<PAGE>

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

                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549
                              ________________

                                  FORM 10-Q

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

    For the Quarter Ended March 31, 2000    Commission File Number: 0-9628
                                     or

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

    For the transition period from [        ]  to  [        ]


                      ANCHOR PACIFIC UNDERWRITERS, INC.
           (Exact name of registrant as specified in its charter)


            Delaware                                94-1687187
  (State or other jurisdiction of                (I.R.S. Employer
  incorporation or organization)                Identification No.)

    1800 Sutter Street, Suite 400                      94520
        Concord, California                          (Zip Code)
 (Address of principal executive offices)

     Registrant's telephone number, including area code:  (925) 682-7707


         Securities registered pursuant to Section 12(b) of the Act:

                                    None

         Securities registered pursuant to Section 12(g) of the Act:

                        Common stock, $.02 par value


  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 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.  [X] Yes    [_] No



  As of March 31, 2000, the Registrant had 4,710,055 shares of common stock
and 1,853,300 shares of preferred stock outstanding.


                   This document is comprised of 17 pages

================================================================================
<PAGE>

                       ANCHOR PACIFIC UNDERWRITERS, INC.

                                     INDEX


<TABLE>
<S>           <C>        <C>                                                           <C>
Part I.       FINANCIAL INFORMATION

              Item 1.    Financial Statements:

                         Consolidated Balance Sheets, March 31, 2000 (unaudited) and
                         December 31, 1999...........................................        1

                         Consolidated Statements of Operations (unaudited) for the
                         three months ended March 31, 2000 and 1999..................        3

                         Consolidated Statements of Shareholders' Equity (Deficit)
                         for the three months ended March 31, 2000 (unaudited) and
                         year ended December 31, 1999................................        4

                         Consolidated Statements of Cash Flows (unaudited ) for the
                         three months ended March 31, 2000 and 1999..................        5

                         Notes to Consolidated Financial Statements..................        6

              Item 2.    Management's Discussion and Analysis of Financial
                         Condition and Results of Operations.........................       10

 Part II.     OTHER INFORMATION

              Item 1.    Legal Proceedings...........................................       14

              Item 2.    Changes in Securities.......................................       14

              Item 3.    Defaults Upon Senior Securities.............................       14

              Item 4.    Submission of Matters to a Vote of Security Holders.........       14

              Item 5.    Other Information...........................................       14

              Item 6.    Exhibits and Reports on Form 8-K............................       14
</TABLE>
<PAGE>

PART I - FINANCIAL INFORMATION


             Anchor Pacific Underwriters, Inc. and Subsidiaries
                         Consolidated Balance Sheets



<TABLE>
<S>                                                         <C>                       <C>
                                                             March 31, 2000            December 31, 1999
                                                          -------------------       ------------------------
                                                               (unaudited)

Assets
Current Assets:
    Cash and cash equivalents - corporate funds                    $  250,456                     $        -
    Cash and cash equivalents - third-party
         administration fiduciary funds                             4,577,212                      4,686,823
    Accounts receivable (less allowance for
         doubtful accounts of $7,500 in
         2000 and 1999, respectively)                                 426,482                        465,337
    Prepaid expenses and other current assets                         114,184                        148,774
Total current assets                                                5,368,334                      5,300,934
                                                          -------------------       ------------------------

Property and equipment                                              2,986,478                      2,918,110
Accumulated depreciation and amortization                          (2,350,811)                    (2,287,299)
                                                          -------------------       ------------------------
                                                                      635,667                        630,811
Other assets:
    Intangible assets, net                                            511,283                        527,813
    Other                                                              57,288                         60,477
                                                                      568,571                        588,290
                                                          -------------------       ------------------------

Total assets                                                      $ 6,572,572                    $ 6,520,035
                                                          -------------------       ------------------------
</TABLE>

                                       1
<PAGE>

               Anchor Pacific Underwriters, Inc. and Subsidiaries
                    Consolidated Balance Sheets (continued)


<TABLE>
<S>                                                        <C>                      <C>
                                                            March 31, 2000           December 31, 1999
                                                         --------------------     ---------------------
                                                              (unaudited)

Liabilities and Shareholders' Equity (Deficit)
Current Liabilities:
    Cash and cash equivalents - third-party
         administration fiduciary funds                           $ 4,577,212               $ 4,686,823
    Cash overdraft                                                          -                    55,926
    Accounts payable                                                  820,796                 1,161,334
    Accrued expenses                                                  196,340                   664,810
    Short-term debt                                                         -                   200,000
    Current portion of long-term debt                                 873,510                   588,060
    Current portion of long-term liabilities                          176,487                   194,529
Total current liabilities                                           6,644,345                 7,551,482
                                                         --------------------     ---------------------


Long-term liabilities, net of current portion                         347,102                   353,127
                                                         --------------------     ---------------------

 Long-term debt, including $509,000 and $234,000
 in 2000 and 1999, respectively, owed to related
 parties, net of current portion                                      844,986                 1,394,485

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

Shareholders' equity (deficit):
     Preferred stock - $.02 par value; 2,500,000
     shares authorized; none issued as of                             37,066                         -
     12/31/99, 1,853,300 issued as of 3/31/00
    Common stock  - $.02 par value; 50,000,000                         94,201                    94,201
         shares authorized; 4,710,055 shares issued
         as of 3/31/00 and 12/31/99
    Additional paid-in capital                                      6,177,345                 4,232,265
    Accumulated deficit                                            (7,572,473)               (7,105,525)

Total shareholders' (deficit)                                      (1,263,861)               (2,779,059)
                                                                  $ 6,572,572               $ 6,520,035
                                                         --------------------     ---------------------
</TABLE>

See accompanying notes.

