<PAGE>
                                    FORM 10-Q
                         SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C. 20549

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

       For the quarter ended:  September 30, 1995
                             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:  0-9628

                       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 Identification
 incorporation or organization)                  No.)

1800 Sutter Street, Suite 400                           (510) 682-7707
Concord, California 94520                       (Registrant's telephone number,
(Address of principal executive offices)         including area code)
(Zip Code)

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.

            Class                          Outstanding as of September 30, 1995
Common Stock, par value $.02 per share         3,674,559 shares

                  This document is comprised of 28 pages.


<PAGE>

                     ANCHOR PACIFIC UNDERWRITERS, INC.
                                  INDEX

Part I.     FINANCIAL INFORMATION

              ITEM 1.   FINANCIAL STATEMENTS

                        CONSOLIDATED BALANCE SHEETS,
                        SEPTEMBER 30, 1995 (UNAUDITED) AND
                        DECEMBER 31, 1994...................................  1

                        CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE
                        MONTHS AND QUARTERS ENDED SEPTEMBER 30, 1995 AND
                        1994 (UNAUDITED)....................................  3

                        CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR
                        THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
                        AND YEAR ENDED DECEMBER 31, 1994....................  4

                        CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE
                        MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 (UNAUDITED). 5

                        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS........... 7

              ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                        FINANCIAL CONDITION AND RESULTS OF OPERATIONS........10


PART II.    OTHER INFORMATION

              ITEM 1.  LEGAL PROCEEDINGS.....................................19

              ITEM 2.  CHANGES IN SECURITIES.................................19

              ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.......................19

              ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...19

              ITEM 5.  OTHER INFORMATION.....................................19

              ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K......................19


<PAGE>

              ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                             September 30
                                                                 1995          December 31
                                                             (unaudited)           1994
                                                             ------------      -------------
<S>                                                          <C>               <C>
ASSETS
Current assets:
            Cash and cash equivalents-corporate funds        $    347,527       $    384,102
            Cash and cash equivalents-brokerage
             fiduciary funds                                    1,612,364          1,323,372
            Cash and cash equivalents-third party
             administration fiduciary funds                     3,300,683          4,349,629
            Accounts receivable (less allowances of
             $36,718 and  $33,700  in 1995 and 1994,
             respectively)                                      1,250,710          1,306,627
            Prepaid expenses                                      832,760            949,710
            Deferred tax asset                                     48,402             48,402
                                                              -----------        -----------
Total current assets                                            7,392,446          8,361,842

Property and equipment                                          2,656,049          2,498,171
Less accumulated depreciation and amortization                 (1,699,451)        (1,540,120)
                                                              -----------        -----------
                                                                  956,598            958,051
Other assets:
            Goodwill, net of accumulated amortization           2,171,612          2,525,591
             of  $916,034 and $720,993 in 1995 and 1994,
             respectively
            Intangible assets, net of accumulated               1,195,023          1,144,091
             amortization of $1,011,313 and $315,221
             in 1995 and 1994, respectively
            Other                                                 119,870            144,808
                                                              -----------        -----------
                                                                3,486,505          3,814,490
                                                              -----------        -----------
Total assets                                                  $11,835,549        $13,134,383
                                                              -----------        -----------
                                                              -----------        -----------
</TABLE>


                                     - 1 -

<PAGE>

             ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                  September 30       December 31
                                                                     1995               1994
                                                                  ------------       -----------
                                                                  (unaudited)
<S>                                                               <C>                <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
            Cash and cash equivalents-third party
               administration fiduciary funds                      $ 3,300,683       $ 4,349,629
            Net premiums payable-insurance companies                 2,603,327         2,256,313
            Accounts payable and accrued expenses                      331,792           365,089
            Capital lease obligations                                       --            46,610
            Short-term debt                                          1,125,000           850,000
            Other liabilities                                        1,111,750           894,832
                                                                  ------------       -----------
Total current liabilities                                            8,472,552         8,762,473

Long-term liabilities, less current portion                          1,312,359         1,471,723

Deferred tax liability                                                 164,859           159,724

Shareholders' equity:
            Common stock-$.02 par value;
             8,000,000 authorized;
             3,674,559 and 3,923,258 shares issued
             as of 9/30/95 and 12/31/94, respectively                   73,491            78,465
            Additional paid-in capital                               2,988,819         3,294,702
            Retained earnings (deficit)                             (1,176,531)         (632,704)
                                                                  ------------       -----------
Total shareholders' equity                                           1,885,779         2,740,463
                                                                  ------------       -----------
Total liabilities and shareholders' equity                         $11,835,549       $13,134,383
                                                                  ------------       -----------
                                                                  ------------       -----------

