-ii-

                   SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
                                
                            FORM 10-K
                                
          Annual Report Pursuant to Section 13 or 15(d)
             of the Securities Exchange Act of 1934
                                
           For the fiscal year ended December 31, 1996
                                
                      Gryphon Holdings Inc.
                         30 Wall Street
                  New York, New York 10005-2201
                         (212) 825-1200
                                
                  Commission file number 0-5537
                State of Incorporation:  Delaware
          I.R.S. Employer Identification No. 13-3287060
                                
    Securities registered pursuant to Section 12(b) of the Act:
                                
                                        Name of each exchange
     Title of each class                 on which registered
        Common Stock                    NASDAQ National Market
  (par value $.01 per share)

 Securities registered pursuant to Section 12(g) of the Act: None

  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 than the Registrant was required  to
file  such  reports),  and (2) has been subject  to  such  filing
requirements for the past 90 days. Yes  X .  No    .

  Indicate  by  check  mark if disclosure  of  delinquent  filers
pursuant  to Item 405 of Regulation S-K (229.405 of this chapter)
is  not contained herein, and will not be contained, to the  best
of  registrant's  knowledge, in definitive proxy  or  information
statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K.  [  ]

  As  of March 13, 1997, the aggregate market value of the voting
stock held by non-affiliates of the Registrant was $94,731,229.

  As  of March 13, 1997, the number of shares outstanding of  the
Registrant's  Common  Stock,  par  value  $.01  per  share,   was
6,668,340.

              DOCUMENTS INCORPORATED BY REFERENCE
  Proxy  statement for the Annual Meeting of Shareholders  to  be
held  on May 8, 1997, which is incorporated into Part III of this
Form 10-K.

                            FORM 10-K
                                
                        TABLE OF CONTENTS

                                                             Page

Part I

Item 1.   Business                                             1
Item 2.   Properties                                          21
Item 3.   Legal Proceedings                                   21
Item 4.   Submission of Matters to a Vote of Security
            Holders                                           21

Part II

Item 5.   Market for Company's Common Equity and
            Related Stockholder Matters                       22
Item 6.   Selected Consolidated Financial Data                22
Item 7.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations     25
Item 8.   Financial Statements and Supplementary Data         30
Item 9.   Changes In and Disagreements with Accountants on
            Accounting and Financial Disclosure               30

Part III                                                      30

Part IV

Item 14.  Exhibits, Financial Statement Schedules, and
            Reports on Form 8-K                               30
                           
                           PART I

              ITEM 1.  BUSINESS.

      (a)  General Development of Business.

        Gryphon  Holdings Inc. (the "Company")  was  incorporated
under the laws of the State of Delaware in 1983.  The Company  is
a  holding  company  that, through its subsidiaries,  underwrites
specialized commercial property and casualty insurance  coverages
in  selected niche markets.  The Company has developed  expertise
in  lines of insurance typically not emphasized by standard lines
insurers,   including  architects'  and  engineers'  professional
liability  ("A&E"),  difference in conditions ("DIC")  (primarily
earthquake coverage), and various other specialty coverages.  The
Company  focuses on providing coverage for small to  medium-sized
insureds.

       The Company employs a disciplined approach to underwriting
to  achieve  an  overall  underwriting  profit,  even  if  it  is
necessary  to  limit  premium  growth  at  times.   The   Company
emphasizes  quality  service in all areas of its  operations  and
believes  that this approach has enabled the Company to  maintain
strong  relationships  with its insurance  producers,  which  are
primarily excess and surplus lines brokers and general agents.

        On  December 28, 1993 and January 6, 1994, Willis Corroon
Group  plc, a public company organized under the laws of  England
and  Wales  ("Willis Corroon"), through a wholly owned subsidiary
sold  4,500,000 shares and 632,100 shares, respectively,  of  the
outstanding common stock (the "Common Stock"), par value $.01 per
share,  of  the  Company to the public pursuant  to  the  initial
public offering (the "Offering") of the Company.  The Company did
not  receive any proceeds from the Offering.  As a result of  the
Offering,  Willis Corroon's ownership was reduced  from  100%  to
36.1%.   In  September  1995, the Company purchased  1.5  million
shares  of  its Common Stock from Willis Corroon for  a  purchase
price  of $25.5 million, including related expenses, in a private
transaction.  This transaction reduced Willis Corroon's ownership
in  the Company to 21.6%.  In November 1995, Willis Corroon  sold
its  remaining ownership interest in the Company in  transactions
that   were   effected  on  the  NASDAQ  stock   exchange.    See
"Management's Discussion and Analysis of Financial Condition  and
Results of Operations-- Liquidity and Capital Resources."

         Historically,  the  Company's  insurance   subsidiaries,
Associated   International  Insurance  Company,   a   California-
domiciled  insurance  corporation  ("Associated"),  and   Calvert
Insurance Company, a Pennsylvania-domiciled insurance corporation
("Calvert"),   operated   primarily  as   independent,   indirect
subsidiaries of Willis Corroon, each having its own underwriting,
marketing,   claims   processing   and   administrative    staff.
Associated  is an admitted carrier in California and an  approved
excess and surplus lines insurer in 48 other states.  Calvert  is
a specialty property and casualty carrier that is admitted in all
states,  the  District  of Columbia and Canada  and  all  of  its
provinces.

Business Plan

        Since  the  Offering, the Company has pursued a  business
plan  that  has  emphasized  a  more coordinated  and  integrated
approach   to  the  businesses  of  its  two  major  underwriting
subsidiaries.  Through this strategy, the Company has  endeavored
to  better  utilize  the  complementary state  licensing  of  the
subsidiaries by making available to all underwriting personnel of
the Company the policy issuance capability of either its admitted
insurance   company  subsidiary,  Calvert,  or  its  non-admitted
subsidiary,  Associated.  In addition, the Company has  attempted
to   enhance   profitability  by  increasing  the  net   per-risk
retentions  of  its  smaller  subsidiary,  Calvert,   by   making
available  to it the financial resources of the Company's  larger
subsidiary, Associated.

         In   pursuit  of  these  objectives,  the  Company   has
implemented two significant changes, effective January  1,  1996.
On  that  date,  all of the operating-level personnel  previously
employed  by Associated and Calvert, became employees  of  a  new
management  and service subsidiary, Gryphon Insurance Group  Inc.
("GIG").   The consolidation into a single company has created  a
more  efficient  organization, has  facilitated  a  more  uniform
approach  to  underwriting  and related  operations,  with  freer
access  to  either issuing company, and has encouraged a  single-
company  culture.   Secondly, the Company has put  into  place  a
pooling arrangement between Associated and Calvert through  which
the  financial resources of the two subsidiaries are, in  effect,
combined  into one larger and stronger entity.  This  arrangement
has enhanced various operating ratios and facilitated the use  of
higher net retentions in selected lines of business.

Underwriting Strategy

        The  Company seeks to optimize underwriting profitability
regardless of market conditions by providing specialty  insurance
products  to  small and medium-sized commercial insureds.   Using
its  expertise  in  specialized lines of insurance,  the  Company
endeavors to maintain adequate pricing by exercising underwriting
discipline,  particularly  during times  of  excess  underwriting
capacity  and greater competition among insurers.  The  principal
elements of this strategy are set forth below.

                 Focus on Specialized Lines.  The Company focuses on
     specialized  lines  of insurance where the  Company  expects
     that  its  particular  expertise in evaluating  and  pricing
     risks will give it a competitive advantage.  By underwriting
     a  variety  of  specialty insurance  programs,  the  Company
     diversifies its risk among lines of insurance.
     
                 Underwriting Discipline.  The Company seeks to write
     insurance at prices and terms that it believes will generate
     overall  underwriting profits.  In underwriting, the Company
     typically  reviews  the type of risk, the attractiveness  of
     the pricing and terms relative to the risk and the Company's
     aggregate exposure to similar risks.
     
     
                 Opportunistic Approach.  The Company changes its mix
     of  business  as market conditions change and  opportunities
     arise.   The Company generally emphasizes insurance products
     which have greater potential for underwriting profitability.
     The  Company avoids underwriting a line of business  if  the
     line  cannot  be  priced profitably. The  Company  does  not
     emphasize market share.
     
                  Commitment to Service.  The Company focuses  on
     providing  consistent, high quality service to its insurance
     producers  and  insureds  in both  underwriting  and  claims
     handling.   The Company believes its producers and  insureds
     benefit  from  the extensive experience of its  underwriting
     and claims personnel.
     