                                       2
<PAGE>

               Anchor Pacific Underwriters, Inc. and Subsidiaries
                     Consolidated Statements of Operations
                                  (unaudited)

<TABLE>
<CAPTION>

                                                                        Three Months Ended March 31,
                                                         -----------------------------------------------------
<S>                                                        <C>                              <C>
                                                                              2000                        1999
Revenues:
    Administrative fees and other income                                $2,493,899                  $2,467,645
    Interest income                                                          3,962                       6,237
Total revenue                                                            2,497,861                   2,473,882
                                                         -------------------------        --------------------

Operating expenses:
    Salaries, commissions and employee benefits                          1,837,204                   1,915,220
    Selling, general and administrative expenses                         1,033,813                   1,097,948
Total operating expenses                                                 2,871,017                   3,013,168
                                                         -------------------------        --------------------

                                                                          (373,156)                   (539,286)
                                                         -------------------------        ____________________


Other income (expense):
    Amortization of goodwill and intangible                                (16,530)                    (16,530)
    assets
    Interest                                                               (71,943)                    (34,819)
    Other                                                                     (609)                     39,922
                                                         -------------------------        --------------------
Total other income (expense)                                               (89,082)                    (11,427)

Loss before income taxes                                                  (462,238)                   (550,713)

Provision for income taxes                                                  (4,710)                     (4,870)
                                                         -------------------------        --------------------

Net (loss)                                                              $ (466,948)                 $ (555,583)
                                                         -------------------------        --------------------

Basic and diluted (loss) per common share                                   $(0.10)                     $(0.12)
                                                         -------------------------        --------------------

Weighted average number of common shares
    Outstanding                                                          4,710,055                   4,710,057
                                                         -------------------------        --------------------
</TABLE>

See accompanying notes

                                       3
<PAGE>

                       Anchor Pacific Underwriters, Inc.

           Consolidated Statements of Shareholders' Equity (Deficit)

<TABLE>
<CAPTION>
                                                                                                Additional
                      Common Stock                  Preferred Stock                               Paid-In          Accumulated
                  Shares          Amount        Shares         Amount           Capital          (Deficit)            Total
            --------------------------------------------------------------------------------------------------------------------
<S>               <C>              <C>           <C>           <C>              <C>              <C>                <C>
Balance at
 12/31/98          4,710,057        $94,201             -          $     -       $4,232,265       $(4,627,554)       $  (301,088)

Canceled
 stock                    (2)             -             -                -                -                 -                  -
(fractional
 shares)

Net loss                   -              -             -                -                -        (2,477,971)        (2,477,971)
            --------------------------------------------------------------------------------------------------------------------

Balance at
 12/31/99          4,710,055        $94,201             -          $     -       $4,232,265       $(7,105,525)       $(2,779,059)

Shares
 issued, net
 of direct
 cost                      -              -     1,853,300           37,066        1,945,080                 -          1,982,146

Net Loss                   -              -             -                -                -          (466,948)          (466,948)
            --------------------------------------------------------------------------------------------------------------------

Balance at
 3/31/00
 (Unaudited)       4,710,055        $94,201     1,853,300          $37,066       $6,177,345       $(7,572,473)       $(1,263,861)
            --------------------------------------------------------------------------------------------------------------------

</TABLE>


See accompanying notes

                                       4
<PAGE>

               Anchor Pacific Underwriters, Inc. and Subsidiaries
                     Consolidated Statements of Cash Flows
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                              Three Months
                                                                             Ended March 31,
                                                          --------------------------------------------------
                                                                      2000                         1999
<S>                                                            <C>                           <C>
Operating activities:
Net (loss)                                                         $   (466,948)                 $  (555,583)
Items not requiring the current use of cash:
    Depreciation and amortization                                        63,512                       57,283
    Amortization of goodwill and other
         intangibles                                                     16,530                       16,530
Changes in items affecting operations:
    Accounts receivable                                                  38,855                       93,728
    Prepaid expenses and other current assets                            34,590                      (14,056)
    Other assets                                                          3,189                       (2,759)
    Accounts payable                                                   (340,538)                     (56,237)
    Accrued expenses                                                   (468,470)                    (389,247)
                                                           --------------------         --------------------
Net cash (used in) operating activities                              (1,119,280)                    (850,341)
                                                           --------------------         --------------------

Investment activities:
Purchases of property and equipment                                     (68,368)                    (127,005)
Net proceeds from sale of assets                                              -                    2,165,003
                                                          ---------------------        ---------------------
Net cash provided by (used in) investing
 activities                                                             (68,368)                   2,037,998
                                                          ---------------------        ---------------------

