<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

(Mark One)
[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

For the quarterly period ended . . . . . . . . . . . . . . . . . March 31, 1998


                                       OR

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


For the transition period from . . . . . . . . . . to . . . . . . . . . . .

Commission file number . . . . . . . . . . . . . . . . . . . . . . . 000-23005

                       INSPIRE INSURANCE SOLUTIONS, INC.

             (Exact name of registrant as specified in its charter)


                TEXAS                                        75-2595937

(State or other jurisdiction of incorporation              (I.R.S. Employer
        or organization)                                   Identification No.)

                 300 BURNETT STREET, FORT WORTH, TX 76102-2799

                    (Address of principal executive offices)
                                   (Zip Code)


                                  817-348-3999
              (Registrant's telephone number, including area code)

                                      N/A
            (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 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  [ ]

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 12,192,396.
<PAGE>   2
                                     INDEX

<TABLE>
<CAPTION>
                                                                               PAGE
                                                                               ----
<S>                                                                            <C>
 PART I  - FINANCIAL INFORMATION ..........................................      1

 Item 1.   Financial Statements ...........................................      1

           Condensed Balance Sheets as of March 31, 1998 (unaudited)
           and December 31, 1997 ..........................................      1

           Condensed Statements of Operations (unaudited) for the three
           months ended March 31, 1998 and 1997 ...........................      2

           Condensed Statements of Cash Flows (unaudited) for the three
           months ended March 31, 1998 and 1997 ...........................      3

           Notes to Condensed Financial Statements  (unaudited) ...........      4

           Independent Accountants' Report ................................      6


 Item 2.   Management's Discussion and Analysis of Financial
           Condition and Results of Operations ............................      7



 PART II - OTHER INFORMATION ..............................................     10

 Item 2.   Changes in Securities and Use of Proceeds ......................     10

 Item 6.   Exhibits and Reports on Form 8-K ...............................     10


 Signatures ...............................................................     11
 </TABLE>
<PAGE>   3
PART I  - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                        INSPIRE INSURANCE SOLUTIONS, INC.
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 March 31,        December 31,
                                                                                   1998              1997
                                                                                ------------     ------------
                                                                                 (unaudited)
<S>                                                                             <C>              <C>
                                     ASSETS
 CURRENT ASSETS:
      Cash and cash equivalents ...........................................     $ 19,721,454     $ 28,039,323
      Short-term investments ..............................................        8,541,035             --
      Accounts receivable, net ............................................       10,370,528       10,976,672
      Income taxes receivable .............................................          149,041          149,041
      Deferred income taxes ...............................................          765,229        1,434,000
      Stock proceeds receivable ...........................................       44,415,000             --
      Prepaid expenses and other current assets ...........................        1,811,278        1,727,876
                                                                                ------------     ------------
  Total current assets ....................................................       85,773,565       42,326,912
 Accounts receivable, excluding current portion ...........................           17,109           74,258
 Property and equipment, net (accumulated depreciation
  1998 $8,853,227; 1997 $8,214,514) .......................................        5,746,262        6,029,973
 Intangibles and other assets .............................................       16,898,775       17,039,634
                                                                                ------------     ------------
 TOTAL ....................................................................     $108,435,711     $ 65,470,777
                                                                                ============     ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

 CURRENT LIABILITIES:
      Accounts payable ....................................................     $    555,534     $    834,418
      Accrued payroll and compensation ....................................          465,260          633,252
      Other accrued expenses ..............................................        1,474,020        1,485,543
      Unearned revenue ....................................................          856,890        2,626,624
      Deferred compensation ...............................................        2,557,198        2,699,000
      Income taxes payable ................................................          819,709        3,063,000
      Current portion of long-term debt ...................................          568,432          609,658
                                                                                ------------     ------------
        Total current liabilities .........................................        7,297,043       11,951,495
                                                                                ------------     ------------
 Deferred compensation ....................................................          549,876        1,657,017
 Long-term debt ...........................................................          214,890          373,151
 Deferred income taxes ....................................................        2,375,660        2,723,000