</TABLE>

                             See accompanying notes


                                     - 2 -
<PAGE>

             ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                            Nine  Months                    Quarter
                                         Ended September 30            Ended September 30
                                     ---------------------------     --------------------------
                                        1995            1994           1995            1994
                                     (unaudited)     (unaudited)     (unaudited)    (unaudited)
<S>                                  <C>             <C>             <C>             <C>
Revenues:
  Commissions, fees and
   other income                      $6,620,790      $3,833,939      $2,182,458      $1,436,949
  Interest income                       103,883          58,775          42,146          17,754
                                     ----------      ----------      ----------       ----------
Total revenue                         6,724,673       3,892,714       2,224,604       1,454,703

Operating expenses:
  Salaries, commissions and
   employee benefits                  4,468,034       2,498,673       1,454,431       1,051,384
  Selling, general and
   administrative                     2,307,208       1,301,176         785,044         388,053
                                     ----------      ----------      ----------       ----------
Total operating expenses              6,775,242       3,799,849       2,239,475       1,439,437
                                     ----------      ----------      ----------       ----------
                                        (50,569)         92,865         (14,871)         15,266
Other income (expense):
  Amortization of goodwill and
   intangible assets                   (300,465)       (106,604)        (97,086)         (36,620)
  Interest                             (113,677)         (8,566)        (39,876)          (2,894)
  Other                                 129,893           2,257         (28,652)             966
  Nonrecurring merger expenses         (204,209)             --              --               --
                                     ----------      ----------      ----------       ----------
Total other income (expense)           (488,458)       (112,913)       (165,614)         (38,548)
                                     ----------      ----------      ----------       ----------
Loss before income taxes               (539,027)        (20,048)       (180,485)         (23,282)
Income tax expense                        4,800          10,695              --            2,120
                                     ----------      ----------      ----------       ----------
Net loss                             $ (543,827)     $  (30,743)    $  (180,485)      $  (25,402)
                                     ----------      ----------      ----------       ----------
Net loss per common and common
 equivalent share                    $     (.15)     $     (.01)    $      (.05)      $     (.01)
                                     ----------      ----------      ----------       ----------
Number of common and common
 equivalent shares outstanding        3,674,559       2,722,488       3,674,559        2,722,488
                                     ----------      ----------      ----------       ----------

</TABLE>

                              See accompanying notes

                                     - 3 -
<PAGE>

              ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                         ADDITIONAL         RETAINED
                                    COMMON STOCK           PAID-IN          EARNINGS
                                SHARES       AMOUNT        CAPITAL          (DEFICIT)       TOTAL
                               ---------------------------------------------------------------------
<S>                            <C>        <C>            <C>               <C>          <C>
Balance at
 12/31/93                      2,722,488  $   54,450     $   1,817,752     $    17,785    $1,889,987
 (restated)
Stock issued for
 acquisitions                  1,200,770      24,015         1,476,950              --     1,500,965

Net loss                              --          --                --        (650,489)     (650,489)
                               ---------------------------------------------------------------------
Balance at
 12/31/94                      3,923,258      78,465         3,294,702        (632,704)    2,740,463

Stock issued for
 warrants exercised                   11          --                33              --            33

Canceled stock                  (248,710)     (4,974)         (305,916)             --      (310,890)

Net loss                              --          --                --         (543,827)    (543,827)
                               ---------------------------------------------------------------------
Balance at
 9/30/95
 (unaudited)                   3,674,559   $  73,491      $  2,988,819      $(1,176,531)  $1,885,779
                               ---------------------------------------------------------------------

</TABLE>









                                     - 4 -

<PAGE>

             ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                     Nine Months
                                                                  Ended September 30
                                                               --------------------------
                                                                  1995            1994
                                                               -----------      ----------
                                                               (unaudited)      (unaudited)
<S>                                                            <C>              <C>
OPERATING ACTIVITIES
Net loss                                                        $(543,827)       $ (30,743)
Adjustments to reconcile net loss to cash
 provided by (used in) operating activities:
    Depreciation and amortization                                 159,331          124,173
    Amortization of goodwill, other intangibles
     and organization expenses                                    300,465          106,604
    Deferred tax asset                                                 --           27,344
    Deferred tax liability                                          5,135          (27,344)
    Changes in operating assets and liabilities,
     net of effect of purchases of subsidiaries:
        Cash and cash equivalents-brokerage
         fiduciary funds                                         (288,992)            8,729
        Accounts receivable                                        55,917           163,339
        Prepaid expenses                                          195,119           (18,463)
        Other assets                                               24,937          (299,911)
        Net premiums payable-insurance companies                  347,014           102,427
        Accounts payable and accrued expenses                     (33,297)          (13,589)
        Other liabilities                                         (10,072)           (7,094)
                                                                 --------           -------
Net cash provided by operating activities                         211,730           135,472

INVESTING ACTIVITIES
Notes receivable, net                                             (78,169)         (164,041)
Purchases of property and equipment                              (157,878)         (191,864)
Purchase of customer list                                         (63,368)               --
Purchase of subsidiary, net of cash acquired                           --           (31,977)
                                                                 --------           -------
Net cash used in investing activities                            (299,415)         (387,882)