Financing activities:
Preferred stock issued, net                                           1,982,146                            -
Cash overdraft                                                          (55,926)                           -
Borrowings on long-term debt                                            100,000                       85,000
Repayment on long-term debt and liabilities                            (588,116)                  (1,186,018)
                                                          ---------------------        ---------------------
Net cash provided by (used in) financing
 activities                                                           1,438,104                   (1,101,018)
                                                          ---------------------        ---------------------

Net increase in cash                                                    250,456                       86,639
Cash and cash equivalents-corporate funds at
 beginning of period                                                          -                      138,139
                                                          ---------------------        ---------------------
Cash and cash equivalents-corporate funds at
 end of period                                                      $   250,456                  $   224,778
                                                          ---------------------        ---------------------

Supplemental cash flow information:
Cash paid during the period for:
    Interest                                                       $     71,943                  $    34,819
                                                          ---------------------        ---------------------
    Income taxes                                                   $      4,710                  $     4,870
                                                          ---------------------        ---------------------
</TABLE>



See accompanying notes

                                       5
<PAGE>

             Anchor Pacific Underwriters, Inc. and Subsidiaries
                 Notes to Consolidated Financial Statements
                                 (Unaudited)
                               March 31, 2000

NOTE 1 - BASIS OF PRESENTATION
------------------------------

    The accompanying unaudited consolidated financial statements of Anchor
Pacific Underwriters, Inc. and its subsidiaries ("Anchor and/or Company") have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X.  Accordingly, they do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments, consisting
of normal recurring accruals, considered necessary for a fair presentation have
been included.  Operating results for the three month period ended March 31,
2000, are not necessarily indicative of the results that may be expected for the
year ending December 31, 2000.  For further information, refer to the
consolidated financial statements and footnotes thereto included in Anchor's
Annual Report on Form 10-K for the year ended December 31, 1999.

Reclassifications
-----------------

    Certain reclassifications have been made to the prior year financial
statements to conform with the current year financial statement presentation.
Such reclassifications have had no effect on net income as previously reported.

NOTE 2 - RECENT DEVELOPMENTS, CHANGE IN CONTROL OF COMPANY
----------------------------------------------------------

    On November 29, 1999, the Company and Ward North America Holding, Inc.
("Ward") executed a letter of intent whereby Ward would acquire a controlling
ownership interest in the Company and nominees of Ward would assume a majority
of the seats on the Company's Board of Directors.  The November 29, 1999 letter
of intent was further modified by the parties pursuant to a February 18, 2000
binding Letter Agreement that specifically bound the parties to certain funding
and structural commitments.

    Effective March 9, 2000, the Company and Ward entered into a Securities
Purchase Agreement ("Agreement") which superseded and replaced in its entirety
the binding Letter Agreement dated February 18, 2000 and letter of intent dated
November 29, 1999.  The Agreement provides that Ward would purchase from the
Company a package of debt and equity securities and that it would make available
a $1,000,000 loan facility.  The specific securities and facility are described
below:

    (a)  Series E Convertible Debentures (the Series E Debentures").  The
Series E Debentures have a two year term with a provision that provides for
repayment on July 1, 2000, if requested by Ward; conversion price of $0.50 per
share and "Piggyback" registration rights for three years.  For each $5,000 of
Series E Debentures acquired, Ward received a five year warrant to acquire 3,000
shares of the Company's common stock at an exercise price of $0.50 per share.
The Series E Debentures are subordinate to the Company's "Senior Debt" (as
defined in the Series E Debentures) and are superior to all other debentures of
the Company, including without limitation the Series A, B, C and D debentures
previously issued by Anchor, and shall constitute "Senior Debt" for purposes of
those debentures.  As of March 31, 2000, Ward has invested $500,000 in the
Series E Debentures;

    (b) a $200,000 bridge loan facility to the Company evidenced by a
promissory note ("Bridge Loan"); bearing interest at the rate of 10% per annum
with a maturity date of July 1, 2000.  The principal amount and all accrued
interest under the Bridge Loan were applied by Ward toward the purchase of
Series A Convertible Preferred stock, described below;

    (c)  1,853,3000 shares of Series A Convertible Preferred stock ("Series
A Preferred") at a purchase price of $2,000,000, which constitute 62.6% of
Anchor's common stock on a fully diluted basis; and

    (d)  a $1,000,000 convertible loan facility (the "Convertible Loan") which
was made available immediately following the closing of the purchase of the
Series A Preferred.  The Convertible Loan is convertible, at Ward's option, into
shares of Series A Preferred stock which are further convertible into a number
of shares of


                                       6
<PAGE>

common stock, which, when added to the shares of common stock issued or
issuable pursuant to the Series E Debentures (not including the warrants
accompanying the Series E Debentures) and other shares of Series A Preferred
issued to Ward, would constitute 73.5% of the Company's common stock on a
fully diluted basis following such conversion, assuming the maximum amount of
$1,000,000 was borrowed by the Company pursuant to the Convertible Loan.