 Commitments and contingencies ............................................             --               --

 SHAREHOLDERS' EQUITY:
      Preferred stock, $1.00 par value; 1,000,000 shares
        authorized, none issued and outstanding ...........................             --               --
      Common stock, $.01 par value; 50,000,000 shares
        authorized and 11,892,396 shares issued and outstanding
        in 1998; 50,000,000 shares authorized, 10,191,250 shares issued
        and outstanding in 1997 ...........................................          118,924          101,913
      Additional paid-in capital ..........................................       95,621,219       48,725,299

      Retained earnings (accumulated deficit) .............................        2,258,099          (61,098)
                                                                                ------------     ------------
        Total shareholders' equity ........................................       97,998,242       48,766,114
                                                                                ------------     ------------
 TOTAL ....................................................................     $108,435,711     $ 65,470,777
                                                                                ============     ============
 </TABLE>

           See accompanying notes to condensed financial statements.





                                       1
<PAGE>   4
                        INSPIRE INSURANCE SOLUTIONS, INC.
                 CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     Three months ended
                                                                          March 31,
                                                               ------------------------------
                                                                   1998              1997
                                                               ------------      ------------
<S>                                                            <C>               <C>
 REVENUES:
   Outsourcing services ..................................     $ 10,131,963      $  6,736,301
   Software and software services ........................        7,625,048         1,079,910
   Other .................................................          598,770           374,866
                                                               ------------      ------------
            Total revenues ...............................       18,355,781         8,191,077
                                                               ------------      ------------
 EXPENSES:
   Cost of outsourcing services ..........................        5,634,863         4,891,346
   Cost of software and software services ................        4,076,635           738,671
   Cost of other revenues ................................          424,743           182,537
   Selling, general and administrative ...................        3,243,521           259,519
   Research and development ..............................          422,270           126,000
   Depreciation and amortization .........................        1,212,840           534,603
   Purchased research and development ....................             --           3,000,000
   Deferred compensation .................................             --           3,065,000
   Management fees to shareholder ........................             --             626,286
                                                               ------------      ------------
            Total expenses ...............................       15,014,872        13,423,962
                                                               ------------      ------------
 OPERATING INCOME (LOSS) .................................        3,340,909        (5,232,885)
 OTHER INCOME (EXPENSE):
   Interest income .......................................          418,770            13,745
   Interest expense ......................................          (19,038)          (65,088)
                                                               ------------      ------------
            Total other income (expense) .................          399,732           (51,343)
                                                               ------------      ------------
 INCOME (LOSS) BEFORE INCOME TAXES .......................        3,740,641        (5,284,228)
 INCOME TAX BENEFIT (EXPENSE) ............................       (1,421,444)        1,789,000
                                                               ------------      ------------

 NET INCOME (LOSS) .......................................     $  2,319,197      $ (3,495,228)
                                                               ============      ============

 NET INCOME (LOSS) PER SHARE (BASIC) .....................     $       0.22      $      (0.50)
                                                               ============      ============

 NET INCOME (LOSS) PER SHARE (DILUTED) ...................     $       0.20      $      (0.50)
                                                               ============      ============
 </TABLE>


           See accompanying notes to condensed financial statements.