                 Use of Sophisticated Computer Modeling Techniques.
     In  addition  to  employing standard insurance  underwriting
     techniques,   the   Company's   underwriters   utilize   the
     Insurance/Investment  Risk  Assessment  System  ("IRAS"),  a
     sophisticated  computer model which estimates  the  probable
     maximum  loss ("PML") from earthquakes of varying  frequency
     and  severity,  to  quantify  the  risk  of  and  assist  in
     determining  the  price  and terms  of  DIC  coverage.   The
     Company  also  uses  IRAS  on an ongoing  basis  to  monitor
     aggregate earthquake exposure.
     
                  Emphasis on Relationships with Producers.   The
     Company  utilizes select excess and surplus lines producers,
     including   general   agents  and  wholesale   brokers,   to
     distribute its insurance products, expand market  reach  and
     provide   specialized  knowledge  of  particular  coverages,
     markets and customers.  The Company generally seeks to be  a
     substantial  underwriter  for its  producers,  in  order  to
     enhance  the  likelihood  of receiving  the  most  desirable
     underwriting opportunities.

       (b)  Financial Information about Industry Segments.

        The  Company  operates in only one industry segment,  the
property and casualty insurance industry.

       (c)  Narrative Description of Business.

Principal Business Lines and Products

        The following tables set forth the gross and net premiums
written  by  principal lines of business of the Company  for  the
periods indicated:
<TABLE>
Gross Premiums Written by Principal Lines of Business
   (Dollars in thousands)
<CAPTION>

                                                        Year Ended December 31,
-------------------------------------------------------------------------------------------------------------------------
                      1996                 1995                  1994                  1993                  1992
               Premiums   Percent   Premiums   Percent    Premiums   Percent    Premiums   Percent    Premiums   Percent

<S>           <C>        <C>       <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>    
Lines of Business

Architects'& Engineers'
Liability     $17,843     11.4%     $14,452     9.2%      $15,910     11.4%     $16,677     14.9%     $18,539     20.0%
Casualty       29,234     18.6       26,902    17.2        21,284     15.3       19,680     17.6       18,381     19.9
Commercial    
Automobile     18,337     11.7       18,580    11.8        14,258     10.3        3,201      2.9
Difference in
Conditions     38,500     24.5       45,213    28.8        43,259     31.1       34,035     30.5       26,914     29.1
Other
Property       24,192     15.4       27,601    17.6        18,424     13.2       13,159     11.8        9,792     10.6
Specialty 
Lines          28,831     18.4       24,232    15.4        26,014     18.7       24,588     22.0       17,507     18.9
Run-Off Business                                                2                   323       .3        1,424      1.5
              _______    _____      _______   _____       _______    _____      _______    _____      _______    _____
TOTAL        $156,937    100.0%    $156,980   100.0%     $139,151    100.0%     $111,663   100.0%     $92,557    100.0
</TABLE>

<TABLE>
Net Premiums Written by Principal Lines of Business
   (Dollars in thousands)
<CAPTION>

                             Year Ended December 31,
-----------------------------------------------------------------------------------------------------------------------
                      1996                  1995                 1994                   1993                 1992
               Premiums   Percent    Premiums   Percent    Premiums   Percent    Premiums   Percent    Premiums   Percent
<S>           <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>       
Lines of Business

Architects' & Engineers'
Liability      $12,884    13.6%     $10,576     11.7%     $11,381     16.5%     $12,302     19.8%     $14,971     28.3%
Casualty        20,775    22.0       17,266     19.2       14,611     21.1       12,538     20.2       13,080     24.8
Commercial   
Automobile      13,947    14.7       13,111     14.5        6,022      8.7        2,341      3.7            
Difference in
Conditions      20,238    21.4       22,497     25.0       17,247     24.9       18,008     29.0       11,372     21.5
Other   
Property         9,843    10.4       10,454     11.6        4,916      7.1        3,724      6.0        4,541      8.6
Specialty
Lines           16,920    17.9       16,271     18.0       15,008     21.7       12,931     20.8        7,558     14.3
Run-Off Business                                                2                   323       .5        1,324      2.5
               _______   _____      _______    _____      _______    _____      _______    _____      _______    _____
TOTAL          $94,607   100.0%     $90,175    100.0%     $69,187    100.0%     $62,167    100.0%     $52,846    100.0%
</TABLE>

        Architects'  and  Engineers'  Liability.   A&E  insurance
protects  architects,  engineers and other  design  professionals
against   liability  to  third  parties  due  to  the   insured's
negligence.   A&E policies are written by the Company exclusively
as  claims-made  coverage. A&E policies written  by  the  Company
protect insureds for up to $5 million.

          The   Company   generally   concentrates   on   smaller
architectural and engineering firms (i.e., those with $10 million
or  less  in  annual  billings)  where  the  principals  actively
participate in the operations of the business.  Based upon  gross
premiums  written,  approximately 49.0%  and  54.1%  of  the  A&E
insurance  was  written for firms located in California  for  the
years ended December 31, 1996 and 1995, respectively.

        The  Company  has generated its A&E business  exclusively
through  Risk  Administration & Management Company ("RAMCO")  for
over  9 years.  RAMCO has been granted binding authority, subject
to  A&E  underwriting guidelines specified by  the  Company.  The
Company  may  cancel any policy, subject to applicable  insurance
regulations, if it is inconsistent with such guidelines. All  A&E
claims  are handled by RAMCO with oversight by the Company.   The
Company conducts semi-annual audits of RAMCO's underwriting files
and reviews claims with RAMCO on a quarterly basis.

        As  compensation for A&E insurance produced by RAMCO, the
Company  pays RAMCO commissions based upon a percentage of  gross
A&E   premiums   written.   RAMCO  also  receives  a   contingent
commission based upon the profitability of A&E insurance policies
it produces.

        Casualty.   The Company specializes in casualty  policies
which  provide coverage above an insured's self-insured retention
("SIR  policies"), umbrella and buffer or excess  layer  casualty
coverage,  including  general liability  and  products  liability
coverage.   SIR  policies  have  minimum  attachment  points   of
$100,000   on  automobile  liability  and  $50,000   on   general
liability.    The  Company's  commercial  umbrella  coverage   is
generally  written  in  excess  of  primary  liability  insurance
coverage  provided by other insurance carriers. The Company  also
writes  primary  general  liability  and  commercial  multi-peril
package policies.

       Commercial Automobile.  The Company underwrites commercial
automobile  policies  for owner-operators  and  small  commercial
fleets  for  local,  intermediate and  long-haul  trucking  risks
produced  through selected general agents.  The policies  provide
liability,  physical  damage and cargo insurance  with  liability
protection up to $1 million.

        Difference in Conditions. Substantially all  of  the  DIC
policies  written  by  the Company are for California  earthquake
coverage.  The Company uses IRAS, a computer modeling program, in
connection  with underwriting DIC coverage to estimate  PML  from
earthquakes  of varying severity.  IRAS evaluates seismic  hazard
by  matching  structural  information  provided  by  the  Company
regarding  a particular building, group of exposures or portfolio
with  the  IRAS  database, which includes information  concerning
earthquake   severity  and  frequency,  soil   composition,   and
proximity to known faults.  Although IRAS is available  to  other
property  and  casualty insurers, the Company believes  that  the
amount  and quality of information input into IRAS by the Company
results in more effective utilization of IRAS' capabilities.  The
Company  further  believes that its use of IRAS prior  to  actual
risk  selection enables the Company to differentiate its  pricing
and terms with respect to particular risks on DIC coverage.

        Other  Property.   The Company's other property  coverage
consists  primarily of fire insurance, inland  marine  and  plate
glass  insurance  written on either a primary or  an  excess  and
surplus  basis.   The  Company also writes course-of-construction
coverage on engineering projects, national accounts, railroad and
utilities coverage on an excess-of-loss basis.

        Specialty  Lines.   Other  specialty  insurance  products
provided  by  the  Company  include liquor  liability  insurance,
special  events  insurance  (for  events  such  as  concerts  and
contests),  directors'  and  officers'  liability  insurance  for
"not-for-profit" organizations, fiduciary liability insurance for
pension   fund   trustees,   public   officials   liability   and
miscellaneous errors and omissions. The Company has expanded  its
specialty lines business to diversify its risk exposure.

Marketing

        The Company writes business through wholesale excess  and
surplus  lines brokers and general agents.  The Company  believes
that  close working relationships with these insurance  producers
are   essential   to   its  success.   These  producers   provide
specialized   knowledge  of  particular  products,  markets   and
customers,  and enable the Company to capitalize on  underwriting
opportunities.  The Company seeks to be a substantial underwriter
for its producers in order to enhance the likelihood of receiving
the most desirable underwriting opportunities.