     Under the terms of the Agreement, Ward agreed that during the 36 month
period following the closing of the transaction neither Ward or its affiliates
would make any further acquisitions of Anchor's securities unless Ward first
made a tender offer (the "Tender Offer") to buy all of the shares of Anchor's
common stock not then owned by Ward or its affiliates at a purchase price equal
to the greater of: (i) $0.80 per share (as adjusted for stock splits,
       -------
combinations or dividends with respect to such shares) or (ii) the price per
share determined by assuming the value of Anchor to be equal to Anchor's
earnings before income taxes ("EBIT") for the 12 full calendar months preceding
the month in which the offer is made, multiplied by six and divided by the
number of shares outstanding of the Company on a fully diluted basis.

     In connection with the transaction, all of Company's directors resigned
with the exception of James R. Dunathan.  Gordon Silverstein, Donald Putnam and
R. William MacCullough resigned on March 9, 2000.  Earl Wiklund, Audie Dudum,
James Wieking, Michael Sanford, Lawrence Hayes and Steven Gonsalves resigned on
March 14, 2000.  As the sole remaining director, Mr. Dunathan appointed Jeffrey
S. Ward, Kevin P. Jasper, Russ A. Whitmarsh, Gerard A.C. Bakker, William Beasley
and John F. Darden to the Board of Directors.

NOTE 3 - DISCONTINUED OPERATIONS
--------------------------------

     During the period from 1990 through 1996, Anchor expanded its property and
casualty business by acquiring certain assets, including insurance brokerage
accounts.   In 1994 Anchor acquired a property and casualty insurance brokerage
company, Putnam, Knudsen & Wieking, Inc. ("PKW").  Shortly thereafter it
consolidated all of its property and casualty insurance brokerage business under
PKW.   After evaluating trends in the insurance industry in mid-1998, the Board
of Directors of Anchor decided to sell its property and casualty business and to
focus on its third-party administration business conducted through its wholly-
owned subsidiary, Harden & Company Insurance Services, Inc. ("Harden Group").
Effective December 31, 1998, Anchor sold substantially all the assets of PKW to
an unrelated third party for approximately $2,250,000 in cash.  The proceeds
derived from the asset sale were largely used to reduce debt and to make
additional financial resources available for working capital needs and third-
party administration opportunities.

     In 1999, Anchor caused PKW to change its name to Shelby Insurance
Services, Inc. ("Shelby").  Effective March 9, 2000, Anchor sold all of the
capital stock of Shelby to James R. Dunathan, a member of the Board of
Directors.

NOTE 4 - CONTINGENCIES
----------------------

     Anchor is subject to certain legal proceedings and claims arising in the
ordinary course of its business.  It is management's opinion that the resolution
of these claims will not have a material effect on Anchor's consolidated
financial position.

NOTE 5 - 10% CONVERTIBLE SUBORDINATED DEBENTURES
------------------------------------------------

     In 1995, Anchor issued $370,000 of 10% Convertible Subordinated Debentures
(the "Debentures").  Investors holding $270,000 of the Debentures, including one
member of the Board of Directors (Mr. Dunathan who held $20,000), converted the
Debentures into Anchor's common stock at $1.35 per share.  These conversions
reduced Anchor's outstanding indebtedness by $270,000 and, in turn, increased
shareholders' equity by $270,000.  On March 15, 2000, Anchor repaid the
remaining outstanding Debentures ($60,000) with the proceeds from the Series A
Preferred shares purchased by Ward.

NOTE 6 - SUBORDINATED BRIDGE NOTES AND WARRANT
----------------------------------------------

     During 1996, Anchor raised $225,000 from one member of the Board of
Directors (Mr. Dunathan who purchased $10,000) and other qualified investors
through the issuance of 10% Subordinated Bridge Notes with a

                                       7
<PAGE>

Warrant to Purchase Shares of Anchor Common Stock ("Bridge Notes"). In
February 1997, Anchor offered the purchasers of said Bridge Notes an
opportunity to either change the terms of the warrants underlying the Bridge
Notes or to participate in the 1997 Offering (discussed below), by exchanging
the Bridge Notes. The basic terms of the two alternatives were: (a) in lieu of
receiving a five year warrant to purchase 1,000 shares of Anchor common stock
at a purchase price of $1.75 per share, for every $10,000 in principal
invested, the purchaser would receive a five year warrant to purchase 2,000
shares of Anchor common stock at a purchase price of $1.35 per share; or (b)
be allowed to participate in the 1997 Offering by exchanging the Bridge Notes
and receiving in return (i) interest at the rate of 10% per annum up to the
date of conversion; (ii) Anchor common stock in place of the Bridge Notes at a
conversion price equal to $0.90 per share; and (iii) a five year warrant,
equal to the number of shares issued in place of the Bridge Notes, with the
right to purchase Anchor's common stock at a purchase price of $0.90 per
share. Purchasers representing $180,000 (including Director, Mr. Dunathan who
held $10,000) of said Bridge Notes chose alternative (a) above, and the
remaining $45,000 chose alternative (b) above. On March 15, 2000, Anchor
repaid the remaining $80,000 of said Bridge Notes ($10,000 of which was repaid
to Mr. Dunathan) with the proceeds from the Series A Preferred shares
purchased by Ward.