                                       2
<PAGE>   5
                       INSPIRE INSURANCE SOLUTIONS, INC.
                 CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                 Three months ended
                                                                                      March 31,
                                                                           ------------------------------
                                                                               1998              1997
                                                                           ------------      ------------
<S>                                                                        <C>               <C>          
 OPERATING ACTIVITIES:
    Net income (loss) ................................................     $  2,319,197      $ (3,495,228)
    Adjustments to reconcile net income (loss) to net cash provided
      by operating activities:
      Depreciation and amortization ..................................        1,212,840           534,603
      Deferred income taxes ..........................................             --          (1,946,000)
      Purchased research and development .............................             --           3,000,000
      Change in operating assets and liabilities:
        Accounts receivable ..........................................          663,293          (372,419)
        Prepaid expenses and other current assets ....................          111,598           (49,191)
        Other assets .................................................           76,492            60,053
        Accounts payable .............................................         (278,884)         (887,398)
        Accrued payroll and compensation .............................         (167,993)         (555,392)
        Other accrued expenses .......................................         (386,522)         (176,807)
        Unearned revenue .............................................       (1,769,734)          (20,371)
        Income taxes payable .........................................         (225,189)          (61,007)
        Deferred compensation ........................................         (303,557)        3,065,000
                                                                           ------------      ------------
 Net cash provided by (used in) operating activities .................        1,251,541          (904,157)
                                                                           ------------      ------------

 INVESTING ACTIVITIES:
    Purchase of short-term investments ...............................       (8,541,035)             --
    Purchases of property and equipment ..............................         (387,432)         (795,562)
    Capitalized research and development costs .......................         (477,331)             --
    Acquisition of subsidiary, net of cash acquired ..................             --         (17,174,723)
                                                                           ------------      ------------
 Net cash (used in) investing activities .............................       (9,405,798)      (17,970,285)
                                                                           ------------      ------------

 FINANCING ACTIVITIES:
    Proceeds from borrowings .........................................             --           7,500,000
    Repayment of borrowings ..........................................         (199,487)       (2,850,536)
    Proceeds of borrowings from shareholder ..........................             --           3,140,795
    Contribution from shareholder ....................................             --          10,500,000
    Proceeds from exercises under stock plans, net ...................           35,875              --
    Bank overdrafts ..................................................             --             593,446
                                                                           ------------      ------------
 Net cash provided by (used in) financing activities .................         (163,612)       18,883,705
                                                                           ------------      ------------
 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................       (8,317,869)            9,263
 CASH AND CASH EQUIVALENTS AT BEGINNING
 OF PERIOD ...........................................................       28,039,323           363,398
                                                                           ------------      ------------
 CASH AND CASH EQUIVALENTS AT END OF PERIOD ..........................     $ 19,721,454      $    372,661
                                                                           ============      ============
 SUPPLEMENTAL CASH FLOW INFORMATION:
   Interest paid .....................................................     $     19,947      $     68,023
                                                                           ============      ============
   Income taxes paid .................................................     $ (1,653,173)     $       --
                                                                           ============      ============
    Noncash investing activities - contribution of fixed assets
     from shareholder ................................................     $       --        $  1,308,191
                                                                           ============      ============
    Noncash financing activities - proceeds receivable from
     sale of common stock ............................................     $ 44,415,000      $       --
                                                                           ============      ============
</TABLE>


           See accompanying notes to condensed financial statements.



                                       3
<PAGE>   6
                       INSPIRE INSURANCE SOLUTIONS, INC.
               NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       General -- INSpire Insurance Solutions, Inc. ("INSpire" or the "Company")
(formerly Millers Integrated Claims Resources, Inc. and MiliRisk, Inc.) is a
provider of policy and claims administration and information technology
outsourcing services to the property and casualty ("P&C") insurance industry.
The Company also develops, markets, licenses and supports computer software and
related services to the P&C insurance industry. The Company sells its products
directly to the customer. The majority of sales are in North America. Prior to
the initial public offering of common stock on August 22, 1997, the Company was
a wholly-owned subsidiary of The Millers Mutual Fire Insurance Company ("Millers
Mutual").

       Unaudited Interim Condensed Financial Statements -- The accompanying
unaudited condensed financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion
of management, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the financial position, results of
operations and cash flows for the periods presented have been included. Results
of operations for the periods presented herein are not necessarily indicative of
results of operations for any subsequent quarter or the year ending December 31,
1998. The independent accountants' review report of Deloitte & Touche LLP is
included in Part I, Item 1 of this report.