</TABLE>



                                     - 5 -
<PAGE>

             ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES
              CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>
                                                           Nine Months
                                                        Ended September 30
                                                     --------------------------
                                                        1995           1994
                                                     -----------    -----------
                                                     (unaudited)    (unaudited)
<S>                                                   <C>           <C>
FINANCING ACTIVITIES
Debt:
   Borrowings                                          1,089,545             --
   Repayment                                            (946,944)      (118,172)
   Capital leases payments                               (46,610)            --
Proceeds from issuance of common stock                        33             --
Net payments on amounts due on acquisitions              (44,914)        12,637
                                                      ----------      ---------
Net cash provided by (used in) financing activities       51,110       (105,535)
                                                      ----------      ---------
Net decrease in cash                                     (36,575)      (357,945)
Cash and cash equivalents-corporate funds
 at beginning of period                                  384,102        943,130
                                                      ----------      ---------
Cash and cash equivalents-corporate funds
 at end of period                                     $  347,527     $  585,185
                                                      ----------      ---------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
   Interest                                           $  113,677     $    8,566
                                                      ----------      ---------
   Income taxes                                       $    5,600     $   12,300
                                                      ----------      ---------
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
 AND FINANCING ACTIVITIES
Increase in goodwill and liabilities as a result of
 purchase price adjustments related to the
 merger with PKW                                      $  104,542      $      --
                                                      ----------      ---------
Decrease in goodwill and shareholders'
 equity related to cancellation of stock
 issued in conjunction with PKW merger                $  310,890      $      --
                                                      ----------      ---------
Increase in intangible assets and notes payable,
 related to the purchase of customer list             $  140,395      $      --
                                                      ----------      ---------
</TABLE>


                                     - 6 -

<PAGE>

              ANCHOR PACIFIC UNDERWRITERS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  (UNAUDITED)

                               SEPTEMBER 30, 1995

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Anchor
Pacific Underwriters, Inc. and its subsidiaries ("Anchor") have been prepared
in accordance with generally accepted accounting principles for interim
financial information and in accordance 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 nine-month period ended September 30, 1995 are not necessarily indicative
of the results that may be expected for the year ending December 31, 1995.
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, 1994.

NOTE 2 - ACQUISITIONS

On January 6, 1995, Anchor merged with System Industries, Inc. ("System").
For accounting purposes, the merger has been treated as a recapitalization of
Anchor with Anchor as the acquirer (reverse acquisition).  The historical
financial statements prior to January 6, 1995 are those of Anchor.  These
historical financial statements have been restated to give effect to this
recapitalization. Upon consummation of this merger, shareholders of System
received one share of Anchor Common Stock and one Warrant to purchase one
share of Anchor Common Stock for every 42.3291 shares of issued and
outstanding System Common Stock.  As a result of the merger, Anchor became a
public company.  In February 1995, Anchor acquired certain third party
administration accounts from a company located in Stockton, California at a
preliminary purchase price of approximately $204,000 (which reflects a
$50,000 cash payment and a discounted future income stream) with an
additional $55,000 of stock consideration to be determined.

The results of operations from these accounts are included in Anchor's
consolidated financial statements from the date of purchase.

Although Anchor is engaged in discussions with third parties regarding
potential acquisitions, as of November 8, 1995, it did not have any binding
agreements with respect to acquisitions.  No assurances can be given with
respect to the likelihood, or financial or business effect, of any possible
future acquisition.

                                     - 7 -
<PAGE>

NOTE 3 - CONTINGENCIES

Anchor is subject to certain legal proceedings and claims arising in
connection with 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.  On October 13, 1995, Putnam, Knudsen & Wieking,
Insurance Brokers ("PKW"), a subsidiary of Anchor reached an agreement to
settle a lawsuit, CARE CONVALESCENT AMBULANCE, INC., A CALIFORNIA CORPORATION
V. PUTNAM, KNUDSEN & WIEKING, INC., A CALIFORNIA CORPORATION, ET AL., brought
in the Superior Court of Orange County in 1993. In this suit, a former client
claimed that PKW acted negligently when, as agent, it wrote liability
insurance with an insurance carrier that was subsequently declared insolvent.
 Under the settlement terms PKW, without admitting any liability as part of
the settlement agreement, will pay on or before February 15, 1996, a total
payment of $50,000.

NOTE 4 - CONVERTIBLE SUBORDINATED DEBENTURES

Anchor is seeking to raise up to $750,000 in short-term financing to
supplement its working capital by selling 10% Convertible Subordinated
Debentures (the "Debentures") to members of its Board of Directors and a
limited number of other sophisticated investors.  As of November 8, 1995,
Anchor has raised $310,000 from the sale of Debentures to seven members of
the Board of Directors of Anchor and a limited number of other sophisticated
investors.  The basic terms of the Debentures are:  (a) 10% interest per
annum; (b) two year maturity; (c) conversion price of $1.35 in the first year
and $1.65 in the second year; (d) "piggyback" registration rights for three
years; (e) subordination provisions that subordinate the Debentures to
Anchor's "Senior Debt" (as defined in the Debenture); and (f) provisions that
permit Anchor to redeem the Debentures at par at any time.

