-kind dividends yielding 7%.

8. SHAREHOLDERS' EQUITY

  a) Common stock

     The number of common shares outstanding as of September 30, 1999 and the
year ended December 31, 1998 were as follows:

<TABLE>
<CAPTION>
                                                             SEPTEMBER 30,    DECEMBER 31,
                                                                 1999             1998
                                                             -------------    ------------
<S>                                                          <C>              <C>
Issued and outstanding.....................................   28,005,648       9,100,000
Weighted average number of shares..........................   24,908,935       9,100,000
</TABLE>

                                       12
<PAGE>   15
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The common stock of CGA Group carries two votes per share on all matters
presented to the security holders of CGA Group for their approval.

  b) Series C preferred stock

     The Series C preferred stock are voting securities and are entitled to 1
vote per share on all matters presented to the security holders of CGA Group for
their approval. The book values of shares issued and outstanding as of September
30, 1999 and the year ended December 31, 1998 were as follows:

<TABLE>
<CAPTION>
                                                     SEPTEMBER 30, 1999    DECEMBER 31, 1998
                                                     ------------------    -----------------
<S>                                                  <C>                   <C>
44,971,346 and nil shares issued and outstanding...     $   449,713               $--
Additional paid-in-capital.........................      49,466,298               --
                                                        -----------               --
Total Series C preferred stock.....................     $49,916,011               $--
                                                        ===========               ==
</TABLE>

     The shares of Series C preferred stock, which may be converted into shares
of common stock on a one-for-one basis at the holder's option at any time, are
mandatorily convertible into shares of common stock upon the occurrence of
certain events at the conversion rate specified in CGA Group's Bye-Laws, and are
subject to redemption by CGA Group for cash upon the occurrence of certain
events at the redemption rate specified in CGA Group's Bye-laws.

     The additional paid in capital has been reduced by approximately $1.2
million in issuance costs and $1.0 million in employee loans. CGA Group holds
promissory notes from certain employees in connection with the sale of Series C
preferred stock that occurred on April 26, 1999. The notes are repayable in
three equal installments and accrue interest at an annual rate of 7%. The
employee loan balance represents the original principal loan balance.

9. LOSS PER COMMON SHARE

     The following table sets forth the computation of basic and diluted loss
per share for the periods ended September 30, 1999 and 1998.

<TABLE>
<CAPTION>
                                                            NINE MONTHS ENDED     NINE MONTHS ENDED
                                                            SEPTEMBER 30, 1999    SEPTEMBER 30, 1998
                                                            ------------------    ------------------
<S>                                                         <C>                   <C>
Basic loss per share
Numerator:
  Net loss................................................     $ (1,677,949)         $ (2,930,128)
  Series A -- Pay-in-kind dividends paid..................       (8,568,400)           (7,715,430)
  Series A -- Accretion to redemption value...............         (342,849)             (399,990)
  Series A -- Accretion on warrants.......................         (101,048)             (174,027)
  Series B -- Pay-in-kind dividends accrued...............       (2,700,795)           (7,004,735)
  Series B -- Accretion to redemption value...............          (50,137)             (175,478)
                                                               ------------          ------------
Net loss available to common shareholders.................     $(13,441,178)         $(18,399,788)
                                                               ------------          ------------
Denominator:
  Weighted average shares outstanding.....................       24,908,935             9,100,000
                                                               ------------          ------------
  Basic loss per share....................................     $      (0.54)         $      (2.02)
                                                               ============          ============
Diluted loss per share:
Numerator.................................................     $(13,441,178)         $(18,399,788)
                                                               ------------          ------------
Denominator...............................................       24,908,935             9,100,000
                                                               ------------          ------------
  Diluted loss per share..................................     $      (0.54)         $      (2.02)
                                                               ============          ============
</TABLE>

                                       13
<PAGE>   16
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     CGA Group has outstanding warrants and Series C preferred stock which were
not included in the computation of the diluted loss per share as the effect of
these warrants and Series C preferred stock is antidilutive for the periods
presented above.

     On June 17, 1997, CGA Group issued warrants to purchase 270,000 shares of
common stock in connection with the issuance of 2.6 million shares of Series A
preferred stock. All of the warrants are outstanding as of September 30, 1999.
These warrants are exercisable at any time on or prior to June 17, 2007 at an
exercise price of $.01 per share of common stock.

     CGA Group also issued 847,729 warrants to certain investors and members of
management on June 17, 1997. Each such warrant represents the right to purchase
one share of common stock on or prior to June 17, 2007. The exercise price of
the warrants was lowered from $5 per share to $2.12 per share in connection with
the Series B preferred stock conversion into common stock and the issuance of
the Series C preferred stock. All such warrants were outstanding as of September
30, 1999. In addition, CGA Group has authorized 1,494,771 warrants for issuance
to certain employees. These warrants each represent the right to purchase one
share of common stock on or prior to June 17, 2007 at an exercise price of $5
per share. The employee warrants vest ratably over a four-year period and expire
if not exercised within thirty days of the employee's termination of employment.
As of September 30, 1999, there were 1,315,984 warrants outstanding, of which
657,992 warrants were exercisable. As of December 31, 1998, there were 1,348,129
warrants outstanding, of which 337,032 warrants were exercisable. The total
number of common share equivalents not included in the calculation of diluted
loss per share was 46,747,067 because they were anti-dilutive.