       The information included in this Form 10-Q should be read in conjunction
with the financial statements and notes thereto for the year ended December 31,
1997 included in the Company's Form 10-K (File No. 000-23005).

       Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission's rules and regulations.

       Accounting Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those amounts.

2.   RELATED PARTY TRANSACTIONS

       The Company provides outsourcing services and software and software
services to Millers Mutual, a shareholder of the Company, and The Millers
Casualty Insurance Company ("Millers Casualty"), an indirect 99.4% subsidiary of
Millers Mutual, under the terms of various agreements. For the three months
ended March 31, 1998 and 1997, under such agreements, the Company earned total
fees of approximately $5,615,980 and $2,884,630, respectively.

       Prior to January 1, 1998, pursuant to various agreements, Millers Mutual
has provided management and administration services to the Company. For the
three months ended March 31, 1997, total fees paid by the Company to Millers
Mutual were approximately $626,286. Effective January 1, 1998, the Company and
Millers Mutual entered into a new agreement whereby the Company provides
benefits administration services to Millers Mutual and Millers Casualty for a
monthly fee of $15,000. As of March 31, 1998, total fees earned under this
agreement were $45,000.

       During each of the three month periods ended March 31, 1998 and 1997, the
Company incurred rental expense of approximately $78,858 under a month-to-month
lease agreement with Millers Mutual.

       There was a net receivable due from Millers Mutual of approximately
$3,235,611 at March 31, 1998 and $1,301,000 at December 31, 1997.





                                       4
<PAGE>   7
3.  SUBSEQUENT EVENT

       On April 20, 1998, the Company acquired all of the outstanding shares of
common stock of Paragon Interface, Inc. ("Paragon") for an aggregate cash
purchase price of $4.25 million and costs and expenses of approximately
$100,000. The acquisition was funded with cash generated from operating
activities.

       The acquisition was accounted for using the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets acquired
and liabilities assumed based on their relative fair market values. As of the
acquisition date, assets acquired and liabilities assumed were as follows

<TABLE>
     <S>                                                       <C>
     Purchase price........................................    $   4,350,000
     Fair values of net assets acquired:
       Software............................................        2,000,000
       Purchased research and development..................        2,000,000
       Fair value of tangible assets acquired..............          603,861
       Liabilities assumed.................................       (1,487,122)
                                                               -------------
                                                                   3,116,739
                                                               -------------
     Goodwill..............................................    $   1,233,261
                                                               =============
</TABLE>

     The amount assigned to purchased research and development was charged
against operating results at the time of acquisition. Paragon was merged with
and into the Company on May 1, 1998.





                                       5
<PAGE>   8


                        INDEPENDENT ACCOUNTANTS' REPORT


Board of Directors and Shareholders
INSpire Insurance Solution, Inc.
Fort Worth, Texas


      We have reviewed the accompanying condensed balance sheet of INSpire
Insurance Solutions, Inc. (the "Company") as of March 31, 1998, and the related
condensed statements of operations and cash flows for the three months ended
March 31, 1998 and 1997. These financial statements are the responsibility of
the Company's management.

      We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

      Based on our review, we are not aware of any material modifications that
should be made to such condensed financial statements for them to be in
conformity with generally accepted accounting principles.

      We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet of INSpire Insurance Solutions, Inc. as of December
31, 1997, and the related statements of operations, shareholders' equity and
cash flows for the year then ended (not presented herein); and in our report
dated January 19, 1998, we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
condensed balance sheet as of December 31, 1997 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.




DELOITTE & TOUCHE LLP

Fort Worth, Texas
April 17, 1998





                                       6
<PAGE>   9
ITEM 2.
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RECENT DEVELOPMENTS

      Acquisition of Paragon Interface, Inc. On April 20, 1998, the Company
acquired all of the outstanding shares of common stock of Paragon Interface,
Inc. ("Paragon") for $4.25 million and costs and expenses of approximately
$100,000. The acquisition was accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on their relative fair market values.