NOTE 5 - ADJUSTMENT OF PKW PURCHASE PRICE

In October 1994, Anchor acquired PKW.  In connection with the acquisition,
Anchor issued 120,077 shares of its common stock at a value determined to be
$12.50 per share (which were converted into 1,200,770 shares, having a value
of $1.25 per share, upon consummation of the System merger) to the former
shareholders of PKW.  Two of the former shareholders of PKW are members of
the Board of Directors of Anchor.  Subsequent to the PKW acquisition certain
contingencies regarding PKW's operations caused Anchor to negotiate and
secure an adjustment to the purchase price paid for PKW.  As a result, the
former PKW shareholders have returned to Anchor 248,710 shares of Anchor's
common stock that were issued in connection with the PKW acquisition.  The
return of shares has resulted in a reduction of : (a) shareholders' equity
totaling $310,890; (b) the number of outstanding shares of Anchor's common
stock by 248,710; and (c) future amortization expenses related to the PKW
acquisition.


                                      - 8 -
<PAGE>

NOTE 6 - SUBLEASE LIABILITY

In May 1995, PKW entered into a sublease with respect to 82% of PKW's prior
office space.  The sublease expires on September 30, 1997 (unless extended by
the subtenant through November 30, 1999, the date on which the term of the
master lease expires) and requires PKW to provide a multi-year rent subsidy.
The amounts classified as short and long-term liability with respect to the
PKW lease reflect such subsidy and are based upon the assumptions that: (a)
the subtenant will exercise its option to extend the lease through 1999; and
(b) the remaining 18% of such office space will not be subleased.  Management
believes, however, that it will sublease the remaining space, in which case
the related liability may be reduced.














                                     - 9 -

<PAGE>

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

BACKGROUND

   Anchor was organized in 1986 as a California general partnership for the
specific purpose of acquiring Harden & Company Insurance Services ("Harden"),
a third party employee benefits administrator.  Anchor was reorganized as a
private California corporation in March 1987, and became a  public reporting
Delaware corporation on January 6, 1995 when it merged with System
Industries, Inc. ("System").

   Since its inception, Anchor has expanded its insurance and financial
service capabilities through internal growth and a series of acquisitions.
In August 1994, Anchor acquired Benefit Resources, Inc. ("BRI"), a third
party administrator located in Scottsdale, Arizona.   In October 1994, Anchor
acquired Putnam, Knudsen & Wieking, Insurance Brokers ("PKW"), a property and
casualty insurance brokerage company located in Concord, California. The
acquisitions of these entities were accounted for under the purchase method
of accounting.  Anchor expects to continue to expand its insurance brokerage
and administration product lines and to explore other complementary expansion
opportunities.

   Historically, Anchor derived a majority of its revenues from third party
administration services.  In light of its acquisition of PKW, Anchor expects
to significantly increase the percentage of its revenues that are derived
from insurance brokerage activities.

RESULTS OF OPERATIONS -- NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

   GENERAL

   Anchor derives a substantial portion of its revenues from commissions,
which generally are based on a percentage of premiums produced by Anchor,
contingent commissions, which generally are based on underwriting profits
derived over a given period of time by the insurance carrier, and fees for
claims administration (including underwriting and risk analysis) services,
which generally are based on a percentage of premiums collected, or on a per
capita basis. Anchor does not assume any underwriting risk in connection with
its business.

   Fluctuations in premiums charged by insurance companies materially affect
commission revenues.  During the last five years, the property and casualty
insurance industry has experienced a "soft market" where the underwriting
capacity of insurance companies expanded, stimulating an increase in
competition and a decrease in premium rates, thereby reducing related
commissions and fees.  Although the Company has seen modest premium increases
during the first nine months of 1995, the prospect of continued rate
increases remains uncertain. In addition to the soft market, recent workers'
compensation reform in California has had the effect of reducing


                                     - 10 -
<PAGE>

workers' compensation insurance premiums and, consequently, reducing
commissions generated by the sale of related insurance products.  Anchor
believes that revenues generated from anticipated future growth and continued
diversification of its business will substantially offset any loss of
revenues that results from workers' compensation reform.

   Historically, inflation has also affected commission revenues by, among
other things, increasing property replacement costs and workers' compensation
and liability claims, thereby causing some clients to seek higher levels of
insurance coverage and pay higher premiums. During the past several years,
the United States has experienced very low rates of inflation along with
business downsizing, reduced sales and lower payrolls; these events have
resulted in lower levels of exposure to insure.   Although the United States
has recently experienced limited inflationary pressures, prices have not yet
increased significantly.