        The Company pays brokers and agents commissions based  on
the amount of premiums and types of business underwritten.  These
payments  constitute part of the Company's acquisition costs  and
are included in its underwriting expenses.  The Company also pays
RAMCO and other general agents contingent commissions based  upon
the  profitability of the policies they produce for the  Company.
See  "Principal  Business  Lines  and  Products--Architects'  and
Engineers' Liability."

       Gross premiums written in the State of California amounted
to  approximately 43.7% and 48.7% of the aggregate gross premiums
written by the Company for the years ended December 31, 1996  and
1995,  respectively.   In the State of New  York,  the  Company's
gross premiums written were 7.6% and 12.8% of total premiums  for
the  years ended December 31, 1996 and 1995, respectively.  Gross
premiums  written in any other state did not exceed 10% of  gross
premiums written during 1996 or 1995.

       Management emphasizes quality service in all phases of its
operations  and  believes  that this  approach  has  enabled  the
Company to maintain strong relationships with its producers.   To
deliver  prompt  service  while ensuring  consistent  disciplined
underwriting, the Company has granted selected general agents the
authority to sell and bind insurance coverages in accordance with
detailed  procedures and limitations established by the  Company.
The  Company  promptly reviews coverages bound by  these  agents,
decides whether the insurance is written in accordance with  such
procedures and limitations and may cancel policies that  are  not
in    compliance   with   such   procedures   and    limitations.
Approximately 35.6% and 25.4% of the Company's gross premiums for
the  years  ended December 31, 1996 and 1995, respectively,  were
written by general agents with binding authority.

Underwriting

       The Company employs a disciplined approach to underwriting
to  achieve  an  overall  underwriting  profit,  even  if  it  is
necessary to limit premium growth at times.

         At   December   31,  1996,  the  Company's  thirty-three
underwriters   had  an  average  of  19  years  of   underwriting
experience.  By focusing on specialized classes of insurance, the
Company is able to take advantage of its underwriters' experience
to  underwrite  complicated insurance  risks  on  a  case-by-case
basis.   In  accepting  risks, each underwriter  is  required  to
comply   with  risk  parameters,  retention  limits   and   rates
prescribed  by  the Company. Compensation of senior  underwriters
depends in part on the profitability of the lines of business for
which they are responsible.

        The  Company's computer systems are capable of generating
specific risk reports, which include a variety of historical data
regarding  individual risks underwritten by the  Company.   These
reports  inform the underwriters of the historical annual premium
quoted  with  respect to the risk, the reported losses  and  loss
adjustment  expenses  ("LAE") relating to  the  risk,  cumulative
underwriting profitability and other relevant information.

        The  Company's underwriters generally perform a  complete
underwriting evaluation of applicants and determine premiums  and
coverage  provisions  before an insurance  quotation  is  issued.
While  the Company's business is primarily underwritten  in-house
(except  for  A&E coverage, which is underwritten exclusively  by
RAMCO), the Company has granted selected agents binding authority
to  underwrite  programs  for the Company,  subject  to  specific
guidelines  that  have  been established  by  the  Company.   See
"Marketing."

Claims Management and Administration

         In   accordance   with  its  emphasis  on   underwriting
profitability,  the  Company has an  active  approach  to  claims
management  that  is designed to investigate claims  as  soon  as
practicable,  manage  and  anticipate  developments  and  service
producing  brokers  and  insureds throughout  the  process.   The
Company maintains an experienced claims management staff at  each
of  its  major offices, with eight claims examiners  in  Woodland
Hills,  California  and  five claims examiners  in  Hoboken,  New
Jersey.


        Claims in respect of A&E insurance written by the Company
are  administered by RAMCO under the Company's supervision.  Each
of  the  A&E  policies written by the Company is on a claims-made
basis and includes defense costs within the policy limit.  Due to
the  nature of this line of professional liability coverage,  the
Company generally has needed to retain counsel for a majority  of
its  A&E claims.  When the estimated value of a claim exceeds the
Company's attachment level on a particular policy, RAMCO provides
the  Company with documentation and a caption report,  recommends
appropriate reserve levels and sends requests for claims payments
directly to the Company for processing.  The Company reviews each
claim  that  is  submitted and makes the payment it  believes  is
appropriate.

Reserves

        The Company's loss reserves are estimates of amounts that
may  be  needed in the future to pay losses as well  as  expenses
related  to  the final adjustment of those losses.  Reserves  for
losses  and LAE have been estimated by the Company utilizing  its
own historical experience as well as that of the industry.  These
estimates  include  two  components: case reserves  and  non-case
reserves.   Case  reserves are estimates of losses  and  LAE  for
reported  claims  and  are established by  the  Company's  claims
departments.   Non-case reserves, which include a  provision  for
losses  that  have  occurred but have not been  reported  to  the
Company  as  well  as  development on reported  claims,  are  the
difference  between (i) the sum of case reserves and paid  losses
and  (ii)  estimated ultimate incurred losses.  Ultimate incurred
losses are an estimate of total losses and LAE necessary for  the
ultimate  settlement  of all reported claims,  including  amounts
already  paid and incurred but not reported claims.  The  Company
engages  independent  actuarial consultants to  perform  periodic
loss and LAE reserve analyses.

        The  Company's  management  believes  its  loss  and  LAE
reserves  are  adequate for the ultimate net cost of  all  losses
incurred  by  the  Company.  The Company does  not  discount  its
reserves.    The   Company  will  continue  to  make   additional
adjustments  to  loss  and  LAE  reserve  calculations  based  on
additional     analyses    and    information    as    available.
Notwithstanding the foregoing, the Company can give no assurances
as  to  the  ultimate accuracy of current reserves for losses  or
LAE,  or that additional development will not occur in the future
since  the  process of establishing and estimating loss  and  LAE
reserves is, by its nature, imprecise.

        The  following loss and LAE development table illustrates
the    change    over   time   of   reserves   established    for
property-liability losses and LAE at the end of various  calendar
years.  The  amounts shown for each year on the top line  of  the
table represent the Company's estimate of its gross liability for
future payments of losses and LAE as of the balance sheet date as
originally  reported.   The next line represents  the  amount  of
ceded reserves recoverable from reinsurers for losses and LAE for
the same period, followed by the net losses and LAE unpaid on the
Company's  business.  The upper half of the  table  includes  re-
estimates of the original balance sheet net liability for  unpaid
losses  and LAE at the end of each period following the  original
report  date.  The estimates change as more information is  known
about  the  frequency and severity patterns of  claims  for  each
year.   A  redundancy  (deficiency) exists when  the  reserve  as
originally   reported   is  greater  (less)   than   the   amount
re-estimated  at  each  December 31.  The  cumulative  redundancy
(deficiency) depicted in the table for a particular calendar year
shows  the aggregate change in estimates over the period of years
subsequent  to  the original calendar year.  As of  December  31,
1996,   the   cumulative   deficiency  of   $4,298,000   resulted
principally from additional loss and LAE development from a truck
leasing  program and a used car dealers program, each in run-off,
which  during  1996  produced $5.3 million and  $2.2  million  of
losses,  respectively,  in excess of existing  reserves;  and  an
increase  of  $2.2  million  in reserves  for  environmental  and
asbestos-related  exposures on business written  prior  to  1985.
Such increases were partially offset by favorable development  of
A&E  reserves and a re-estimation of IBNR reserves pertaining  to
other  property business.  The lower portion of the  table  shows
the cumulative amount of the original net liability that has been
paid in each succeeding year.

        In evaluating the information in the table, it should  be
noted  that  each column includes the effects of all  changes  in
amounts  for prior periods.  The table does not present  accident
year or policy year development data.  Conditions and trends that
have affected the development of liabilities in the past may  not
necessarily  occur  in the future. Accordingly,  it  may  not  be
appropriate  to  extrapolate future redundancies or  deficiencies
based on this table.