      Follow-on Public Offering. On March 27, 1998, the Company's follow-on
public offering of 2,645,000 shares of the Company's common stock, par value
$.01 per share ( "Common Stock") became effective. Pursuant to this offering, as
of March 31, 1998, the Company sold 1,500,000 shares of Common Stock. Subsequent
to March 31, 1998, the Company sold an additional 300,000 shares of Common Stock
pursuant to the underwriter's exercise of their overallotment option. Certain
shareholders sold 845,000 share of Common Stock. The shares of Common Stock were
sold at a price of $31.50 per share that resulted in net proceeds to the Company
of approximately $53 million. The Company intends to use such net proceeds for
general corporate purposes, including working capital, product development and
possible acquisitions. Pending such uses, the Company invested the net proceeds
in short-term, investment grade, interest bearing securities.

RESULTS OF OPERATIONS

      The following table sets forth, with respect to the Company and for the
periods indicated, the percentage of total revenues represented by certain
revenue, expense and income items:

<TABLE>
<CAPTION>
                                                             March 31,
                                                    ---------------------------
                                                       1998             1997
                                                    ----------       ----------
<S>                                                 <C>              <C>
 REVENUES:
   Outsourcing services .......................           55.2%            82.2%
   Software and software services .............           41.5             13.2
   Other ......................................            3.3              4.6
                                                    ----------       ----------
   Total revenues .............................          100.0            100.0
                                                    ----------       ----------
 EXPENSES:
   Cost of outsourcing services ...............           30.7             59.7
   Cost of software and software services .....           22.2              9.0
   Cost of other revenues .....................            2.3              2.2
   Selling, general and administrative ........           17.7              3.3
   Research and development ...................            2.3              1.5
   Depreciation and amortization ..............            6.6              6.5
   Purchased research and development .........           --               36.6
   Deferred compensation ......................           --               37.4
   Management fees to shareholder .............           --                7.7
                                                    ----------       ----------
    Total expenses ............................           81.8            163.9
                                                    ----------       ----------
 OPERATING INCOME (LOSS) ......................           18.2            (63.9)
 OTHER INCOME (EXPENSE) .......................            2.2             (0.6)
                                                    ----------       ----------
 INCOME (LOSS) BEFORE INCOME TAXES ............           20.4            (64.5)
 INCOME TAX BENEFIT (EXPENSE) .................           (7.7)            21.8
                                                    ----------       ----------

 NET INCOME (LOSS) ............................           12.6%           (42.7)%
                                                    ==========       ==========
 </TABLE>

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997

     Revenues. The Company's revenues were $18.4 million for the three months
ended March 31, 1998 compared to $8.2 million for the three months ended March
31, 1997, an increase of $10.2 million or 124%. This increase is primarily
attributable to the acquisition of Strategic Data Systems, Inc. ("SDS") on March
12, 1997 by





                                       7
<PAGE>   10
the Company ("SDS Acquisition") and growth in outsourcing services revenues. The
growth in outsourcing services revenue is due primarily to revenues from four
significant outsourcing contracts entered into after the first quarter of 1997
and an increase in outsourcing services provided under two other significant
claims administration agreements.

     Cost of Revenues. Cost of revenues, which is comprised mainly of personnel
costs, was $10.1 million for the three months ended March 31, 1998 compared to
$5.8 million for the three months ended March 31, 1997, an increase of $4.3
million or 74%. This increase was primarily attributable to the increased cost
of revenues associated with the SDS Acquisition and the performance of services
under the outsourcing contracts described above. Cost of revenues as a
percentage of total revenues decreased from 71% for the three months ended March
31, 1997 to 55% for the three months ended March 31, 1998. This decrease is a
result of economies of scale associated with spreading certain fixed costs over
a larger revenue base and lower personnel costs as a percentage of revenues.