   Other factors, such as client uncertainty about the ultimate impact of
health care reform, could also affect Anchor's business.  Anchor believes,
however, that its expertise in two major elements of recent health care
reform proposals (managed care and managed competition), combined with its
strategy of serving middle market clients, makes it well positioned to
operate effectively in a managed care and managed competition environment.
Anchor also believes that in light of the recent political changes in the
United States Congress, the United States will experience incremental, rather
than comprehensive, changes in health care regulations.  It is not possible
at this time to predict the effect that any health care legislation will have
on Anchor's business condition or operations.

   Anchor is unaware of any current regulatory proposals, except for health
care reform, that could have a material effect on its liquidity, capital
resources or operations.

REVENUES

   TOTAL REVENUES.  Total revenues for the nine months ended September 30,
1995  were $6,724,673, an increase of $2,831,959, or 72.8%, over 1994 third
quarter revenues.  The increase resulted primarily from the inclusion of the
operations of PKW and BRI for the nine month period ended September 30, 1995.
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.

   Commissions and fees make up substantially all of Anchor's revenues.  The
following table sets forth the percentages of Anchor's revenues attributable
to insurance brokerage services (for which commissions are generated), and
third party administration and underwriting and risk analysis services (for
which fees are generated), for the nine months ended September 30, 1995 and
1994.  Also included is the percentage of revenues generated from premium
finance activities.


                                     - 11 -
<PAGE>


   Nine Months Ended September 30       1995        1994
                                        ----        ----
              Insurance Brokerage        40%         21%
       Third Party Administration        59          78
                Premium Financing         1           1
                                        ----        ----
                            Total       100%        100%
                                        ----        ----

   COMMISSIONS.  Commissions are reported net of sub-broker commissions and
generally are recognized as of the effective date of the insurance policy
except for commissions on installment premiums which are recognized
periodically as billed.  Commissions for the first nine months of 1995 were
$2,670,570, an increase of $1,848,370, or 224.8%, over $822,200 of
commissions for the first nine months of 1994.  The acquisition of PKW
accounted for substantially all of the increase.

   FEES.  Fees from Anchor's third party administration (including
underwriting and risk analysis) services for the nine months ended September
30, 1995 were $3,941,899, an increase of $951,192, or 31.8%, over $2,990,707
in fees for the same period in 1994.  The acquisition of BRI accounted for
all of the increase.

   Fee revenues generated by Anchor in the first nine months of 1995 from
third party administration services included revenues generated by Harden and
BRI. A significant portion of BRI's fee revenues related to an insurance
product underwritten by one insurance carrier, which currently is an A++
(superior) rated insurance carrier.

   Harden's third party administration revenues substantially relate to: (a)
an insurance product underwritten by an insurance carrier, which currently is
an A (excellent) rated insurance carrier; and (b) the administration of
insurance programs underwritten by various insurance carriers for a number of
self-insured employers.  The insurance product referred to in subparagraph
(a) above accounted for approximately 62.8% of Harden's revenues (or
approximately 25.0% of Anchor's total revenues) in the nine months ended
September 30, 1995, and revenues related to the administration of
self-insured programs accounted for 35.8% of Harden's revenues in such
period.  Self-insurance is a program 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.

   The insurance company which offered the product that accounted for 62.8%
of Harden's third party administration revenues in the first nine months of
1995 informed Harden that as a result of changes in its business strategy, it
will discontinue offering such an insurance product by the end of 1995.  On
July 20, 1995, Harden obtained a binding commitment from an A++ (Superior)
rated insurance carrier to underwrite the risk and provide a replacement
product as of October 1, 1995.  Management anticipates an orderly transition
to the new carrier.  However, the change to the new carrier does not
guarantee that revenue will be maintained at the same level.


                                     - 12 -
<PAGE>

   INTEREST INCOME.  Interest income consists of interest earned on insurance
premiums and other funds held in fiduciary accounts and interest earned on
investments.  Interest income was $103,883 and $58,775 for the nine months
ended September 30, 1995 and 1994, respectively. The increase in interest
income in the first nine months of 1995, as compared to 1994, resulted
primarily from the assumption of insurance premiums and other funds held in
fiduciary accounts in connection with the acquisition of PKW and BRI and
higher interest rates.

   EXPENSES

   TOTAL EXPENSES.  Total operating expenses for the nine months ended
September 30, 1995 were $6,775,242, an increase of $2,975,393, or 78.3%, over
the operating expenses for the same period in 1994.  The increase resulted
primarily from the inclusion of approximately $1,909,863 of operating
expenses for PKW, and $922,465 for BRI, in Anchor's consolidated financial
statements.

   EMPLOYEE COMPENSATION AND BENEFITS.  Employee compensation and benefits
for the nine months ended September 30, 1995  were $4,468,034, an increase of
$1,969,361 or 78.8%, over the same period in 1994.  The acquisitions of PKW
and BRI had the effect of increasing employee compensation and benefits by
approximately $1,883,612.  The remaining increase related primarily to
expansion of existing operations.

   SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses were $2,307,208 and $1,301,176 for the nine months
ended September 30, 1995 and 1994, respectively.  The $1,006,032, or 77.3%,
increase in the first nine months of 1995, as compared to the same period in
1994, resulted primarily from the acquisitions of PKW and BRI. Other
operating expenses include rent, travel, insurance, postage, telephone,
supplies and other miscellaneous expenses.

   INTEREST EXPENSE.  Interest expense was $113,677 and $8,566 for the nine
months ended September 30, 1995 and 1994, respectively.  The increase in
interest expense in 1995, as compared to 1994, resulted primarily from the
assumption of existing debt in connection with the acquisition of PKW, an
increase in outstanding borrowings on Anchor's existing line of credit and
accrued interest on the 10% Convertible Subordinated Debentures.

   AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES.  Goodwill represents the
excess of the cost of acquisitions over the fair value of net assets
acquired, net of purchase price adjustments, which were recorded during the
allocation period subsequent to the acquisition date.  Other intangibles
include covenants not to compete, customer lists and other contractual
rights.  Amortization of goodwill and other intangibles was $300,465 and
$106,604 for the nine months ended September 30, 1995 and 1994, respectively.
As a result of Anchor's acquisitions of PKW and BRI, amortization of
goodwill and other intangibles increased significantly in 1995 over 1994.


                                     - 13 -
<PAGE>

   NONRECURRING EXPENSES

   During the first quarter of 1995, Anchor incurred nonrecurring expenses of
$204,209 for costs related to professional services associated with merger
and acquisition activities.  The transaction with System did not generate any
new proceeds from which the professional fees could be deducted.

   INCOME TAXES

   Anchor's expense for income taxes was $4,800 and $10,695 for the nine
months ended September 30, 1995 and 1994, respectively.  This $4,800 expense
represents the minimum annual required tax payment due.

RESULTS OF OPERATIONS - QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994

   REVENUES

   TOTAL REVENUES.  Total revenues for the three months ended September 30,
1995 were $2,224,604, an increase of $769,901, or 52.9%, over 1994 third
quarter revenues. The increase resulted primarily from the inclusion of the
operations of PKW and BRI for the three month period ended September 30, 1995.

   COMMISSIONS..  Commissions for the third quarter of 1995 were $873,218, an
increase of $588,373, or 206.6%, over $284,845 of commissions for the third
quarter of 1994.  The acquisition of PKW accounted for substantially all of
the increase.

   FEES.  Fees from Anchor's third party administration (including
underwriting and analysis) services for the three months ended September 30,
1995 were $1,308,070, an increase of $164,220, or 14.4%, over $1,143,850 in
fees for the same period in 1994. The acquisition of BRI accounted for all of
the increase.

   INTEREST INCOME.  Interest income was $42,146 and $17,754 for the three
months ended September 30, 1995 and 1994, respectively.  The increase in
interest income in the third quarter of 1995, as compared to 1994, resulted
primarily from the assumption of insurance premiums and other funds held in
fiduciary accounts in connection with the acquisition of PKW and BRI and
higher interest rates.

   EXPENSES

   TOTAL EXPENSES.  Total operating expenses for the three months ended
September 30, 1995 were $2,239,475, an increase of $800,038, or 55.6%, over
the operating expenses for the same period in 1994.  The increase resulted
primarily from the inclusion of the third quarter operating expenses of PKW,
totaling approximately $586,597, and BRI, totaling $103,642, in Anchor's
consolidated financial statements.


                                     - 14 -
<PAGE>

   EMPLOYEE COMPENSATION AND BENEFITS. Employee compensation and benefits
were $1,454,431 and $1,051,384 for the three months ended September 30, 1995
and 1994 respectively.  The $403,047, or 38.3%, increase in the third quarter
of 1995 as compared to the same period in 1994, resulted primarily from the
acquisitions of PKW and BRI.

   SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative expenses were $785,044 and $388,053 for the three months ended
September 30, 1995 and 1994, respectively.  The $396,991, or 102.3%, increase
in the third quarter of 1995, as compared to the same period in 1994,
resulted primarily from the acquisitions of PKW and BRI.

   INTEREST EXPENSE.  Interest expense was $39,876 and $2,894 for the three
months ended September 30, 1995 and 1994, respectively.  The increase in
interest expense in 1995, as compared to 1994, resulted primarily from the
assumption of existing debt in connection with the acquisition of PKW and an
increase in outstanding borrowings on Anchor's existing line of credit.

   AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Goodwill represents the
excess of the cost of acquisitions over the fair value of net assets
acquired, net of purchase price adjustments, which were recorded during the
allocation period subsequent to the acquisition date.  Other intangibles
include covenants not to compete, customer lists and other contractual
rights. Amortization of goodwill and other intangibles was $97,086 and
$36,620, for the three months ended September 30, 1995 and 1994,
respectively.  As a result of Anchor's acquisitions of PKW and BRI,
amortization of goodwill and other intangibles has increased significantly in
1995 over 1994.