10. INSURANCE IN FORCE

     The following table shows the net par outstanding of insured obligations,
net of reinsurance, at September 30, 1999 and December 31, 1998 by asset type:

<TABLE>
<CAPTION>
                                                     SEPTEMBER 30, 1999    DECEMBER 31, 1998
ASSET TYPE                                               (IN 000'S)           (IN 000'S)
----------                                           ------------------    -----------------
<S>                                                  <C>                   <C>
Auto...............................................      $    7,469           $    3,158
Commercial loan and bond obligations...............         299,065              189,375
Commercial mortgage-backed securities..............         462,043              185,754
Corporate asset-backed securities..................         132,490               75,000
Credit card receivables............................         164,765              185,732
Equipment..........................................          18,246               27,129
Future flows.......................................          60,669               39,108
Home equity loans..................................         348,880              236,381
Real estate investment trust debt..................         211,774              381,777
Real estate investment trust preferred stock.......          70,000               70,000
Sovereign debt.....................................         110,000              120,000
Excess of loss reinsurance.........................          91,250               46,250
                                                         ----------           ----------
Total..............................................      $1,976,651           $1,559,664
                                                         ==========           ==========
</TABLE>

                                       14
<PAGE>   17
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table presents the credit ratings of the above assets, based
on net par outstanding at September 30, 1999 and December 31, 1998:

<TABLE>
<CAPTION>
                                                     SEPTEMBER 30, 1999    DECEMBER 31, 1998
                                                     ------------------    -----------------
<S>                                                  <C>                   <C>
"AAA"..............................................          4.6%                   4%
"AA"...............................................          1.4%                   3%
"A"................................................         20.0%                  12%
"BBB"..............................................         59.5%                  67%
"BB"...............................................         12.2%                  11%
Not rated..........................................          2.3%                   3%
                                                            ----                  ---
Total..............................................          100%                 100%
                                                            ====                  ===
</TABLE>

11. OTHER COMPREHENSIVE INCOME

     Other comprehensive income is comprised of unrealized gains and losses on
investments. Accumulated other comprehensive income is as follows:

<TABLE>
<CAPTION>
                                                     NINE MONTHS ENDED        YEAR ENDED
                                                     SEPTEMBER 30, 1999    DECEMBER 31, 1998
                                                     ------------------    -----------------
<S>                                                  <C>                   <C>
Unrealized appreciation (depreciation) on
  investments
Balance -- beginning of period.....................     $   927,676           $1,638,092
Decrease during period.............................      (5,754,564)            (710,416)
                                                        -----------           ----------
Balance -- end of period...........................     $(4,826,888)          $  927,676
                                                        ===========           ==========
</TABLE>

12. SEGMENT REPORTING

     CGA Group has two reportable segments: Commercial Guaranty Assurance and
CGA Investment Management (see description of each segment in Note 1). CGA
Group's management has identified the operating segments on the basis that they
are separate legal entities and that each entity carries on a different type of
business. Commercial Guaranty Assurance provides financial guaranty insurance
and CGA Investment Management provides investment management services. The
accounting policies of each of the segments are the same as those described in
the summary of significant accounting policies.

     The table below presents financial information for each of the operating
segments.

                                       15
<PAGE>   18
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     As of and for the nine months ended September 30, 1999:

<TABLE>
<CAPTION>
                                       COMMERCIAL         CGA
                                        GUARANTY      INVESTMENT
                                       ASSURANCE      MANAGEMENT      OTHER(A)         TOTAL
                                      ------------    -----------    -----------    ------------
<S>                                   <C>             <C>            <C>            <C>
REVENUES
Net premiums earned.................  $  8,887,662    $        --    $        --    $  8,887,662
Net investment income...............     5,938,658         48,503        412,318       6,399,479
Net realized gains..................        (2,106)            --             --          (2,106)
Management fees/other...............            --      2,130,353             --       2,130,353
Intersegment revenue................            --        235,008        149,425         384,433
                                      ------------    -----------    -----------    ------------
TOTAL REVENUES......................    14,824,214      2,413,864        561,743      17,799,821
EXPENSES
Operating expenses..................     1,136,211      7,916,243      1,272,027      10,324,481
Acquisition costs...................       502,056             --             --         502,056
Commitment fees.....................       451,233             --             --         451,233
Excess of loss facility.............       150,000             --             --         150,000
Losses and loss adjustment
  expenses..........................     8,050,000             --             --       8,050,000
TOTAL EXPENSES......................    10,289,500      7,916,243      1,272,027      19,477,770
                                      ------------    -----------    -----------    ------------
NET INCOME..........................     4,534,714     (5,502,379)      (710,284)     (1,677,949)
                                      ============    ===========    ===========    ============
ASSETS
Total assets........................  $161,505,812    $ 2,440,128    $15,916,996    $179,862,936
                                      ============    ===========    ===========    ============
</TABLE>

---------------
(a) The "other" segment is comprised of CGA Group, Ltd., the holding company,
    which does not meet any of the quantitative thresholds for determining a
    reportable segment.