     Selling, General and Administrative. Selling, general and administrative
expenses, including management fees paid to shareholder, were $3.2 million for
the three months ended March 31, 1998 compared to $886,000 for the three months
ended March 31, 1997, an increase of $2.3 million or 261%. Selling, general and
administrative as a percentage of total revenues increased from 11% for the
three months ended March 31, 1997 to 18% for the three months ended March 31,
1998. This increase is primarily due to: (i) the SDS Acquisition, (ii) increased
marketing costs and (iii) additional staffing, office space and computer
equipment and software required to expand the infrastructure to support the
Company's growth.

     Research and Development. Research and development expense was $422,000 for
the three months ended March 31, 1998 compared to $126,000 for the three months
ended March 31, 1997, an increase of $296,000 or 235%. This increase is due to
the Company not incurring any significant research and development expenses
prior to the SDS Acquisition on March 12, 1997. This expense is comprised
primarily of personnel costs related to software development. For the three
months ended March 31, 1998, the research and development expense is net of
capitalized research and development costs of $477,000.

     Depreciation and Amortization. Depreciation and amortization expense was
$1.2 million for the three months ended March 31, 1998 compared to $535,000 for
the three months ended March 31, 1997, an increase of approximately $665,000 or
124%. This increase is primarily attributable to amortization of goodwill and
capitalized software recorded in connection with the SDS Acquisition and a 75%
increase in fixed assets since March 31, 1997 as a result of the expansion in
infrastructure to support the Company's growth.

     Nonrecurring Operating Expenses. In the purchase price allocation of the
SDS Acquisition, $3.0 million was assigned to in-process research and
development. This amount was charged to operations in March 1997. In addition,
$3.1 million was charged to operations as deferred compensation associated with
stock options granted to executive officers during March 1997.

     Other Income. The increase in other income is primarily attributable to
interest income, which increased primarily due to an increase in short-term
investments purchased with unused net proceeds from the Company's initial public
offering in August 1997. During the first quarter of 1997, the Company did not
have significant investments that earned interest income.

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents were $19.7 million as of March 31, 1998 compared
to approximately $28.0 million as of December 31, 1997, a decrease of $8.3
million or 30%. Net cash provided by operating activities was $1.3 million for
the three months ended March 31, 1998 compared to net cash used in operating
activities of $904,000 for the three months ended March 31, 1997. Net cash used
in investing activities was $9.4 million for the three months ended March 31,
1998, primarily attributable to the purchase of $8.5 million in short-term
investments, compared to $18.0 million for the three months ended March 31,
1997, primarily attributable to the SDS Acquisition. Net cash provided by
financing activities was $18.9 million during the three months ended March 31,
1997, primarily due to capital contributions from a shareholder and borrowings
of $10.6 million to fund the SDS Acquisition, compared to net cash used in
financing activities of $164,000 during the period ended March 31, 1998.





                                       8
<PAGE>   11
     The Company entered into a bank credit facility with Nationsbank of Texas,
N.A. ("NationsBank Facility") on March 12, 1997, pursuant to which the Company
borrowed $5.0 million under a term credit facility and $2.5 million under a $4.0
million revolving credit facility, subject to a borrowing base formula, to
finance in part the SDS Acquisition. Although the Company used a portion of the
net proceeds from the initial public offering to repay these amounts, the
Company intends to keep the revolving credit facility in place for future
borrowings. The Company must pay a commitment fee of 0.25% per annum on the
average daily unused portion of the revolving credit facility. In addition, the
NationsBank Facility contains certain restrictive covenants that require the
Company to meet certain requirements, such as maintaining a minimum net worth,
and that, without the prior written consent of NationsBank of Texas, N.A.
prohibit the Company from incurring indebtedness other than pursuant to the
NationsBank Facility or declaring or paying dividends or other distributions.
The revolving credit facility matures March 12, 1999. Borrowings under the
NationsBank Facility are secured by all accounts receivable, inventory,
equipment, servicing contract rights, and other personal property of the
Company. As of March 31, 1998, there are no outstanding borrowings under the
NationsBank Facility, and the Company is in compliance with its covenants under
the NationsBank Facility.