NOTE 7 - 1997 OFFERING
----------------------

     During 1997, Anchor raised $305,000 from other qualified investors through
a private offering of Anchor common stock along with warrants to acquire shares
of Anchor common stock (the "1997 Offering").  Anchor utilized a substantial
portion of the proceeds from the 1997 Offering to fund current and future
working capital needs of Anchor.  The basic terms of the 1997 Offering were: (a)
up to 555,000 shares of Anchor common stock available at a purchase price of
$0.90 per share; (b) five year warrants to acquire one share of Anchor common
stock for each share of Anchor common stock purchased at an exercise price of
$0.90 per share; (c) "piggyback" registration rights for three years; and (d)
anti-dilution protection for stock splits, stock dividends, recapitalizations
and reorganizations.

NOTE 8 - 10% CONVERTIBLE SUBORDINATED DEBENTURES, SERIES B
----------------------------------------------------------

     At the end of the third quarter 1998, Anchor commenced raising additional
funds by offering 10% Convertible Subordinated Debentures, Series B (the "Series
B Debentures").  Anchor raised $495,000, $200,000 from its primary bank lender
and the remaining $295,000 from one member of the Board of Directors (Mr.
Dunathan who purchased $15,000 of the Series B Debentures) and other qualified
investors.  Anchor utilized the proceeds from the Series B Debentures to fund
current working capital needs.  The basic terms of the Series B Debentures were:
(a) 10% interest, payable semi-annually in arrears; (b) two year maturity; (c)
conversion price of $0.50 per share; (d) "Piggyback" registration rights for
three years; (e) for each $5,000 of Series B Debentures acquired, an investor
received a five year warrant to acquire 2,000 shares of Anchor common stock at
an exercise price of $0.50 per share; and (f) subordination provisions that
subordinated the Series B Debentures to Anchor's "Senior Debt" (as defined in
the Series B Debentures).  The Series B Debentures contained a provision that
permitted Anchor to redeem all or a portion of their Series B Debentures, at
par, plus any outstanding interest, in the event Anchor sold PKW for an amount
in excess of $2 million.  Anchor sold PKW for $2,250,000 cash, effective
December 31, 1998.   As a result of the December 31, 1998 sale of PKW in excess
of $2 million, Anchor repurchased $230,000 of the Series B Debentures including
$200,000 from its primary lender.  On March 15, 2000, Anchor repaid $145,000
($15,000 of which was repaid to Mr. Dunathan) of the outstanding Series B
Debentures with the proceeds from the Series A Preferred shares purchased by
Ward.  As of March 31, 2000, $120,000 of the Series B Debentures remained
outstanding.

                                       8
<PAGE>

NOTE 9 - 10% CONVERTIBLE SUBORDINATED DEBENTURES, SERIES C
----------------------------------------------------------

     During the first nine months of 1999, Anchor raised $179,000 from one
member of the Board of Directors (Mr. Dunathan who purchased $9,000) and other
qualified investors by offering 10% Convertible Subordinated Debentures, Series
C (the "Series C Debentures").  Anchor utilized a substantial portion of the
proceeds from the Series C Debentures to fund current working capital needs.
The basic terms of the Series C Debentures were:  (a) 10% interest, payable
semi-annually in arrears; (b) two year maturity; (c) conversion price of $0.60
per share; (d) "Piggyback" registration rights for three years; (e) for each
$5,000 of Series C Debentures acquired, an investor received a five year warrant
to acquire 2,000 shares of Anchor common stock at an exercise price of $0.60 per
share; and (f) subordination provisions that subordinated the Series C
Debentures to Anchor's "Senior Debt" (as defined in the Series C Debentures).

     In September 1999, Anchor offered the investors of said Series C
Debentures the opportunity to either remain as investors in the Series C
Debentures or to convert their Series C Debentures into the Series D Debentures
(discussed below).  The basic terms of the two alternatives were:  (a) remain as
an investor of the Series C Debentures; or (b) exchange the Series C Debentures
and warrants and receive in return (i) Series D Debentures at a conversion price
of $0.50 per share; and (ii) for each $5,000 of Series C Debentures originally
purchased, a warrant to acquire 3,000 shares of Anchor's common stock at a
purchase price of $0.50 per share.  All of the Series C Debentures investors,
including Director, Mr. Dunathan, chose alternative (b) above.

NOTE 10 - 10% CONVERTIBLE SUBORDINATED DEBENTURES, SERIES D
-----------------------------------------------------------

     During the last three months of 1999, Anchor raised an additional
$100,000 from other qualified investors by offering 10% Convertible Subordinated
Debentures, Series D (the "Series D Debentures").  Anchor utilized a substantial
portion of the proceeds from the Series D Debentures to fund current working
capital needs.  The basic terms of the Series D Debentures were:  (a) 10%
interest, payable semi-annually in arrears; (b) two year maturity; (c)
conversion price of $0.50 per share; (d) "Piggyback" registration rights for
three years; (e) for each $5,000 of Series D Debentures acquired, an investor
received a five year warrant to acquire 3,000 shares of Anchor common stock at
an exercise price of $0.50 per share; and (f) subordination provisions that
subordinated the Series D Debentures to Anchor's "Senior Debt" (as defined in
the Series D Debentures).  Of the $244,000 Series D Debentures that remain
outstanding as of March 31, 2000, one Director, Mr. Dunathan holds $9,000.