                                       16
<PAGE>   19
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     As of and for the nine months ended September 30, 1998:

<TABLE>
<CAPTION>
                                       COMMERCIAL         CGA
                                        GUARANTY      INVESTMENT
                                       ASSURANCE      MANAGEMENT        OTHER          TOTAL
                                      ------------    -----------    -----------    ------------
<S>                                   <C>             <C>            <C>            <C>
REVENUES
Net premiums earned.................  $  5,748,012    $        --    $        --    $  5,748,012
Net investment income...............     5,858,917         44,660         55,971       5,959,548
Net realized gains..................       791,556             --             --         791,556
Management fees.....................            --      2,154,584             --       2,154,584
Intersegment revenue................            --         61,597             --          61,597
                                      ------------    -----------    -----------    ------------
TOTAL REVENUES......................    12,398,485      2,260,841         55,971      14,715,297
EXPENSES
Operating expenses..................     1,012,385      9,203,535      1,327,969      11,543,889
Acquisition Costs...................       275,531             --             --         275,531
Commitment Fees.....................       448,767             --             --         448,767
Excess of loss facility.............       150,000             --             --         150,000
Losses and loss adjustment
  expenses..........................     1,300,000             --             --       1,300,000
                                      ------------    -----------    -----------    ------------
TOTAL EXPENSES......................     3,186,683      9,203,535      1,326,969      13,717,187
Cumulative effect of change in
  accounting principle..............    (1,127,353)      (480,207)    (2,320,678)     (3,928,238)
                                      ------------    -----------    -----------    ------------
NET INCOME..........................  $  8,084,449    $(7,422,901)   $(3,591,676)   $ (2,930,128)
                                      ============    ===========    ===========    ============
ASSETS
Total assets........................  $144,323,883    $ 4,307,633    $ 8,185,339    $156,816,855
                                      ============    ===========    ===========    ============
</TABLE>

     The following are reconciliations of reportable segment revenues, expenses
and assets to CGA Group's consolidated totals in the financial statements.
Depreciation expense is included in operating expenses.

<TABLE>
<CAPTION>
                                                            NINE MONTHS ENDED     NINE MONTHS ENDED
                                                            SEPTEMBER 30, 1999    SEPTEMBER 30, 1998
                                                            ------------------    ------------------
<S>                                                         <C>                   <C>
REVENUES
Total revenues for reportable segments....................     $ 17,799,821          $ 14,715,297
Elimination of intersegment revenues......................         (384,433)              (61,597)
                                                               ------------          ------------
Total consolidated revenues...............................     $ 17,415,388          $ 14,653,700
                                                               ============          ============
EXPENSES
Total expenses for reportable segments....................     $ 19,477,769          $ 13,717,187
Elimination of intersegment operating expenses............         (384,432)              (61,597)
                                                               ------------          ------------
Total consolidated expenses...............................     $ 19,093,337          $ 13,655,590
                                                               ============          ============
ASSETS
Total assets for reportable segments......................     $179,862,936          $156,816,855
Intercompany loans........................................       (6,049,694)           (7,588,755)
Other intercompany balances...............................       (2,746,916)           (3,042,629)
                                                               ------------          ------------
Total consolidated assets.................................     $171,066,326          $146,185,471
                                                               ============          ============
</TABLE>

                                       17
<PAGE>   20
                                CGA GROUP, LTD.

      NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. TAXATION

     CGA Group and Commercial Guaranty Assurance, which are domiciled in
Bermuda, have received from the Minister of Finance of Bermuda an assurance
under the Exempted Undertakings Tax Protection Act, 1966, as amended, of
Bermuda, that generally protects them from incurring taxation by Bermuda tax
authorities until March 28, 2016. Since CGA Group and Commercial Guaranty
Assurance are not engaged in a trade or business in the U.S., there should be no
U.S. income taxes due, however, CGA Group and Commercial Guaranty Assurance do
file protective U.S. income tax returns. CGA Investment Management is subject to
U.S. taxation at regular corporate tax rates, but has tax losses carried forward
of approximately $7.65 million and $5.3 million as at December 31, 1998 and 1997
respectively, for which no benefit has been recorded in the financial
statements. These tax loss carry-forwards expire in 2013 and 2012, respectively.

14. STATUTORY FINANCIAL DATA

     Under The Insurance Act 1978 of Bermuda, amendments thereto and related
regulations, Commercial Guaranty Assurance is required to file an annual
Statutory Financial Return and Statutory Financial Statements and is required to
maintain certain measures of solvency and liquidity during the period. The
statutory capital and surplus at September 30, 1999 and December 31, 1998 were
$227,846,188 and $114,898,018, respectively. Statutory net income for the nine
months ended September 30, 1999 was $3,446,307 and statutory net loss for the
year ended December 31, 1998 was $13,809,607. The principal differences between
capital and surplus and statutory net income and shareholders' equity and income
as reported in conformity with GAAP relates to deferred acquisition costs and
prepaid expenses of Commercial Guaranty Assurance. There were no statutory
restrictions on payment of dividends from the retained earnings of Commercial
Guaranty Assurance as the required level of solvency was met by the common stock
in issue.