     The Company believes that cash generated from operations and its net
proceeds from the initial public offering and the follow-on offering will
satisfy the Company's anticipated working capital requirements for at least one
year. The Company, however, may require substantial additional funds for
potential acquisitions and expansion. In the normal course of business, the
Company evaluates acquisitions of businesses, products and technologies that
complement the Company's business.

YEAR 2000 ISSUES

     The Company believes that the computer equipment and software used and sold
by the Company will function properly with respect to dates in the Year 2000 and
thereafter. The Company is in the process of communicating with its significant
suppliers and customers to determine the extent to which interfaces with such
entities are vulnerable to Year 2000 issues and the extent to which any products
purchased by or from such entities are vulnerable to Year 2000 issues. The
Company presently believes that the Year 2000 issues will not require the
Company to incur any material costs or pose significant operational problems for
the Company directly or as a result of any Year 2000 issues of suppliers or
customers. The Company believes that Year 2000 issues of its customers or
potential customers provide opportunities to the Company to market its products
and services as a solution to such Year 2000 issues.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In October 1997, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
No. 97-2, Software Revenue Recognition ("SOP 97-2"). SOP 97-2 is effective for
transactions entered into in fiscal years beginning after December 15, 1997. The
Company believes the adoption of SOP 97-2 will not have a material effect on the
Company's financial position or results of operations.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

     This Report on Form 10-Q contains or may contain "forward-looking
statements" within the meaning of Section 27A of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). All statements made in this report, other
than statements of historical fact, including but not limited to statements made
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" that relate to future results and operations of the Company, and
which may be indicated by words such as "anticipate," "believe," "estimate,"
"expect," "intend" and similar expressions, are "forward-looking statements."
Actual results could differ materially from those contemplated by the
forward-looking statements as a result of certain factors, including but not
limited to difficulties associated with growth, the Company's dependence on
major customers and limited operating history, technological change, competitive
factors and pricing pressures, product development risks, changes in legal and
regulatory requirements, and general economic conditions. Such statements
reflect the current views of the Company with respect to future events and are
subject to these and other risks, uncertainties and assumptions relating to the
operations, results of operations, growth strategy and liquidity of the Company.
All subsequent written and oral forward-looking statements attributable to the
Company or person acting on its behalf are expressly qualified in their entirety
by this paragraph.





                                       9
<PAGE>   12
PART II - OTHER INFORMATION

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

     Effective April 7, 1998, the Board of Directors of the Company approved and
adopted the First Amendment to the Rights Agreement by and between the Company
and U.S. Trust Company of Texas, N. A. dated as of July 30, 1997 (the "Rights
Agreement"). Pursuant to such First Amendment to the Rights Agreement, the
exercise price of each Series A Junior Preferred Stock Purchase Right issued
under the Rights Agreement, which represents the right to purchase from the
Company one one-hundredth (1/100) of a share of Series A Junior Preferred Stock,
par value $1.00 per share, was increased from $40 to $100.

     Under the terms of the NationsBank Facility, the Company cannot declare or
pay any dividends or return any capital to its shareholders or authorize or make
any other distribution, payment or delivery of property or cash to its
shareholders as such without the prior written consent of NationsBank of Texas,
N.A.

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

(a)  The following exhibits are filed as part of this Form 10-Q:

2.1  Form of Stock Purchase Agreement, dated April 20, 1998, by and among the
     Company, Paragon Interface, Inc. and the shareholders of Paragon Interface,
     Inc.