<TABLE>
            Analysis of Loss and Loss Adjustment Expense Development
                             (Dollars in thousands)
<CAPTION>
                                            December 31,
                     1986    1987    1988     1989     1990     1991     1992     1993     1994     1995     1996
<S>               <C>      <C>      <C>       <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Gross liability for
 unpaid losses
 and LAE          $93,492  $109,557 $115,796  $151,952 $163,818 $201,057 $231,415 $275,660 $315,691 $308,886 $309,259
Deduct: reinsurance
 recoverable on unpaid
 losses and LAE    53,077    58,396   57,097    83,574   77,334   87,927  104,352  133,783  169,889  152,975  137,952
                  _______   _______  _______   _______  _______  _______  _______  _______  _______  _______  _______ 
Net liability for unpaid
 losses and LAE   $40,415   $51,161  $58,699   $68,378  $86,484 $113,130 $127,063 $141,877 $145,802 $155,911 $171,307
Liability re-estimated
 as of:
One year later     40,627    49,839   61,040    67,584   83,630  111,197  125,372  133,367  146,194  160,209
Two years late     41,233    52,808   58,037    66,774   82,672  110,056  118,354  128,675  143,131
Three years later  44,159    51,360   57,297    66,244   82,271  102,436  114,577  123,942
Four years later   44,876    51,188   56,583    65,745   76,339   98,812  110,989
Five years later   45,712    52,219   55,042    61,067   72,766   96,907
Six years later    45,845    50,122   51,921    58,220   71,686
Seven years later  44,728    48,719   48,290    58,509
Eight years later  43,354    45,261   50,370
Nine years later   39,938    48,154
Ten years later    42,619
                  _______   _______  _______   _______  _______  _______  _______  _______  _______   _______  ________
Cumulative redundancy
 (deficiency)     $(2,204)   $3,007   $8,329    $9,869  $14,798  $16,223  $16,074  $17,935   $2,671   $(4,298)       $0

Cumulative liability
 paid as of:
One year later     $6,186    $9,321   $8,854    $8,253   $2,692  $16,014  $16,692  $24,152  $28,911   $30,784
Two years later    12,541    16,078   13,539    11,135   12,648   27,223   34,302   42,402   47,380
Three years later  17,772    20,020   15,143    17,906   20,788   39,657   45,587   53,752
Four years later   21,114    20,936   18,221    21,485   28,381   46,314   52,959
Five years later   21,939    23,453   19,748    26,127   33,633   51,038
Six years later    22,775    23,847   22,641    29,941   36,714
Seven years later  22,939    25,571   25,814    32,322
Eight years later  23,470    28,348   27,552
Nine years later   25,986    29,682
Ten years later    27,321
</TABLE>

          Prior    to    June    30,   1985,   the   Company   wrote    casualty
insurance   coverage   at   high   attachment  levels   on   an   excess-of-loss
basis.     The    Company's   net   retention   was   generally   $50,000    per
risk    on    such    coverage.    As   was   customary   for   the    insurance
industry   at   that   time,   such   policies   sometimes   included   coverage
for    sudden   and   accidental,   as   well   as   cumulative,   environmental
impairment    and    asbestos-related    risks    that    involve    significant
unresolved   issues   regarding   liability,   policy   coverage    and    other
matters.     Given    the    nature    of   this    business,    the    pre-1985
casualty   book   of   business   has   an   extremely   long   tail,   creating
uncertainty   in   the  estimation  of  ultimate  losses  to   be   paid.    The
Company    generally   establishes   reserves   for   such    claims    if    it
believes   that   the   attachment  level  of  such  policies   is   likely   to
be reached.

          The    Company's    reserves   also   reflect   certain    facultative
and     treaty     casualty     and    professional    liability     reinsurance
assumed   (written)   prior   to   1985.    The   inherent   uncertainties    in
estimating   reserves   are   greater   for   reinsurance   than   for   primary
insurance   due   to   the   diversity  of  the   development   patterns   among
different    types    of    reinsurance    contracts,    the    longer    period
between   the   occurrence  of  a  claim  and  the  reporting  of   such   claim
to   the   reinsurer,   the   necessary  reliance   on   ceding   companies   or
reinsurance     intermediaries     for    information     regarding     reported
claims    and    different   reserving   practices   among   ceding   companies.
A    reinsurer's   internal   data   is   often   supplemented   with   industry
data     to    provide    the    basis    for    reserve    analysis.      Thus,
management's    judgments   about   the   applicability   of    industry    data
to   the   Company's   reinsurance   assumed   business   adds   an   additional
element   of   uncertainty   to  the  reserving   process.    The   Company   no
longer writes this business.

         The   insurance   industry   experienced  a   number   of   reinsurance
company    failures   in   the   1980's   and   certain   of    the    Company's
treaty    reinsurers    relating   to   the   pre-1985    book    of    casualty
business   have   become   insolvent   or   are   financially   impaired.    The
Company   has   written   off   all   debts   due   from   insolvent   companies
and   all   receivables  for  paid  losses  and  LAE  and  reserves   ceded   to
companies it believes to be financially impaired.

         Since   1985,   the   Company  has  changed  the   type   of   casualty
insurance   it   writes   and  the  risks  it  covers  and   has   amended   the
policy   forms   it   uses   to  expressly  exclude  from   the   coverage   any
risks directly associated with pollution and asbestos.

          Associated    revised   its   casualty   coverage    to    meet    the
severity     of     loss     requirements    of     sophisticated     commercial
insureds   by   providing   coverage   over   an   SIR   together   with   first
layer    umbrella    and   buffer/excess   layer   policies.     The    policies
generally   have   minimum   SIR's  of  $50,000  for   general   liability   and
$100,000    for   commercial   automobile.    As   a   result,   coverage    now
attaches   at   much   lower   levels  and  the  reporting   tail   for   claims
is   much   shorter   than   for   the   pre-1986   book   of   business.    The
Company    has    also   developed   specialty   programs   which    focus    on
lower-severity    business    and,   in   addition,    writes    A&E    coverage
only   on   a   claims-made  basis  and  includes  defense  costs   within   A&E
policy limits.

         The   following   table   provides  a   reconciliation   of   beginning
and   ending   loss   and  LAE  reserve  balances  of  the  Company   for   each
of   the   years  in  the  three-year  period  ended  December  31,   1996,   as
computed in accordance with GAAP.

<TABLE>
Reconciliation of Liability for Loss and Loss Adjustment Expenses
                     (Dollars in thousands)
<CAPTION>
                                                                          Year ended December 31,
                                                                        1996       1995        1994
<S>                                                                  <C>        <C>         <C>
Gross reserves for losses and LAE at the beginning of the year       $308,886   $315,691    $275,660
Ceded reserves for losses and LAE at the beginning of the year        152,975    169,889     133,783
                                                                     ________   ________    ________
Net reserves for losses and LAE at the beginning of the year          155,911    145,802     141,877
                                                                     --------   --------    --------
Add:Provision for losses and LAE for claims occurring in:
  The current year                                                     53,402     50,424      49,047
  Prior years                                                           4,298        392      (8,510)
                                                                     --------   --------    --------
     Total net incurred losses and LAE                                 57,700     50,816      40,537
                                                                     --------   --------    --------
Less:Losses and LAE payments for claims occurring in:
  The current year                                                     11,520     11,796      12,460
  Prior years                                                          30,784     28,911      24,152
                                                                     --------   --------    --------
     Total net paid losses and LAE                                     42,304     40,707      36,612
                                                                     --------   --------    --------
Reserves for net losses and LAE at end of year                        171,307    155,911     145,802
Reinsurance recoverable on unpaid losses                              137,952    152,975     169,889
                                                                     --------   --------    --------
Reserves for gross losses and LAE at end of year                     $309,259   $308,886    $315,691
</TABLE>

       The following table provides a reconciliation of beginning
and  ending loss and LAE reserve balances of the Company for each
of the years in the three-year period ended December 31, 1996 for
environmental impairment and asbestos-related liabilities.