   INCOME TAXES

   Anchor's expense for income taxes was $-0- and $2,120 for the three months
ended September 30, 1995 and 1994, respectively. The minimum annual required
tax payment due was reported during the first quarter of 1995.

LIQUIDITY AND CAPITAL RESOURCES

   Anchor's business is not capital intensive and Anchor historically has had
sufficient capital to meet its operating needs.   Anchor reported net cash
flows provided by operations of $211,730 for the nine months ended September
30, 1995,  compared to $135,472 for the nine months ended September 30, 1994.
Anchor anticipates that cash flow from operations and borrowing under its
existing credit agreements will be sufficient to fund its current operating
and capital expenditure requirements.

   Anchor, however, is seeking to raise up to $750,000 in short-term
financing to supplement its working capital by selling 10% Convertible
Subordinated Debentures (the "Debentures")  to members of its Board of
Directors and a limited number of other sophisticated investors.  The basic
terms of the Debentures are:  (a)  10% interest per annum; (b) two year
maturity;


                                     - 15 -
<PAGE>

(c) conversion price of $1.35 in the first year and $1.65 in the second year;
(d) "piggyback" registration rights for three years; (e) subordination
provisions that subordinate the Debentures to Anchor's "Senior Debt" (as
defined in the Debenture); and (f) provisions that permit Anchor to redeem
the Debentures at par at any time.  As of November 8, 1995, Anchor has raised
$310,000 from the sale of Debentures to seven members of the Board of
Directors of Anchor and a limited number of other sophisticated investors,
and has received commitments for the purchase of an additional $40,000
principal amount of Debentures from additional sophisticated investors.

   Anchor is also seeking to raise additional capital of up to approximately
$10 million for debt consolidation, working capital and to fund future
acquisitions.  Anchor has had preliminary discussions with various parties,
but has not yet obtained any commitments with respect to such financing.
There can be no assurance as to when or whether Anchor will raise additional
capital or what the terms and conditions would be for such capital.

   Capital and certain acquisition related expenditures (not including
expenditures related to the acquisition of BRI and PKW, or the System merger)
were $361,641 and $191,864 for the nine months ended September 30, 1995 and
1994, respectively.  The increase in such expenditures in the first nine
months of 1995, as compared to 1994, related primarily to the acquisition of
certain third party administration accounts from a company located in
Stockton, California.  In addition to such expenditures, Anchor made several
significant expenditures in the first quarter of 1995 related primarily to
professional services associated with the System merger and the PKW and BRI
acquisitions.

   Short-term debt and other liabilities at September 30, 1995, totaling in
the aggregate $2,236,750 (as compared to $1,744,832 at December 31, 1994)
consisted of:  (a) $925,000 outstanding under a $1,000,000 revolving line of
credit maintained by Anchor with a regional San Francisco Bay Area bank;  (b)
$200,000 outstanding under a $500,000 line of credit maintained by Anchor
with an additional regional San Francisco Bay Area bank;  (c) approximately
$300,000 of future fixed payments under a consulting agreement entered into
with a company affiliated with the former shareholders of BRI;  (d) $300,000
representing the current portion of obligations with regard to certain real
property leased by PKW prior to its acquisition by Anchor and relocation to
Anchor's executive offices; and  (e) $512,000 for certain other current
liabilities.

   On October 25, 1995 the $1,000,000 line of credit expired. The bank has
extended the line of credit to December 18, 1995.  Management and the bank
are currently in discussions to extend the line of credit to April 24, 1996.
The line of credit currently requires Anchor to maintain shareholders' equity
of at least $800,000.  Anchor's shareholders' equity at September 30, 1995
was $1,885,779.  The $500,000 unsecured line of credit, expires on July 30,
1996; replaces an earlier $200,000 line of credit which expired on November
5, 1995, and was secured by the net commission portion of PKW's accounts
receivable and equipment and general intangibles.  The interest rate on the
$1,000,000 line of credit is equal to the lending bank's prime rate, and on
the $500,000 line of credit is equal to the lending bank's prime rate plus
1-1/4%.


                                     - 16 -
<PAGE>

   In early 1995, the bank that provided Anchor with the $1,000,000 line of
credit provided Anchor with $125,000 of equipment financing.  Also, during
1995, Anchor has borrowed an additional $500,000 on its $1,000,000 line of
credit, such that the outstanding balance on that line at November 8, 1995
was $975,000.   Anchor's borrowings in 1994 and 1995 under its $1,000,000
line of credit related primarily to payment of: (a) the purchase price for
BRI; (b) a portion of the nonrecurring expenditure with respect to the System
merger; and (c) a portion of Anchor's contribution of approximately $945,000
to PKW and BRI as working capital.