3.1  Restated Articles of Incorporation of the Company and Articles of Amendment
     No. 1 thereto (Incorporated by reference to Exhibit 3.1 of the Company's
     Registration Statement on Form S-1, Registration No. 333-31173).

3.2  Amended and Restated Bylaws of the Company (Incorporated by reference to
     Exhibit 3.2 of the Company's Registration Statement on Form S-1,
     Registration No. 333-31173).

3.3  Form of First Amendment to the Bylaws of the Company.

4.1  Specimen Certificate for shares of Common Stock of the Company
     (Incorporated by reference to Exhibit 4.1 of the Company's Registration
     Statement on Form S-1, Registration No. 333-31173).

4.2  Form of Rights Agreement, by and between the Company and U.S. Trust Company
     of Texas, N.A. dated as of July 30, 1997 (Incorporated by reference to
     Exhibit 4.2 of the Company's Registration Statement on Form S-1,
     Registration No. 333-31173).

4.3  Form of First Amendment to Rights Agreement.

10.1 Employment Agreement, dated and effective as of April 28, 1998, by and
     between the Company and William J. Smith, III.

10.2 Second Amended and Restated 1997 Stock Option Plan.

10.3 Form of First Amendment to the Director Stock Option Plan.

11.1 Statement regarding Computation of Per Share Earnings.

15.1 Letter Re: Unaudited Interim Financial Information.

27.1 Financial Data Schedule (EDGAR version only).

(b)  The Company did not file any reports on Form 8-K during the three months
     ended March 31, 1998.





                                       10
<PAGE>   13

                                   SIGNATURES

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


Dated: May 14, 1998

INSpire Insurance Solutions, Inc.


                                      /s/ F. GEORGE DUNHAM, III                
                                      -------------------------------------
                                      F. George Dunham, III                    
                                      Chief Executive Officer, Chairman and    
                                      Director                                 
                                                                               
                                                                               
                                      /s/ TERRY G. GAINES                      
                                      -------------------------------------
                                      Terry G. Gaines                          
                                      Executive Vice President, Chief Financial
                                      Officer and Treasurer                    


Dated: May 14, 1998





                                       11
<PAGE>   14

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
 NO.                                DESCRIPTION
----                                -----------
<S>    <C>
 2.1   Form of Stock Purchase Agreement, dated April 20, 1998, by and among the
       Company, Paragon Interface, Inc. and the shareholders of Paragon Interface,
       Inc.

 3.1   Restated Articles of Incorporation of the Company and Articles of Amendment
       No. 1 thereto (Incorporated by reference to Exhibit 3.1 of the Company's
       Registration Statement on Form S-1, Registration No. 333-31173).

 3.2   Amended and Restated Bylaws of the Company (Incorporated by reference to
       Exhibit 3.2 of the Company's Registration Statement on Form S-1,
       Registration No. 333-31173).

 3.3   Form of First Amendment to the Bylaws of the Company.

 4.1   Specimen Certificate for shares of Common Stock of the Company
       (Incorporated by reference to Exhibit 4.1 of the Company's Registration
       Statement on Form S-1, Registration No. 333-31173).

 4.2   Form of Rights Agreement, by and between the Company and U.S. Trust Company
       of Texas, N.A. dated as of July 30, 1997 (Incorporated by reference to
       Exhibit 4.2 of the Company's Registration Statement on Form S-1,
       Registration No. 333-31173).

 4.3   Form of First Amendment to Rights Agreement.

10.1   Employment Agreement, dated and effective as of April 28, 1998, by and
       between the Company and William J. Smith, III.

10.2   Second Amended and Restated 1997 Stock Option Plan.

10.3   Form of First Amendment to the Director Stock Option Plan.

11.1   Statement regarding Computation of Per Share Earnings.

15.1   Letter Re: Unaudited Interim Financial Information.

27.1   Financial Data Schedule (EDGAR version only).
</TABLE>