<TABLE>
Reconciliation of Environmental Impairment and Asbestos-related
        Liability for Loss and Loss Adjustment Expenses
                     (Dollars in thousands)
<CAPTION>
                                                                      Year ended December 31,
                                                                    1996         1995         1994
<S>                                                              <C>          <C>          <C>
Environmental Impairment Liability

Gross reserves for losses and LAE at the beginning of the year   $11,938      $14,200      $15,000
Ceded reserves for losses and LAE at the beginning of the year     3,958        5,100        5,000
                                                                 -------      -------      -------
Net reserves for losses and LAE at the beginning of the year       7,980        9,100       10,000
Add:  Provision for losses and LAE 
      for claims occurring in prior years                          1,598            3          (58)
Less: Losses and LAE payments for claims occurring in prior years    774        1,123          842
                                                                 -------      -------      -------
Reserves for net losses and LAE at end of year                     8,804        7,980        9,100
Reinsurance recoverable on unpaid losses                           4,177        3,958        5,100
                                                                 -------      -------      -------
Reserves for gross losses and LAE at end of year                 $12,981      $11,938      $14,200

<CAPTION>
                                                                      Year ended December 31,
                                                                    1996         1995         1994
<S>                                                              <C>          <C>          <C>
Asbestos-related Liability

Gross reserves for losses and LAE at the beginning of the year   $1,700       $4,050       $5,000
Ceded reserves for losses and LAE at the beginning of the year    1,060        3,350        4,250
Net reserves for losses and LAE at the beginning of the year        640          700          750
Add:  Provision for losses and LAE for claims occurring in the
      prior years                                                   583          612         (158)
Less: Losses and LAE payments for claims occurring in the prior
      years                                                         212          672         (108)
Reserves for net losses and LAE at end of year                    1,011          640          700
Reinsurance recoverable on unpaid losses                          3,110        1,060        3,350
Reserves for gross losses and LAE at end of year                 $4,121       $1,700       $4,050
</TABLE>

       At December 31, 1996, the reserve for unpaid environmental
impairment  losses  and  related  loss  adjustment  expenses  was
approximately  $8.8  million,  net  of  reinsurance  recoverables
deemed  probable  of collection by the Company  of  approximately
$4.2   million.    The  range  of  gross  reserves   for   unpaid
environmental impairment losses and loss adjustment  expenses  is
estimated to be $13.0 million to $22.0 million and the  range  of
reserves,   net   of   reinsurance   recoverable,   for    unpaid
environmental impairment losses and loss adjustment  expenses  is
estimated to be approximately $8.8 million to $13.3 million.

        At  December  31, 1996, the reserve for unpaid  asbestos-
related  losses  and related loss adjustment  expenses  was  $1.0
million,  net  of  reinsurance recoverables  deemed  probable  of
collection  by  the Company of approximately $3.1  million.   The
range  of  gross reserves for unpaid asbestos-related losses  and
loss  adjustment expenses is estimated to be $4.1 million to $8.3
million   and   the  range  of  reserves,  net   of   reinsurance
recoverable,   for  unpaid  asbestos-related  losses   and   loss
adjustment expenses is estimated to be approximately $1.0 million
to $2.0 million.

        At  December  31,  1996, reserves for  incurred  but  not
reported losses and LAE for environmental impairment and asbestos-
related claims were $5.3 million and $0.8 million, respectively.

       The range of reserves, net of reinsurance recoverable, for
unpaid  environmental impairment and asbestos-related losses  and
loss   adjustment  expenses  is  estimated  to  be  approximately
$9.8 million to $15.3 million.

       At December 31, 1996 and 1995, the Company had 232 and 229
environmental impairment liability claims, respectively, covering
154  and  103 policyholders, respectively.  At December 31,  1996
and   1995,   the   Company  had  66  and  61  asbestos   claims,
respectively, covering 53 and 39 policyholders, respectively.

        The Company disputes coverage on substantially all of its
environmental impairment and asbestos-related claims  since  such
underlying policies were generally written with certain  coverage
exclusions.  In a majority of cases, coverage is being determined
through judicial interpretation, which can vary from jurisdiction
to jurisdiction.

        There  are  significant uncertainties in  estimating  the
amount  of  the Company's environmental impairment and  asbestos-
related  liabilities  resulting from a lack of  historical  data,
long  reporting delays, uncertainty as to the number and identity
of  insureds  with  potential exposure, and  complex,  unresolved
legal  issues regarding policy coverage and the extent and timing
of any such contractual liability.  Courts have reached different
and sometimes inconsistent conclusions as to when a loss occurred
and  what  policies  provide coverage, what claims  are  covered,
whether  there  is  an insured obligation to defend,  how  policy
limits  are  determined, how policy exclusions  are  applied  and
interpreted, and whether cleanup costs are includible as  insured
property  damage.  These issues are not likely to be resolved  in
the  near  future.   As  a result of these issues,  the  ultimate
number  and  cost of these claims may generate losses  that  vary
materially from the amounts currently recorded and could  have  a
material  adverse effect on the Company's results  of  operations
and financial condition.  While management believes the Company's
reserves  for  these  coverages  are  appropriately  established,
because  of  the  uncertainty of circumstances  surrounding  many
critical   factors  that  affect  environmental  impairment   and
asbestos-related liabilities, there can be no assurance that  the
Company's  reserves  for and losses from these  claims  will  not
increase in the future.

Investments

        The  Company's investment policy has an overall objective
of  enhancing after-tax return, through allocations among a range
of     investment-grade    securities    having    varying    tax
characteristics, maturities and ratings.  The precise  allocation
varies   depending   upon   investment  opportunities,   economic
conditions  and  tax  considerations.  The  Company's  investment
portfolio continues to be professionally managed with emphasis on
municipal  bonds,  U.S. Treasury securities and corporate  bonds.
As of December 31, 1996, the portfolio had an estimated effective
modified duration of approximately 5 years.

        The  Company  utilizes  outside  professional  investment
managers  who currently invest substantially all of the Company's
invested   assets.   The  outside  investment  managers   consult
frequently  with management regarding the Company's tax  position
and   aggregate   portfolio  characteristics.    The   Investment
Committee  of  the Company's Board of Directors  meets  quarterly
with management to review and amend investment policy and monitor
the performance of the Company's investment managers.

        The  Company's investment portfolio is subject to several
risks,  including  interest rate and  reinvestment  risk.   Fixed
maturity  security  values  generally  fluctuate  inversely  with
movements  in  interest  rates.   The  Company's  corporate   and
municipal  bond  investments may contain call  and  sinking  fund
features  which may result in early redemptions and the Company's
mortgage-backed  securities  are  subject  to  prepayment   risk.
Declines  in  interest  rates could cause  early  redemptions  or
prepayments, which would require the Company to reinvest at lower
rates.

        Effective January 1, 1994, the Company changed its method
of  accounting for investments, in accordance with  Statement  of
Financial  Accounting Standards (SFAS) No. 115,  "Accounting  for
Certain  Investments in Debt and Equity Securities."   Under  the
accounting pronouncement, the Company's securities are classified
as available for sale and reported at fair value, with unrealized
gains  and  losses,  net of deferred income  taxes,  included  in
stockholders' equity.







<TABLE>
        The following table summarizes the investment results  of
the Company for the periods indicated.

                       Investment Results
                     (Dollars in thousands)

<CAPTION>
                                        Year ended December 31,
                                         1996      1995      1994
<S>                                    <C>       <C>       <C>
Average invested assets                $287,210  $263,674  $244,296
Net investment income                    16,453    15,839    13,099
Realized gains (losses) on investments    1,203     3,647    (2,046)
Pre-tax yield on average assets (excluding
 realized gains on investments)            5.7%      6.0%      5.4%
</TABLE>
<TABLE>
         The  following  table  summarizes  the  Company's  fixed
maturity  portfolio, excluding short-term investments, by  sector
as of December 31, 1996.

               Fixed Maturity Portfolio by Sector
                     (Dollars in thousands)
<CAPTION>
                                                    December 31, 1996
                                           Amortized   Percent of  Fair
                                              Cost        Total    Value
<S>                                         <C>         <C>        <C>
U.S. Government and government agencies     $55,845      20.3%     $56,584
Debt securities issued by foreign governments 5,747       2.1        5,923
States and political subdivisions           141,686      51.6      146,335
Corporate securities                         27,856      10.2       27,861
Mortgage-backed securities                   43,381      15.8       43,461
Total                                      $274,515     100.0%    $280,164
</TABLE>

<TABLE>
         The  following  table  summarizes  the  Company's  fixed
maturity portfolio by rating as of December 31, 1996.

             Fixed Maturity Portfolio by Rating (1)
                     (Dollars in thousands)
<CAPTION>
                                           December 31, 1996
                                           Fair        Percent of
                                          Value          Total
<S>                                       <C>            <C>
U.S. Government and government agencies   $84,910         30.3%
Aaa                                       107,743         38.5
Aa                                         49,030         17.5
A                                          30,059         10.7
Baa                                         8,422          3.0
Total                                    $280,164        100.0%


(1) Ratings  as assigned by Moody's.  Such ratings are  generally
    assigned  upon  the  issuance of the securities,  subject  to
    revision  on  the basis of ongoing evaluations.  Bonds  rated
    Aaa  by Moody's are judged to be of the best quality and  are
    considered to carry the smallest degree of investment risk.
</TABLE>


<TABLE>
         The  following  table  summarizes  the  Company's  fixed
maturity portfolio by years to stated maturity as of December 31,
1996.