15. COMPARATIVE FINANCIAL INFORMATION

     The comparative figures for the year ended December 31, 1998 are based on
audited financial statements as of that date.

16. RECENT ACCOUNTING PRONOUNCEMENTS

     On June 15, 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" effective for fiscal years beginning after June, 2000,
but earlier application is permitted as of the beginning of any fiscal quarter
subsequent to June 15, 1998. This statement requires all derivatives to be
recognized in the statement of financial position as either assets or
liabilities and measured at fair value. Upon implementation, credit default
swaps will be valued at fair value in accordance with this statement. At
September 30, 1999 the par value of Commercial Guaranty Assurance's credit
default swaps was $230 million.

                                       18
<PAGE>   21

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following discussion should be read in conjunction with, and is
qualified in its entirety by, the consolidated financial statements of CGA Group
and the related notes thereto included elsewhere in this report.

GENERAL

     CGA Group, Ltd., a holding company, was incorporated in Bermuda on June 21,
1996. CGA Group has two wholly owned subsidiaries. Commercial Guaranty
Assurance, Ltd., was incorporated in Bermuda on October 22, 1996. Commercial
Guaranty Assurance is licensed as a class 3 insurer under the Insurance Act 1978
of Bermuda. This act authorizes Commercial Guaranty Assurance to carry on
insurance business of all classes in or from within Bermuda subject to its
compliance with the solvency margin, liquidity ratio and other requirements
imposed on it by the act. Commercial Guaranty Assurance has a "Triple-A" "claims
paying ability" rating from Duff & Phelps Credit Rating Company and has also
been rated in the highest rating category assigned by each of the two Canadian
rating agencies, Dominion Bond Ratings Service and Canadian Bond Ratings
Service. Commercial Guaranty Assurance issues financial guaranty insurance
policies, which are the functional equivalent of direct-pay letters of credit,
to insure payment of interest, principal and other amounts payable in respect of
notes, securities, and other financial obligations.

     CGA Investment Management, Inc. was incorporated in the state of Delaware
in July 1996 by the founders of CGA Group and was acquired at nominal cost to
CGA Group on June 9, 1997. CGA Investment Management did not commence operations
until after its acquisition by CGA Group. CGA Investment Management is
registered as an investment advisor with the United States Securities and
Exchange Commission under the Investment Advisors Act of 1940, as amended. CGA
Investment Management provides investment management and financial advisory
services primarily to specialized investment vehicles and for the U.S. and
international structured finance markets.

     CGA Group and its subsidiaries were inactive until June 17, 1997, on which
date CGA Group's private placement offering was completed and CGA Group was
recapitalized with (a) two classes of preferred stock totaling $105 million, (b)
common stock totaling $45.5 million and (c) conditional commitments to purchase
$60 million of additional preferred stock. On March 31, 1999, CGA Group sold
43,997,863 shares of its Series C preferred stock to existing shareholders for
an aggregate sales price of approximately $51 million. Concurrent with the sale
of the Series C preferred stock, all the outstanding shares of Series B
preferred stock were exchanged for shares of common stock. On April 26, 1999,
CGA Group sold 973,483 shares of Series C preferred stock to employees of CGA
Group and its subsidiaries for an aggregate sales price of approximately $1.2
million.

RESULTS OF OPERATIONS

     Total revenues for the quarter ended September 30, 1999 were $5.1 million,
of which $2.3 million was from financial guaranty insurance premiums, $0.5
million was from investment management fees and $2.3 million was from investment
income. Total revenues for the quarter ended September 30, 1998 were $6.4
million, of which $3.0 million was from financial guaranty insurance premiums,
$1.5 million was from investment management fees, $1.7 million was from
investment income and $0.2 million was from net realized gains on the sale of
investments.

     The net par outstanding insured obligations increased by 7% to $1.97
billion at September 30, 1999, from $1.84 billion as of September 30, 1998.
Although gross premiums written increased by 3% in the quarter ended September
30, 1999 compared to the quarter ended September 30, 1998, net premiums earned
decreased by 23% as a result of an unusually high charge to ceded premiums
totaling $1.1 million. This amount included a charge of $0.9 million for the
prepaid reinsurance premium related to the Commercial Financial Services
securities. As a result of claims paid in September 1999 related to the
Commercial Financial Services securities of approximately $45.1 million by
Commercial Guaranty Assurance's reinsurer, the reinsured exposure decreased from
$126.4 million to $33.2 million, thereby requiring recognition of the $0.9
million charge. Commercial Guaranty Assurance paid an up-front premium of $1.3
million for the reinsurance in
                                       19
<PAGE>   22

October 1998. There is a balance of $0.3 million remaining in the prepaid
reinsurance account related to this exposure as of September 30, 1999.