NOTE 11 - COMMITMENTS
---------------------

     On September 30, 1997, Anchor obtained a $1,600,000 bank loan. The basic
terms and conditions of this loan were:  (a) monthly interest payments equal to
the bank's prime rate, plus 2.5%; (b) five year term; (c) monthly principal
payments in installments of $26,666 (notwithstanding the foregoing payment
provisions, 75% of Anchor's monthly EBITDA were to be applied to principal
payments to the extent such percentage of monthly EBITDA was required to make
the scheduled payment of principal.  To the extent that 75% of monthly EBITDA
fell short of the required principal payment, the difference was to be added to
the final payment); and (d) a five year warrant to acquire 95,000 shares of
Anchor common stock at a purchase price of $1.75 per share.  The proceeds of the
loan were used to retire outstanding credit facilities with another bank.

     On December 22, 1997, the bank that provided Anchor with the $1,600,000
term loan also provided Anchor with a $250,000 loan to support current working
capital needs of Anchor in connection with Harden's expansion in Portland,
Oregon.

     On March 9, 1998, a term loan in the amount of $1,821,890 was entered into
between Anchor and the bank combining both the $1,600,000 term loan and the
$250,000 loan.  The basic terms of this term loan were:  (a)  monthly interest
payments equal to bank's prime rate, plus 2.5%; (b) maturity date of October 5,
2002; and (c) monthly principal payments in installments of $33,125 beginning
April 5, 1998.  All other terms and conditions contained in the term loan dated
September 30, 1997, including all amendments thereto and replacements therefor,
remained in place.

     On June 2, 1998, a new term loan in the amount of $1,741,841 was entered
into between Anchor and the bank, which replaced the $1,821,890 term loan.  The
basic terms of this new term loan are:  (a) monthly interest payments equal to
bank's prime rate, plus 2.5%; (b) a maturity date of October 5, 2002; and (c)
monthly principal payments in installments of $16,500 beginning on June 5, 1998.
The provision which required 75% of Anchor's

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<PAGE>

monthly EBITDA to be applied to principal payments was deleted. All other
terms and conditions of the term loan dated September 30, 1997, including all
amendments thereto and replacements therefor, remain operative.

     On April 29, 1999, Anchor obtained a new $250,000 bank loan from its
primary lender.  The basic terms and conditions of this loan were:  (a) monthly
interest payments equal to the bank's prime rate, plus 2.5%; (b) a maturity date
of September 30, 1999; (c) principal plus all accrued unpaid interest due at
maturity; and (d) a five year warrant to acquire 100,000 shares of Anchor common
stock at a purchase price of $0.60 per share.  The proceeds of the loan were
used to support the current working capital needs of Anchor.

     On September 30, 1999, a new term loan in the amount of $931,485 was
entered into between Anchor and the bank combining both the balances owing on
the $1,741,841 term loan and the $250,000 bank loan.  The basic terms of this
new term loan are:  (a) monthly interest payments equal to bank's prime rate,
plus 2.5%; (b) a maturity date of October 7, 2002; and (c) monthly principal
payment in installments of $16,500 which began on November 7, 1999.  All other
terms and conditions contained in the term loan dated September 30, 1997,
(except for the provision which required 75% of Anchor's monthly EBITDA to be
applied to principal payments which had been deleted earlier) including all
amendments thereto and replacements therefor, remain operative.

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

Background

     Since its inception, Anchor has expanded its insurance and third-party
administration service capabilities through internal growth as well as a series
of acquisitions.  The employee benefits business of Anchor is conducted through
Harden Group and primarily involves third-party health benefits administration
activities.  This business group engages in designing, implementing and
administering health benefit plans for small to medium sized employer groups.
Administration services provided by Harden Group include receiving and managing
employer plan contributions and/or premium payments, monitoring employee and
dependent eligibility, preparing required government and tax reports, handling
day-to-day administration, reviewing and analyzing claims data for coverage, and
managing the claims settlement process.  Anchor, through Harden Group, also
helps develop insurance products and services tailored to the specific needs of
the client, provides risk analysis and conducts loss control and cost studies
for insurance companies and self-insured employers.  As compensation for its
claims administration services, Harden Group generally receives fees based
either on a percentage of premiums collected or on a per capita basis.

     Anchor continues to take steps to strengthen Harden Group's management
and sales and marketing staff and is currently re-organizing the entire
division, including completion of the Company's systems' consolidation.  In
connection with the recent financing by Ward, management is taking steps to
create "Ward Benefits Group".  As part of this process Harden Group will be
renamed Ward Benefits Group.

Results of Operations -- Quarters Ended March 31, 2000 and 1999

Reclassifications

     The prior years' balances detailed below have been reclassified to conform
with the current year presentation of operations.

Revenues

     Total Revenues.  Total revenues for the first quarter of 2000, were
$2,497,861, an increase of $23,979 or 1.0%, as compared to 1999 first quarter
revenues of  $2,473,882.  The increase in revenue in this three-month period was
primarily due to marketing efforts at Harden Group.  Anchor's revenues vary from
quarter to quarter as a result of the timing of policy renewals and net new/lost
business production, whereas expenses are fairly uniform throughout the year.