          Fixed Maturity Portfolio by Stated Maturity
                     (Dollars in thousands)

<CAPTION>
                                           December 31, 1996
                                           Fair        Percent of
                                          Value          Total
<S>                                       <C>          <C>
1 year or less                            $5,148         1.8%
Over 1 year through 5                     47,012        16.8
Over 5 years through 10 years             78,610        28.1
Over 10 years through 20 years            97,808        34.9
Over 20 years                              8,125         2.9
Mortgage-backed securities                43,461        15.5
 Total                                  $280,164       100.0%

</TABLE>
        At  December  31,  1996, investments in Federal  National
Mortgage  Association securities aggregating approximately  $24.7
million represented the only investments in any entity in  excess
of  10%  of  stockholders' equity other  than  those  investments
issued or guaranteed by the U.S. Government.

        The Company is subject to state laws and regulations that
require diversification of its investment portfolio and limit the
amount  of investments in certain investment categories.   As  of
December  31, 1996, the Company's investments complied  with  all
such laws and regulations.

Reinsurance

       Insurance companies purchase reinsurance to spread risk on
individual  exposures,  protect against catastrophic  losses  and
increase their capacity to write insurance.  Reinsurance involves
an insurance company transferring, or ceding, all or a portion of
its  exposure on insurance to a reinsurer.  The reinsurer assumes
the  exposure in return for a portion of the premium received  by
the  insurance  company.   Reinsurance  does  not  discharge  the
insurer  from its obligations to its insureds.  If the  reinsurer
fails  to meet its obligations, the ceding insurer remains liable
to pay the insured.

        The  Company cedes a material amount of its  business  to
reinsurers  to  spread risk and limit loss per exposure.   During
1996,  1995  and  1994,  the Company  ceded  premiums  of   $62.3
million,  $66.8  million and $70.0 million,  respectively,  which
constituted   39.7%,  42.6%,  and 50.3%  respectively,  of  gross
premiums  written  in each year.  Management  seeks  to  mitigate
exposure to adverse reinsurance pricing conditions and its credit
risk by maintaining a diversity of reinsurers.

         Catastrophe   reinsurance  protects  an   insurer   from
significant  aggregate loss exposure arising from a single  event
such   as  an  earthquake,  hurricane,  riot,  tornado  or  other
extraordinary  event.   The Company uses  IRAS  to  evaluate  its
earthquake  exposure  in  connection with purchasing  catastrophe
reinsurance coverage.

        Effective January 1, 1997, The Company maintains  a  six-
layer  catastrophe reinsurance program covering its DIC writings.
The  catastrophe  reinsurance program covers 95%  of  the  annual
aggregate  amount  of  property claims up  to  $138  million  per
occurrence,   subject  to  a  retention  of  $2.5   million   per
occurrence.  The Company limits its net retention to $100,000 per
risk for DIC.

        Most  other exposures, including Casualty, A&E, Specialty
Lines, Commercial Auto and certain Other Property risks have been
consolidated in a new three-layer reinsurance program arranged in
late  1996.   The  new  program provides for indemnity  of  $24.5
million  in excess of an increased net retention of $500,000  per
risk.  In addition to per-risk coverage, the new program provides
casualty   clash  &  contingency  and  certain  non-DIC  property
catastrophe  protection on an occurrence basis,  subject  to  the
same  net retention.  The new program was effective as of October
1,  1996  but will not incorporate some of the lines of  business
until the expiration of previously existing reinsurance contracts
in the first half of 1997.

        Effective  January 1, 1997, the Company entered  into  an
aggregate  stop  loss  reinsurance  agreement  with  Scandinavian
Reinsurance  Company, Ltd.  This agreement is  for  a  three-year
term  and automatically renews annually unless canceled by either
party  at  the  end of any fiscal year.  Under the terms  of  the
agreement, the reinsurer provides indemnity if accident-year loss
and  LAE  ratios  exceed 55%, subject to an  aggregate  limit  of
approximately  $45,000,000  over the  three-year  term.   Certain
terms apply which may increase the loss and LAE threshold to  60%
of the Company's net earned premiums for the 1999 accident year.

        The Company continually evaluates the credit risk related
to  its reinsurers and has established a minimum A.M. Best rating
of  "A-"  for its domestic and Bermuda-based reinsurers and  also
requires  at  least $50 million of policyholder surplus  for  all
domestic   and  foreign  reinsurers.   The  Company  works   with
intermediaries to continually monitor the financial condition  of
its  reinsurers, as appropriate.  If a reinsurer of  the  Company
were  to  become insolvent or unable to make payments  under  the
terms  of  a  reinsurance agreement, it  could  have  a  material
adverse effect on the Company.

Competition

        The  property and casualty insurance industry  is  highly
competitive.   The  Company competes with  national  and  smaller
regional insurers in each state in which it operates, as well  as
with  monoline specialty insurers.  Certain of these  competitors
are larger and have greater financial resources than the Company.
Among  other  things,  competition may take  the  form  of  lower
prices,  broader  coverage, greater product  flexibility,  higher
quality  services  or an insurer's rating by  independent  rating
agencies.   The Company competes with admitted insurers,  surplus
line  insurers, new forms of insurance organizations such as risk
retention groups, and alternative self-insurance mechanisms.

        Increased  public and regulatory concerns  regarding  the
financial  stability  of participants in the  insurance  industry
have  resulted  in greater emphasis being placed by policyholders
upon  insurance company ratings and have created some measure  of
competitive advantage for insurance carriers with higher ratings.
Associated's  and Calvert's financial strength and  claims-paying
ability  are  currently  rated "A p (Excellent)"  by  A.M.  Best.
Also, A.M. Best has assigned the financial size category of Class
VII  to  both  companies  under  its  pooling  arrangement.    In
evaluating  a  company's  financial  and  operating  performance,
A.M.  Best  reviews  the  company's profitability,  leverage  and
liquidity as well as the company's book of business, the adequacy
and  soundness  of  its  reinsurance, the quality  and  estimated
market value of its assets, the adequacy of its loss reserves and
the  experience  and competence of the management.   The  ratings
assigned  by  A.M.  Best  are based upon factors  of  concern  to
policyholders,  agents and intermediaries and  are  not  directed
toward the protection of investors.

Cyclicality

        Historically,  the overall financial performance  of  the
property  and  casualty  industry  has  tended  to  fluctuate  in
cyclical market patterns. These cycles can be more pronounced for
insurance   companies,  such  as  the  Company,  that  underwrite
business  on  a  surplus  lines  basis.  During  a  soft  market,
heightened   competition   for  premiums   not   only   increases
competition  among  surplus  lines  insurers,  but  also   causes
admitted   insurers  to  offer  coverages  for  risks   generally
underwritten by the surplus lines insurers. During a hard market,
the  constriction  of available capital among admitted  carriers,
combined  with the opportunity for increased underwriting  profit
in  their  more  traditional lines of business,  tends  to  cause
admitted  carriers to reduce their underwriting of surplus  lines
coverages.   This  may  increase  the  overall  number  of  risks
submitted  to  the  surplus lines insurers and  consequently  may
enhance  the  opportunity of surplus lines companies to  increase
premium volume and improve pricing.

        Surplus  lines insurance is generally placed by wholesale
brokers and general agents who specialize in particular lines  of
coverage  or  classes  of insureds.  These insureds  tend  to  be
sophisticated  and price-conscious insurance  purchasers.   As  a
result,  surplus lines insurers may experience increased  premium
rate competition and volume competition in soft markets.

        At  present, the property and casualty insurance industry
is experiencing a prolonged soft market.

Employees

         As   of   December   31,  1996,  the  Company   employed
approximately 130 persons, all in the United States.  None of its
employees  is  represented  by a labor  union,  and  the  Company
believes that its employee relations are excellent.

Regulation and Other Matters

        As  a general rule, an insurance company must be licensed
to  transact insurance business in each jurisdiction in which  it
operates,  and  almost all significant operations of  a  licensed
insurer  are subject to regulatory scrutiny.  Licensed  insurance
companies  are  generally  known as  "admitted"  insurers.   Most
states  provide a limited exemption from licensing  for  insurers
issuing insurance coverages that generally are not available from
admitted  insurers.  These coverages are referred to as  "surplus
lines"  insurance and these insurers are referred to  as  surplus
lines or "non-admitted" companies.

       The Company's admitted insurance businesses are subject to
comprehensive, detailed regulation throughout the  United  States
and  Canada.   Various jurisdictions have established supervisory
agencies  with  broad authority to regulate, among other  things,
licenses   to  transact  business,  premium  rates  for   certain
coverages,  trade  practices,  agent  licensing,  policy   forms,
cancellation  and  renewal  practices,  underwriting  and  claims
practices,   reserve   adequacy  and  insurer   solvency.    Many
jurisdictions also regulate investment activities on the basis of
quality,  distribution and other quantitative criteria.  Further,
most   jurisdictions  in  the  United  States  require   admitted
insurance  companies to participate in their respective  guaranty
funds.    Insurers   admitted  to  transact  business   in   such
jurisdictions are required to cover losses of insolvent  insurers
and  are generally subject to annual assessments of 1% to  2%  of
direct  premiums written in that jurisdiction to  pay  claims  of
insolvent  insurers.   In  addition,  most  jurisdictions  compel
participation in, and regulate the composition of, various shared
and  residual market mechanisms under which insurers are  induced
to provide certain coverages.