     Management fees earned by CGA Investment Management decreased by 65% on a
comparable quarter basis although assets under management increased by 11% from
$1.8 billion at September 30, 1998 to $2.0 billion as of September 30, 1999. A
portion of the decrease in management fees earned as a percentage of assets
under management is attributable to certain clients of CGA Investment Management
having resecuritized approximately $805 million in assets over the period
between September 30, 1998 and September 30, 1999. The asset management fees
payable to CGA Investment Management in these resecuritization transactions are
lower than the asset management fees payable to CGA Investment Management while
these assets remained in such clients' investment portfolios. In addition, due
to the credit spread widening faced by the capital markets generally in
September and October of 1998, certain clients of CGA Investment Management
encountered liquidity difficulties. At the request of such clients, CGA
Investment Management reduced the amount of the asset management fee by 60%.

     The amount of Commercial Guaranty Assurance's insured portfolio was $1.97
billion net par as of September 30, 1999. The following table shows the net par
outstanding of insured obligations, net of reinsurance, at September 30, 1999
and December 31, 1998 by asset type:

<TABLE>
<CAPTION>
                                                     SEPTEMBER 30,    DECEMBER 31,
                                                         1999             1998
ASSET TYPE                                            (IN 000'S)       (IN 000'S)
----------                                           -------------    ------------
<S>                                                  <C>              <C>
Auto...............................................   $    7,469       $    3,158
Commercial loan and bond obligations...............      299,065          189,375
Commercial mortgage-backed securities..............      462,043          185,754
Corporate asset-backed securities..................      132,490           75,000
Credit card receivables............................      164,765          185,732
Equipment..........................................       18,246           27,129
Future flows.......................................       60,669           39,108
Home equity loans..................................      348,880          236,381
Real estate investment trust debt..................      211,774          381,777
Real estate investment trust preferred stock.......       70,000           70,000
Sovereign debt.....................................      110,000          120,000
Excess of loss reinsurance.........................       91,250           46,250
                                                      ----------       ----------
          Total....................................   $1,976,651       $1,559,664
                                                      ==========       ==========
</TABLE>

     The following table presents the credit ratings of the above assets, based
on net par outstanding at September 30, 1999 and December 31, 1998:

<TABLE>
<CAPTION>
                                                     SEPTEMBER 30,    DECEMBER 31,
                                                         1999             1998
                                                     -------------    ------------
<S>                                                  <C>              <C>
"AAA"..............................................       4.6%              4%
"AA"...............................................       1.4%              3%
"A"................................................      20.0%             12%
"BBB"..............................................      59.5%             67%
"BB"...............................................      12.2%             11%
Not rated..........................................       2.3%              3%
                                                         -----            ----
Total..............................................       100%            100%
                                                         =====            ====
</TABLE>

     Net investment income was $2.38 million for the quarter ended September 30,
1999 and $1.75 million for the quarter ended September 30, 1998. The value of
the investment portfolio, other investments, and cash was $155.4 million at
September 30, 1999 compared to $133.2 million at September 30, 1998. The higher
balance at September 30, 1999, which reflects the reduction of $13.9 million for
the Commercial Financial Services

                                       20
<PAGE>   23

securities claim payment, was responsible for the increase in investment income.
Cumulative unrealized losses on the investment portfolio as of September 30,
1999 were $4.8 million.

     Operating expenses for the quarter ended September 30, 1999 were $3.4
million, compared to $4.0 million for the quarter ended September 30, 1998. The
reduction resulted from lower personnel and legal costs.

     Total revenues for the nine months ended September 30, 1999 were $17.4
million, compared to $14.6 million for the nine months ended September 30, 1998.
The $2.8 million increase is primarily attributable to the increase in premiums
earned due to the growth in insured par exposure. Net investment income for the
nine months ended September 30, 1999 increased by $0.4 million compared to the
same period in 1998 due to higher investment balances which resulted from the
proceeds of the Series C preferred stock received on March 31, 1999. Operating
expenses for the nine months ended September 30, 1999 decreased by $1.5 million.
The expenses would have been only $0.3 million lower than the comparable period
in 1998 except for the non-recurring expense of $1.2 million of client
acquisition costs in the second quarter of 1998 which had previously been
capitalized.

     In October 1998, the credit ratings on asset-backed securities which
clients of Commercial Guaranty Assurance had purchased, and that were originated
and serviced by Commercial Financial Services Inc., a credit-card debt
collection company, were withdrawn by the three credit rating companies that
rated the most recently issued Commercial Financial Services securities. The
withdrawal of the ratings was in response to allegations of accounting
irregularities at Commercial Financial Services. The rating agencies, investors
and insurers commenced investigations into the allegations. On December 11,
1998, Commercial Financial Services filed a petition for relief under Chapter 11
of the United States Bankruptcy Code with the Bankruptcy Court for the Northern
District of Oklahoma (the "Bankruptcy Court"). The Bankruptcy Court approved
Commercial Financial Services' rejection of the servicing contracts and other
agreements relating to Commercial Financial Services' servicing of the
receivables underlying the Commercial Financial Services securities, effective
as of June 23, 1999. As a result, servicing in respect of the Commercial
Financial Services securities was transferred to the trustees of the respective
trusts which issued such securities (Bankers Trust Company, in the case of the
Commercial Financial Services securities guaranteed by Commercial Guaranty
Assurance), as backup servicers, and their designated sub-servicers.