     Fees.  Fees from Harden Group (including underwriting and risk analysis)
services for the first quarter of 2000, were $2,493,899, an increase of $26,254
or 1.1%, as compared to $2,467,645 in fees for the same period in 1999.   This
increase in fee income is the direct result of Harden Group's marketing efforts.

     Fee revenues generated by Anchor in the first quarter of 2000 from third-
party administration services

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<PAGE>

consist of revenues generated by Harden Group. The third-party administration
revenues are primarily derived from: (a) an insurance product underwritten by
one insurance carrier, which is A-(Excellent); (b) the administration of
insurance programs underwritten by various insurance carriers for a number of
self-insured employers; and (c) dental insurance administration. Self-
insurance is an alternative to fully insured programs in which a client
assumes a manageable portion of its insurance risks, usually (although not
always) placing the less predictable and larger loss exposure with an excess
insurance carrier.

     Interest Income.  Interest income consists of interest earned on funds held
in fiduciary accounts and interest earned on investments.  Interest income was
$3,962 and $6,237 for the three months ended March 31, 2000 and 1999,
respectively.

Expenses

     Total Expenses.  Total operating expenses for the first quarter of 2000,
were $2,871,017, a decrease of $142,151 or 4.7% as compared to operating
expenses of $3,013,168 for the same period in 1999.  As discussed below, the
decrease in total expenses resulted primarily from a decrease in selling,
general and administration expenses and employee compensation and benefits
resulting from management's cost control measures.

     Employee Compensation and Benefits.  Employee compensation and benefits for
the first quarter of 2000 were $1,837,204, a decrease of $78,016 or 4.1% as
compared to $1,915,220 for the same period in 1999.  The decrease related
primarily to management's cost control measures.

     Selling, General and Administrative Expenses.  Selling, general and
administrative expenses were $1,033,813 and $1,097,948 for the quarters ended
March 31, 2000 and 1999, respectively.  The $64,135 or 5.8% decrease in 2000, as
compared to 1999, resulted primarily from management's efforts to control costs.
General and administrative expenses include rent, travel, insurance, postage,
telephone, supplies and other miscellaneous expenses.

     Interest Expense.  Interest expenses were $71,943 and $34,819, for the
first quarter of 2000 and 1999, respectively.  The increase in interest expense
of $37,124 in the first quarter of 2000, as compared to the same period in 1999,
was due to the increase in borrowings under the bank term loan and the issuance
of additional debentures as well as increases in interest rates.

     Amortization of Goodwill and Other Intangibles.  Goodwill represents the
excess of the cost of acquisitions over the fair value of net assets acquired.
Other intangibles include covenants not to compete, customer lists and other
contractual rights.  Amortization of goodwill and other intangibles was $16,530
for the first quarter of 2000 and 1999.

Income Taxes

     Anchor's expense for income taxes was $4,710 for the first quarter of 2000
as compared to a benefit for income taxes of $4,870 for the first quarter of
1999.

Liquidity and Capital Resources

     Anchor reported net cash flows used by operations of $1,119,280 for the
first quarter ended March 31, 2000, compared to net cash flows used by
operations of $850,341 for the same period in 1999.  During the first quarter of
2000, Anchor met its operating and capital needs with the proceeds from the
Series A Preferred shares purchased by Ward (as further discussed in footnote 2
to the Financial Statements, above).

     Capital and certain acquisition related expenditures were $68,368 and
$127,005 for the three months ended March 2000 and 1999, respectively.  The 2000
expenditures primarily involved expenditures related to software development and
implementation to update the eligibility and claims processing system.

     Short-term borrowings, current portion of long-term debt and current
portion of long-term liabilities at March 31, 2000, totaling in the aggregate
$1,049,997 (as compared to $982,589 at December 31, 1999), consisted of:  (a)
$198,000 representing the current portion of a term bank loan further described
in footnote 11 to the Financial

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<PAGE>

Statements, above; (b) approximately $36,445 of future fixed payments under a
consulting agreement entered into with a company affiliated with the former
shareholders of Harden-AZ; (c) $69,037 representing deferred rent with regard
to certain real property currently leased by Anchor; (d) $120,000 of Series B
Debentures; (e) $50,000 of Series D Debentures (f) $500,000 of Series E
Debentures; and (e) approximately $76,515 for certain other current
liabilities.

     At March 31, 2000, long-term liabilities and long-term debt, less the
current portion discussed above, totaled $1,192,088 (as compared to $1,747,612
at December 31, 1999), and primarily consisted of:  (a) $650,986 representing
the long-term portion outstanding under a term bank loan further described in
footnote 11 to the Financial Statements, above; (b) approximately $247,385
representing deferred rent with regard to certain real property currently leased
by Anchor; (c) $194,000 of Series D Debentures; and (d) approximately $99,717
for certain other long-term liabilities.

     Reference is made to footnotes 2 through 11 to the Financial Statements
included in this Form 10-Q for further information on Anchor's fund raising
activities and borrowings from its primary bank lender.

     Anchor has not paid cash dividends in the past and does not expect to pay
cash dividends in the foreseeable future.