        Generally,  non-admitted insurers  are  subject  to  less
regulatory  scrutiny than admitted companies. The eligibility  of
the  Company to write insurance on a surplus lines basis in  most
jurisdictions  is  dependent  on  its  compliance  with   certain
financial  standards, including the maintenance  of  a  requisite
level  of  capital and surplus and the establishment  of  certain
statutory   deposits.   State  surplus  lines   laws   typically:
(i)  require the insurance producer placing the business to  show
that  he  or  she was unable to place the coverage with  admitted
insurers;  (ii)  establish  minimum  financial  requirements  for
surplus  lines insurers operating in the state; and (iii) require
the insurance producer to obtain a special surplus lines license.
In  recent  years, many jurisdictions have increased the  minimum
financial standards applicable to surplus lines eligibility.

         State   insurance  regulators  have  the   discretionary
authority,  in  connection  with the licensing  of  an  insurance
company,  to limit or prohibit writing new business within  their
jurisdiction when, in the state's judgment, the insurance company
is  not  maintaining adequate statutory surplus or capital.   The
Company  does  not currently anticipate that any regulator  would
limit  the amount of new business that Associated or Calvert  may
write,   given  their  respective  current  levels  of  statutory
surplus.

        Most  states  have  enacted  legislation  that  regulates
insurance   holding  company  systems,  including   acquisitions,
dividends,  the  terms of surplus notes, the terms  of  affiliate
transactions and other related matters.  Typically, such statutes
require  the  Company to periodically file information  with  the
state  insurance  commissioner, including information  concerning
its capital structure, ownership, financial condition and general
business  operations.   Under  the  terms  of  applicable   state
statutes,  any person or entity desiring to purchase a  specified
percentage  (commonly  10% or more) of the Company's  outstanding
voting  securities would be required to obtain  prior  regulatory
approval  of  the  purchase. Further,  state  insurance  statutes
typically place limitations on the amount of dividends  or  other
distributions payable by insurance companies, in order to protect
their  solvency.   See "Management's Discussion and  Analysis  of
Financial  Condition  and  Results of  Operations--Liquidity  and
Capital Resources."

        The  insurance  industry has been  subject  to  increased
scrutiny.   A  number  of state legislatures have  considered  or
enacted  legislative  proposals that alter and,  in  many  cases,
increase  the  authority of state agencies to regulate  insurance
companies  and holding company systems.  In addition, legislation
has  been  introduced in several of the past sessions of Congress
which,  if  enacted,  could  result  in  the  federal  government
assuming  some role in the regulation of the insurance  industry.
Several  committees of Congress have made inquiries and conducted
hearings  as  part of a broad study of the regulation  of  United
States insurance companies.

        The  National Association of Insurance Commissioners (the
"NAIC")  and insurance regulators continue to re-examine existing
laws   and   regulations  and  their  application  to   insurance
companies.   In  particular, this re-examination has  focused  on
insurance  company investment and solvency issues  and,  in  some
instances,  has resulted in new interpretations of existing  law,
the   development   of  new  laws  and  the   implementation   of
non-statutory guidelines. The NAIC has formed groups to study and
formulate regulatory proposals on such diverse issues as the  use
of  surplus  debentures, accounting for reinsurance transactions,
and the adoption of risk-based capital rules.  In connection with
its accreditation of states and as part of its program to monitor
the solvency of insurance companies, the NAIC requires states  to
adopt model NAIC laws and regulations on specific topics, such as
holding  company regulations and the definition of  extraordinary
dividends.   The  NAIC  adopted a new system  for  assessing  the
adequacy  of  statutory capital and surplus for all property  and
casualty insurers.  Based on the NAIC guidelines and computations
made  by  the Company in conformity with such risk-based  capital
guidelines, Associated and Calvert satisfy the required levels of
capital.  There  can  be  no  assurance,  however,  that  capital
requirements  applicable  to the Company's  businesses  will  not
increase in the future.

        The  NAIC  has  developed through  the  years  a  set  of
financial   relationships  or  "tests"   called   the   Insurance
Regulatory  Information System ("IRIS")  that  are  designed  for
early  identification  of  companies which  may  require  special
attention   by   insurance  regulatory  authorities.    Insurance
companies  submit data on an annual basis to the NAIC,  which  in
turn  analyzes  the  data. Generally, an insurance  company  will
become subject to regulatory scrutiny if it fails to satisfy NAIC
standards  for such factors as leverage, profitability, liquidity
and  loss reserve development. Failure to satisfy these standards
may  result  in action by regulatory authorities to  constrain  a
company's  underwriting capacity.  No such action has been  taken
with respect to the Company.

        It  is  not  possible  to predict the  future  impact  of
changing   state  and  federal  regulations  on   the   Company's
operations.

              ITEM 2.  PROPERTIES.

        The  Company leases approximately 49,500 square  feet  of
office space, including its corporate headquarters located in New
York,  New  York  and  underwriting offices located  in  Woodland
Hills,  California  and Hoboken, New Jersey,  respectively.   The
headquarters in New York, which consists of 3,900 square feet, is
leased  for  a term ending in the year 1999.  The Woodland  Hills
office space consists of 30,275 square feet and is leased  for  a
term  ending in the year 2008.  The Hoboken office space consists
of 13,525 square feet and is leased for a term ending in the year
2000.   The Company also leases small regional offices  in  Grand
Rapids, Michigan and Denver, Colorado.

              ITEM 3.  LEGAL PROCEEDINGS.

        The  Company is subject to litigation and arbitration  in
the  normal course of its business.  The Company does not believe
that  any  pending litigation or arbitration to  which  it  is  a
party,  or of which any of its property is the subject, is likely
to  have  a material adverse effect on its consolidated financial
position or results of operations.

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

              None.

                             PART II

               ITEM  5.   MARKET FOR COMPANY'S COMMON EQUITY  AND
RELATED STOCKHOLDER MATTERS.

        The  Company's  Common  Stock is  traded  on  the  NASDAQ
National  Market  under the symbol "GRYP".  The  following  table
reflects the high and low prices for the quarterly periods during
the  years ended December 31,1996 and 1995, as furnished  by  the
NASDAQ National Market:

                              1996                1995
                         High      Low       High      Low
First Quarter          $20 1/4   $16 7/8     $14 1/4   $12 5/8
Second Quarter          19 1/2    14 5/8      16 5/8    13 1/2
Third Quarter           15 1/4    12          17        14 3/8
Fourth Quarter          16        12 1/2      19 3/8    15


        As  of  February  10, 1997, there were  approximately  45
record  holders  of  the  Common Stock, which  does  not  include
beneficial owners of shares registered in nominee or street name.
Since  the  Offering, the Company has not paid any cash dividends
on  its  Common  Stock and does not anticipate  paying  any  cash
dividends  in the foreseeable future.  In addition, the Company's
term-loan  agreement contains a covenant restricting its  ability
to  declare  or  pay  any  cash dividends  to  its  shareholders.
Because the Company is a holding company and operates through its
subsidiaries,  its  cash  flow  and  consequent  ability  to  pay
dividends are dependent upon the earnings of its subsidiaries and
the  distribution  of those earnings to the  Company.  Also,  the
ability  of  the Company's subsidiaries to pay dividends  to  the
Company  is  subject  to  certain regulatory  restrictions.   See
"Management's Discussion and Analysis of Financial Condition  and
Results of Operations--Liquidity and Capital Resources" and  Note
9 of Notes to Consolidated Financial Statements.

              ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.

        The  following  table  sets forth  selected  consolidated
financial  data  of the Company for the periods  indicated.   The
selected  consolidated financial data for the  five  years  ended
December  31, 1996 set forth below are derived from  the  audited
consolidated  financial statements of the Company.  The  selected
statutory data have been derived from the financial statements of
Associated  and  Calvert  prepared in accordance  with  statutory
accounting  practices ("SAP") and filed with insurance regulatory
authorities.   The  following  information  should  be  read   in
conjunction  with the Consolidated Financial Statements  and  the
notes  thereto  and  "Management's  Discussion  and  Analysis  of
Financial   Condition   and  Results  of  Operations",   included
elsewhere herein.