   Long-term liabilities, less the current portion discussed above, totaling
$1,312,359 at September 30, 1995 (as compared to $1,471,723 at December 31,
1994), primarily consisted of: (a) approximately $402,000 of future fixed
payments under the consulting agreement mentioned above with a company
affiliated with the former shareholders of BRI; (b) approximately $527,000
representing the long-term portion of obligations with regard to certain real
property leased by PKW prior to its acquisition by Anchor and relocation to
Anchor's executive offices; and (c) approximately $383,359 for certain other
long-term liabilities. In May 1995, PKW entered into a sublease with respect
to 82% of PKW's prior office space. The sublease expires on September 30,
1997 (unless extended by the subtenant through November 30, 1999, the date on
which the term of the master lease expires) and requires PKW to provide a
multi-year rent subsidy.  The amounts classified as short and long-term
liability with respect to the PKW lease reflect such subsidy and are based
upon the assumptions that (a) the subtenant will exercise its option to
extend the lease through 1999; and (b) the remaining 18% of such office space
will not be subleased.  Management believes, however, that it will sublease
the remaining space, in which case the related liability may be reduced.

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

ADJUSTMENT OF PKW PURCHASE PRICE

   In October 1994, Anchor acquired PKW.  In connection with the acquisition,
Anchor issued 120,077 shares of its common stock at a value determined to be
$12.50 per share (which were converted into 1,200,770 shares, having a value
of $1.25 per share, upon consummation of the System merger) to the former
shareholders of PKW.  Two of the former shareholders of PKW are members of
the Board of Directors of Anchor.  Subsequent to the PKW acquisition certain
contingencies regarding PKW's operations caused Anchor to negotiate and
secure an adjustment to the purchase price paid for PKW.  As a result, the
former PKW shareholders have returned to Anchor 248,710 shares of Anchor's
common stock that were issued in connection with the PKW acquisition.  The
return of shares has resulted in a reduction of : (a) shareholders' equity
totaling $310,890; (b) the number of outstanding shares of Anchor's common
stock by 248,710; and (c) future amortization expenses related to the PKW
acquisition.


                                     - 17 -
<PAGE>

STRATEGY

   Anchor's strategy is to strengthen its core health insurance and property
and casualty (including workers' compensation) insurance businesses by:  (a)
continuing to target selected insurance industry markets defined by industry
type, geographic location and consumer demographics; (b) establishing new
products and services; and (c) seeking to acquire and integrate compatible
insurance brokerage and administration businesses in the Western United
States.  In connection with this strategy, Anchor regularly considers
acquisition opportunities. To date, acquisitions by Anchor have ranged from
relatively small acquisitions of insurance brokerage and administration
accounts to larger acquisitions of insurance brokerage companies, such as
PKW, and third party administrators, such as BRI.  Anchor expects to continue
to pursue appropriate acquisition opportunities, and believes that its recent
merger with System greatly enhances its ability to make acquisitions and
continue its expansion strategy.  Although Anchor is engaged in discussions
with third parties regarding potential acquisitions, as of November 8, 1995,
it did not have any binding agreements with respect to acquisitions.  No
assurances can be given with respect to the likelihood, or financial or
business effect, of any possible future acquisition.












                                     - 18 -
<PAGE>

PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

Anchor and its subsidiaries are parties from time to time to various lawsuits
that have arisen 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, except as follows.

PKW, together with several other entities, had been named as a defendant in a
lawsuit filed in 1993 entitled CARE CONVALESCENT AMBULANCE, INC., A
CALIFORNIA CORPORATION V. PUTNAM, KNUDSEN & WIEKING, INC., A CALIFORNIA
CORPORATION, ET AL.  On October 13, 1995, PKW reached an agreement to
settle this lawsuit.  Reference is made to Page 8, Note 3 -Contingencies,
above, and to Item 3, Legal Proceedings, in Anchor's Annual Report on Form
10-K for the year ended December 31, 1994.

ITEM 2.  CHANGES IN SECURITIES

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

A.  Exhibits

   10.1  Settlement Agreement and Mutual Release dated August 22, 1995 between
         Anchor and Donald B. Putnam, James P. Wieking, Ronald J. Marengo, Gary
         N. Lewis, Edward Wieking, and Robert Moser.





                                     - 19 -
<PAGE>

   27   Financial Data Schedule

B.  Reports on Form 8-K

On August 29, 1995, Anchor filed Form 8-K/A-2 amending Item 7 of its Form 8-K
filed with the Commission on January 13, 1995, as amended by Anchor's form
8-K/A-1 filed with the Commission on March 23, 1995, by attaching certain
revised financial statements as exhibits to such document.




















                                     - 20 -

<PAGE>
                                   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: November 8, 1995                   /s/ JAMES R. DUNATHAN
                                         -------------------------------------
                                         James R. Dunathan,
                                         President and Chief Executive Officer


Date: November 8, 1995                   /s/ EARL WIKLUND
                                         -------------------------------------
                                         Earl Wiklund,
                                         Senior Vice President and
                                         Chief Financial Officer






















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