     Clients of Commercial Guaranty Assurance had previously purchased
approximately $212 million face amount of Commercial Financial Services
securities, which exposure was guaranteed by Commercial Guaranty Assurance.
Commercial Guaranty Assurance had obtained reinsurance for about $162 million
face amount of such exposure. In December 1998, Commercial Guaranty Assurance
established a $20.8 million case basis reserve in respect of its exposure on
Commercial Financial Services securities, representing management's estimate of
probable losses on such exposure. In June 1999, Commercial Guaranty Assurance
added an additional $7.1 million to its case basis reserve for Commercial
Financial Services. In June and September 1999, Commercial Guaranty Assurance
made claim payments on its guarantees in respect of Commercial Financial
Services securities in the aggregate amount of approximately $117.8 million, of
which $90 million consisted of payments from its reinsurer and $27.8 million
consisted of Commercial Guaranty Assurance's own funds, paid out of such case
basis reserve. In connection with this claim payment, Commercial Guaranty
Assurance and its reinsurer received approximately $119.1 million par value of
Commercial Financial Services bonds. The bonds have no readily determinable
market value and have not been recorded on the books of Commercial Guaranty
Assurance. Until Commercial Guaranty Assurance's exposure on Commercial
Financial Services securities reaches zero, any future interest payments
received on these securities are intended to be used to purchase additional
Commercial Financial Services securities from Commercial Guaranty Assurance's
clients, thereby further reducing Commercial Guaranty Assurance's exposure.

     As a result of these claim payments and interim principal repayments on the
Commercial Financial Services securities, Commercial Guaranty Assurance's gross
exposure in respect of Commercial Financial Services securities has been reduced
to approximately $78.3 million as of September 30, 1999. Of this exposure,
approximately $59.9 million is covered by reinsurance, leaving Commercial
Guaranty Assurance

                                       21
<PAGE>   24

with a remaining net exposure of approximately $18.4 million. Aggregate incurred
losses for Commercial Financial Services securities total $27.9 million (of
which $27.8 million has been paid) against par exposure of approximately $46.6
million.

LIQUIDITY AND CAPITAL RESOURCES

     CGA Group capitalized Commercial Guaranty Assurance with $125 million. On
March 31, 1999, CGA Group contributed an additional $27.2 million to Commercial
Guaranty Assurance using proceeds from the sale of CGA Group's Series C
preferred stock. Alliance Capital Management Corporation manages Commercial
Guaranty Assurance's entire investment portfolio. These funds are invested in
foreign corporate and government debt securities which are rated "Double-A" or
higher and denominated in U.S. dollars. The portfolio maintains a weighted
average duration of two to five years. CGA Investment Management was capitalized
with $3 million. It has required additional funding from CGA Group since its
commencement of operations through September 30, 1999 of $12.0 million to cover
its operations. It is projected to require additional funding at least through
2002 while it continues to build its assets under management up to an amount
that generates sufficient fee income to cover its operations.

     On a consolidated basis, CGA Group used $21.4 million of cash from
operating activities during the nine months ended September 30, 1999, compared
to $0.5 million for the nine months ended September 30, 1998. CGA Group would
have generated $6.5 million from operating activities during the nine months
ended September 30, 1999 if the $27.9 million of losses related to the
Commercial Financial Services securities had not been incurred.

     CGA Group applied $26.2 million of net cash to investing activities during
the nine months ended September 30, 1999, compared to $3.4 million in the first
nine months of 1998. Cash flows from financing activities in the nine months
ended September 30, 1999 resulted from the sale of Series C preferred stock,
which raised net proceeds of $49.9 million.

     On April 26, 1999, CGA Group sold 973,483 shares of Series C preferred
stock to employees of CGA Group and its subsidiaries. The shares were sold for
$1.20 each, for a total of $1.2 million. The shares were 90% financed by CGA
Group at 7% per annum with equal principal installments due annually over a
three-year period commencing April 26, 2000.

     CGA Group does not expect to pay cash dividends to its shareholders.
Commercial Guaranty Assurance's Board of Directors has passed a resolution that
Commercial Guaranty Assurance will not declare or pay cash dividends during the
first five years of operations. After such five-year period, Commercial Guaranty
Assurance intends to comply with dividend restrictions, if any, imposed by Duff
& Phelps subject to covenants contained in the subscription agreements for the
various classes of CGA Group's stock. In addition, Commercial Guaranty
Assurance's dividend payments are subject to certain limitations under Bermudian
insurance regulations that require minimum solvency margins and liquidity
ratios.