Forward-Looking Information

     This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of that term under the Private Securities Litigation Reform
Act of 1995.  Additional written or oral forward-looking statements may be made
by Anchor from time to time, in filings with the Securities and Exchange
Commission or otherwise.  Statements contained herein that are not historical
facts are forward-looking statements made pursuant to the safe harbor provisions
referenced above.  For example, discussions concerning Anchor's ability to
create new products and services, and expansion of Anchor through internal
growth of existing and new products and services, may involve forward-looking
statements.  In addition, when used in this discussion, the words,
"anticipates," "expects," "intends," "plans" and variations thereof and similar
expressions are intended to identify forward-looking statements.

     Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified based on current
expectations.  Consequently, future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the forward-
looking statements contained in this Quarterly Report.  Statements in this
Quarterly Report, particularly in the Notes to Financial Statements and Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, describe certain factors, among others, that could contribute to or
cause such differences.  Such forward-looking statements involve risks and
uncertainties, and actual results could differ from those described herein.
While the statements represent management's current judgment as to the near-term
future prospects of its business, such risks and uncertainties could cause
actual results to differ from the above statements.  Factors which could cause
actual results to differ include the following:  Harden Group's relationship
with new insurance carriers and marketing partners and their ability to
effectively provide third-party administration services; controlling operating
costs; the impact of competitive products, pricing and services; the
availability of capital to finance operations and future expansion; the cyclical
nature of the health insurance markets; and unanticipated regulatory changes.
Additionally, on March 9, 2000 Anchor entered into an Agreement with Ward
pursuant to which there was a change in both the ownership structure and the
composition of the Board of Directors.  Other risk factors are detailed in
Anchor's filings with the Securities and Exchange Commission.  Anchor assumes no
obligation to update forward-looking statements.

Strategy

     On November 29, 1999 Anchor entered into a letter of intent with Ward North
America Holding, Inc. ("Ward") whereby Ward would acquire a controlling interest
in Anchor.  On March 9, 2000, Anchor and Ward signed an Agreement pursuant to
which Ward acquired a controlling interest in Anchor through the purchase of
Series A Convertible Preferred shares ("Series A Preferred").  The Series A
Preferred shares are senior to the Company's common stock and vote on an as
converted basis of ten for each share of Series A Preferred.  In connection with
its investment, all of Anchor's directors resigned except for James R. Dunathan.
As the sole remaining director, Mr. Dunathan appointed one representative of
Anchor and five representatives of Ward to the board of directors of Anchor.

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<PAGE>

     Ward is a San Diego, California based company that specializes in providing
outsourced claims management, loss control, field adjusting and catastrophe
support to the Insurance and Alternative Risk markets through over 70 offices in
the United States and Canada.  The investment in Anchor represents the first
time Ward has been involved in employee benefits administration.  Anchor's
management and board of directors believe that Ward will be able to provide
needed capital to the Company.  In turn, this will enable Anchor to accelerate
the systems consolidation process and to pursue further expansion opportunities.

     Anchor's current strategy is to focus on expanding Harden Group, its third-
party administration services division by:  (a) continuing to develop, through
its marketing partners, specialized affiliated business units that target
selected insurance industry market segments defined by industry type, geographic
location and consumer demographics; (b) creating new products and services; and
(c) strengthening management, sales and marketing staff.  In conjunction with
this strategy, Anchor intends to seek to manage its affairs to achieve expansion
through internal growth of its existing and new product lines.  Anchor also
intends to consider additional acquisition and merger opportunities in the
third-party administration services business.

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<PAGE>

Part II - Other Information

Item 1. Legal Proceedings

     Anchor and its subsidiaries are parties from time to time to various
lawsuits  that arise in the normal course of business.  Management is not aware
of any lawsuits to which Anchor or its subsidiaries is currently a party or to
which any property of Anchor or any of its subsidiaries is subject, which might
materially adversely affect the financial condition or results of operations of
Anchor.

Item 2.  Changes in Securities

None.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Submission of Matters to a Vote of Security Holders

     On March 9, 2000, the following corporate action amending the Company's
Certificate of Incorporation was approved by written consent of stockholders of
the Company who owned 51.78% of the voting securities of the Company:

     An amendment to Article FOURTH of the Restated Certificate of
     Incorporation of the Company to increase the number of authorized shares
     of common stock, par value $.02 per share, of the Company from 16,000,000
     to 50,000,000 shares, and to increase the number of authorized shares of
     preferred stock, par value $.02 per share, of the Company from 2,000,000
     to 2,500,000 shares.

Notice of such action was provided by means of an Information Statement which
was mailed to all of the Company's stockholders on or about April 28, 2000.

Item 5.  Other Information

None.

Item 6.  Exhibits and Reports on Form 8-K

A.  Exhibits

27.0    Financial Data Schedule

B.  Reports on Form 8-K

None

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                                 SIGNATURES


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


                                         ANCHOR PACIFIC UNDERWRITERS, INC.




Date:                  May 9, 2000        /s/ Jeffrey S. Ward
       ---------------------------       -------------------------------------
                                         Jeffrey S. Ward
                                         President and Chief Executive Officer



Date:                  May 9, 2000        /s/ John F. Darden
       ---------------------------       -------------------------------------
                                         John F. Darden
                                         Chief Financial Officer


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