     Commercial Guaranty Assurance monitors its exposure on a routine basis and
stays in close contact with Duff & Phelps to ensure that its "Triple-A" rating
is maintained. Commercial Guaranty Assurance has a $20 million excess of loss
reinsurance facility agreement and can also arrange reinsurance on an as needed
basis to manage its exposure. CGA Group also has commitments which expire June
17, 2002, from certain institutional shareholders to purchase an aggregate of
$60 million of additional Series B preferred stock. Should those commitments be
called upon, the proceeds would likely be used to increase the capital of
Commercial Guaranty Assurance. The commitments must be funded in the event that
Duff & Phelps notifies

                                       22
<PAGE>   25

CGA Group at least 45 days prior to June 17, 2002 that Commercial Guaranty
Assurance's rating will otherwise be downgraded below a "Triple-A" rating.

YEAR 2000

     CGA Group's primary uses of software systems are for corporate and
investment portfolio accounting, as well as investment underwriting and
analysis. CGA Group's current systems have recently been purchased or leased as
CGA Group commenced operations in June 1997 and are believed to be Year 2000
compliant. Therefore, CGA Group believes that the risk of Year 2000 compliance
is not significant as it relates to its computer systems. CGA Group has incurred
no material costs to date and expects to incur no material costs in the future
to make its systems Year 2000 compliant.

     CGA Group has reviewed its exposure to Year 2000 issues resulting from its
customers and vendors' computer systems. CGA Group has contacted its vendors
regarding the state of their remediation activities for material Year 2000
issues. CGA Group does not expect that there will be material disruptions to its
business or material costs associated with any Year 2000 disruption by its
customers and vendors. However, the cost and timing of third party Year 2000
compliance is not within CGA Group's control and no assurances can be given with
respect to the cost or timing of such efforts or the potential effects of any
failure to comply. CGA Group will continue to monitor Year 2000 compliance and
formal contingency plans will be formulated if CGA Group identifies specific
areas where there is a substantial risk of Year 2000 problems occurring. No
specific areas are identified as of this date.

FORWARD-LOOKING INFORMATION

     The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This report on Form 10-Q or any other
written or oral statements made by or on behalf of the Company may include
forward-looking statements which reflect the Company's current views with
respect to future events and financial performance. The forward-looking
statements are subject to certain uncertainties and other factors that could
cause actual results to differ materially from such statements. These
uncertainties and other factors (which are described in more detail herein and
in other documents filed by the Company with the Securities and Exchange
Commission) include, but are not limited to, (i) financial difficulties
encountered by an insured of the Company's insurance company subsidiary, (ii)
uncertainties relating to government and regulatory policies (such as subjecting
the company and/or its subsidiaries to insurance regulation or taxation in
additional jurisdictions), (iii) the legal environment, (iv) the uncertainties
of the reserving process, (v) the risks relating to the claims-paying ability
rating of the Company's insurer subsidiary, (vi) loss of the services of any of
the Company's executive officers, (vii) changing rates on inflation and other
economic conditions (viii) ability to collect reinsurance recoverables (ix)
developments in global financial markets which could affect the Company's
investment portfolio, and (x) risks associated with the development of new
products and services. The words "believe", "anticipate", "considered to be",
"project", "plan", "expect", "intend", "will likely result" or " will continue"
and similar expressions identify forward-looking statements, whether as a result
of new information, future events or otherwise.

                                       23
<PAGE>   26

                          PART II.  OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

    (a) Exhibits

     The exhibits listed on the accompanying Index to Exhibits are filed as part
of this Report.

    (b) Reports on Form 8-K

     CGA Group filed no Current Report on Form 8-K during the quarter ended
September 30, 1999.

                                      II-1
<PAGE>   27

                                   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.

                                          CGA GROUP, LTD.
                                          Registrant

                                          /s/  JAMES R. REINHART
                                          --------------------------------------
                                               JAMES R. REINHART
                                             CHIEF FINANCIAL OFFICER
                                               (PRINCIPAL FINANCIAL OFFICER)

Date:  November 15, 1999

                                      II-2
<PAGE>   28

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
  EXHIBIT NUMBER                             DESCRIPTION
  --------------                             -----------
<C>                  <S>
        3.1          Memorandum of Association and Certificate of Incorporation
                     of CGA Group, Ltd., incorporated herein by reference to
                     Exhibit 3.1 to the Registration Statement on Form S-1 (No.
                     333-7944) of the Company (the "Registration Statement")
        3.2          Amended and Restated Bye-laws of CGA Group, Ltd.,
                     incorporated herein by reference to Exhibit 4.2 to the
                     Company's Current Report on Form 8-K filed on April 8, 1999
                     (the "April 8, 1999 8-K")
        3.3          Amended and Restated Appendices to Bye-laws of CGA Group,
                     Ltd., incorporated herein by reference to Exhibit 4.3 to the
                     April 8, 1999 8-K
        4.1          CGA Group, Ltd. Shareholders Agreement, dated as of June 12,
                     1997, as amended and restated as of March 31, 1999,
                     incorporated herein by reference to Exhibit 4.4 to the April
                     9, 1999 8-K
       10.1          Series A Subscription Agreement dated as of June 9, 1997, by
                     and among CGA Group, Ltd. and the holders of the Series A
                     Preferred Stock, incorporated herein by reference to Exhibit
                     10.1 to the Registration Statement
       10.2          Common Stock Warrant Acquisition Agreement, dated as of June
                     9, 1997, by and among CGA Group, Ltd. and the holders of the
                     Series A Preferred Stock, incorporated herein by reference
                     to Exhibit 10.2 to the Registration Statement
       10.3          Investment Units Subscription Agreement dated as of June 4,
                     1997, by and among CGA Group, Ltd. and the holders of the
                     Investment Units, incorporated herein by reference to
                     Exhibit 10.3 to the Registration Statement
       10.4          Right of First Refusal Agreement dated as of June 17, 1997,
                     by and between CGA Group, Ltd. and Capital Reinsurance
                     Company, incorporated herein by reference to Exhibit 10.4 to
                     the Registration Statement
       10.5          Discretionary Investment Advisory Agreement, dated as of
                     December 18, 1996 between Alliance Capital Management, L.P.
                     and Commercial Guaranty Assurance, Ltd., incorporated herein
                     by reference to Exhibit 10.5 to the Registration Statement
       10.6          Investment Management Agreement dated as of December 27,
                     1996, between J.P. Morgan Investment Management Inc. and
                     Commercial Guaranty Assurance, Ltd., incorporated herein by
                     reference to Exhibit 10.6 to the Registration Statement
       10.7          Letter Agreement, dated June 17, 1997 between CGA Group,
                     Ltd. and DCR (and Attachments), incorporated herein by
                     reference to Exhibit 10.7 to the Registration Statement
       10.8          Employee Warrant Agreement, incorporated herein by reference
                     to Exhibit 10.8 to the Registration Statement
       10.9          CGA Group, Ltd. Employee Stock Warrant Plan, incorporated by
                     reference to Exhibit 10.9 to the Registration Statement
       10.10         CGA Group, Ltd. Sponsoring Investors and Founders Stock
                     Warrant Plan, incorporated herein by reference to Exhibit
                     10.10 to the Registration Statement
       10.11         Excess of Loss Agreement, dated as of June 12, 1997, by and
                     between CGA Group, Ltd. and KRE Reinsurance Ltd.,
                     incorporated herein by reference to Exhibit 10.11 to the
                     Registration Statement
       10.12         Employment Agreement, as of January 1, 1997, by and between
                     CGA Group, Ltd. and Richard A. Price, incorporated by
                     reference to Exhibit 10.12 to the Registration Statement
</TABLE>

                                      II-3
<PAGE>   29

<TABLE>
<CAPTION>
  EXHIBIT NUMBER                             DESCRIPTION
  --------------                             -----------
<C>                  <S>
       10.13         Employment Agreement, as of January 1, 1997, by and between
                     CGA Investment Management, Inc. and Jean-Michel Wasterlain,
                     incorporated herein by reference to Exhibit 10.13 to the
                     Registration Statement
       10.14         Employment Agreement, as of June 30, 1997, by and between
                     CGA Investment Management, Inc. and Michael M. Miran,
                     incorporated herein by reference to Exhibit 10.18 to the
                     Registration Statement
       10.15         Employment Agreement, as of January 1, 1997, by and between
                     CGA Investment Management, Inc. and Kem H. Blacker,
                     incorporated herein by reference to Exhibit 10.16 to the
                     Registration Statement
       10.16         Employment Agreement, as of August 1, 1997, by and between
                     CGA Investment Management, Inc. and Landon D. Parsons,
                     incorporated herein by reference to Exhibit 10.16 to the
                     Company's Annual Report on Form 10-K for the year ended
                     December 31, 1998
       10.17         CGA Group, Ltd. Founders' Common Stock Subscription
                     Agreement, dated as of June 12, 1997, among CGA Group, Ltd.,
                     CGA Funding, L.P., and certain Founders of CGA Group, Ltd.,
                     incorporated herein by reference to Exhibit 10.17 to the
                     Registration Statement
       10.18         Series C Convertible Cumulative Voting Preferred Stock
                     Subscription Agreement, dated as of March 31, 1999,
                     incorporated herein by reference to Exhibit 10.18 to the
                     Registration Statement.
       10.19         Agreement dated as of March 1, 1999 by and among CGA Group,
                     Ltd. and the holders of the Series C Preferred Stock,
                     incorporated herein by reference to Exhibit 10.19 to the
                     Registration Statement.
       10.20         Restricted Stock Purchase Agreement and Promissory Note,
                     dated as of April 26, 1999, between CGA Group, Ltd. and the
                     employees thereof listed in Exhibit B thereto, incorporated
                     herein by reference to Exhibit 10.20 to the Company's
                     Quarterly Report on Form 10-Q for the quarter ended June 30,
                     1999 (the "June 30, 1999 10-Q").
       10.21         CGA Group, Ltd. Chief Financial Officer's Certificate As To
                     Adjustment to Exercise Price of Warrants Issued Pursuant to
                     the Sponsoring Investors and Founders Stock Warrant Plan,
                     dated May 18, 1999, incorporated herein by reference to
                     Exhibit 10.21 to the June 30, 1999 10-Q
       27.1          Financial Data Schedule
</TABLE>

                                      II-4