<TABLE>
                      Gryphon Holdings Inc.
              Selected Consolidated Financial Data
<CAPTION>
                                
                                          Year ended December 31,
                                                      1996         1995        1994        1993        1992
                           (Dollars and shares in thousands, except per-share amounts)
<S>                                               <C>         <C>         <C>         <C>         <C>
Statement of Operations Data:
  Gross premiums written                          $156,937    $156,980    $139,151    $111,663    $92,557
  Net premiums written                             $94,607     $90,175     $69,187     $62,167    $52,846
 
  Net premiums earned                              $87,929     $83,399     $61,605     $57,933    $53,511
  Net investment income                             16,453      15,839      13,099      12,216     12,367
  Realized gains (losses) on investments             1,203       3,647      (2,046)      5,163      2,377
  Other income                                       1,059
  Total revenues                                   106,644     102,885      72,658      75,312     68,255
 
  Losses and loss adjustment expenses               57,700      50,816      40,537      37,065     32,535
  Underwriting, acquisition, and insurance expenses 40,967      34,590      25,721      18,481     17,771
  Proposition 103 settlement expense                                                     2,000(1)
  Bonuses paid by Willis Corroon                                                         2,670(2)
  Interest expenses                                  1,761         595                     172        437
  Total expenses                                   100,428      86,001      66,258      60,388     50,743

 Income before income taxes                          6,216      16,884       6,400      14,924     17,512
 Provision for income taxes                             53       3,959         169       2,772(3)   5,014
 Net income                                         $6,163     $12,925      $6,231     $12,152    $12,498
 
 Net income per share                                 $.93       $1.69        $.77       $1.62      $1.67
 Weighted average shares outstanding                 6,656       7,648       8,132       7,485      7,478
 
 Pro forma net income per share(4)                                                       $1.51      $1.57
 
GAAP Ratios:
 Loss and loss adjustment expense ratio              65.6%       60.9%       65.8%       64.0%      60.8%
 Underwriting expense ratio,
    excluding Proposition 103 settlement             46.6        41.5        41.8        31.9       33.2
 Combined ratio, excluding
    Proposition 103 settlement                      112.2       102.4       107.6        95.9       94.0
 Proposition 103 settlement                                                               3.5(1)
    Combined ratio                                  112.2%      102.4%      107.6%       99.4%      94.0%

Selected Statutory Data:
 Statutory net income                               $7,298     $13,876      $5,296      $7,459(1)(5)$11,091
 Statutory surplus (at end of period)               82,566      83,433      72,220      69,161     59,123
 Ratio of net premiums
    written to surplus                               1.1:1       1.1:1       1.0:1       0.9:1      0.9:1

Balance Sheet Data (at end of period):
 Investments, including cash and cash equivalents $303,869    $288,602    $245,242    $237,442   $204,094
 Total assets                                      526,984     530,989     492,717     432,080    362,201
 Loss and loss adjustment expense reserves         309,259     308,886     315,691     275,660    231,415
 Long-term debt                                     24,625      25,500                              6,690
 Stockholders' equity                               95,136      93,222      93,773      91,489     68,254
 Book value per share                                14.28       14.02       11.51       11.25       9.13
____________________


(1)   As part of a stipulation and consent order with the
      California Department of Insurance to settle outstanding
      obligations under Proposition 103, the Company refunded to
      policyholders $2.0 million, including interest.  This
      amount has been reflected as a charge to net income for
      the year ended December 31, 1993.

(2)   In connection with the Offering, Willis Corroon paid
      bonuses to certain executives.  The bonuses, consisting of
      cash and common stock and aggregating approximately
      $2,670,000, are shown as an expense and were offset by a
      capital contribution equal to the after-tax cost of such
      bonuses.

(3)   Includes the effect of the Company's adoption of SFAS No.
      109, which resulted in a one-time cumulative tax benefit
      of $0.7 million ($.09 per share) for the year ended
      December 31, 1993.

(4)   After giving pro forma effect to the cancellation of an
      intercompany loan in the amount of $7.9 million and the
      issuance of 651,833 shares of Common Stock in connection
      with the Offering.

(5)   Includes the effect of $5.0 million of additional
      environmental impairment and asbestos-related reserves
      recorded in GAAP financial statements in prior periods.
      The effect of such addition was to increase the 1993
      statutory combined ratio from 97.7% to 106.3%.
</TABLE>

       ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

General

        The  Company  is  a  holding company  that,  through  its
subsidiaries,   underwrites  specialty  property   and   casualty
insurance in sectors of the insurance industry that are generally
considered difficult to insure.  Many of the coverages written by
the Company can be categorized as excess and surplus lines, which
generally  means  that  the risks are nonstandard,  or  that  the
policies in respect of the risks are written with unusual  limits
or  at  deviated  rates.   The property  and  casualty  insurance
industry  is  highly  cyclical.  The  excess  and  surplus  lines
sectors of the property and casualty insurance industry are often
subject  to greater cyclicality and volatility than the  industry
in  general.  During soft markets, large standard lines  insurers
often  utilize  excess capacity to assume  risks  in  excess  and
surplus  and specialty lines.  During hard markets, such insurers
tend to abandon the excess and surplus and specialty lines to the
carriers  that concentrate in these sectors.  Thus,  capacity  in
these lines will fluctuate substantially, often with fluctuations
in revenues or profits, or both.

Results of Operations

Year  Ended  December 31, 1996 Compared with Year Ended  December
31, 1995

        Gross  Premiums  Written.  Gross  premiums  written  were
$156.9  million for the year ended December 31, 1996 compared  to
$157.0 million for the year ended December 31, 1995. In 1996, the
Company's  gross  premiums written experienced increases  in  the
following lines of business: a $4.6 million increase in  premiums
from  specialty  lines, primarily due to a new  animal  mortality
program; a $3.4 million increase in A&E liability due to expanded
marketing  and  enhanced coverages offered; and  a  $2.3  million
increase in casualty premiums, primarily due to new programs, but
offset  in  part  by business lost because of competitive  market
conditions  in  other casualty business written.  Such  increases
were offset by a $6.7 million decrease in DIC premiums, resulting
from  the sharing of premiums with a companion carrier and, to  a
lesser  extent, from an increase in competition with  respect  to
certain  types of DIC risks; a $3.4 million decrease in  premiums
from  other property, due to increased competition, mitigated  in
part  by new business from plate glass and fire policies;  and  a
$0.2  million decrease in commercial automobile, where  the  non-
renewal  of a truck leasing program offset growth resulting  from
new business written.

        Net  Premiums.   Net premiums written increased  4.9%  to
$94.6  million  for the year ended December 31, 1996  from  $90.2
million  for  the  year ended December 31, 1995.   This  resulted
primarily  from a shift in the mix of business toward lines  with
higher net retention levels.  Also, the Company paid $2.2 million
of  catastrophe reinsurance reinstatement premiums in 1995, which
had  the  effect  of increasing ceded premiums and  reducing  net
premiums written.

        Net premiums earned increased by 5.4% to $87.9 million in
the  year ended December 31, 1996 from $83.4 million in the  year
ended December 31, 1995.

        Net  Investment Income.  Net investment income  increased
3.9%  to $16.5 million for the year ended December 31, 1996  from
$15.8  million for the year ended December 31, 1995. The increase
is  primarily due to additional funds available for investment in
1996  and  was  partially  mitigated  by  lower  average  pre-tax
interest  rates  in 1996 than in 1995, resulting from  a  greater
component of tax-exempt securities in 1996.

        Net  Realized Gains on Investments.  For the  year  ended
December  31,  1996,  the Company realized a  net  gain  of  $1.2
million,  compared with a net gain of $3.6 million for  the  year
ended December 31,  1995.  Portfolio sales were effected in  each
year to optimize the mix of taxable and tax-exempt securities.

        Other Income.  For the year ended December 31, 1996,  the
Company recorded $1.1 million of underwriting management fees for
DIC business underwritten on behalf of a companion carrier.

        Losses  and  Loss Adjustment Expenses.   Losses  and  LAE
increased   by  13.5%  to  $57.7  million  for  the  year   ended
December  31,  1996  from  $50.8  million  for  the  year   ended
December   31,  1995,  due  to  additional  losses  and   reserve
strengthening for a truck leasing program ($5.3 million) and used-
car  dealers  program  ($2.2 million), each  discontinued  during
1995;   an increase of $2.2 million in reserves for environmental
impairment  and  asbestos-related exposures on  business  written
prior  to  1985;  other reserve increases pertaining to  previous
accident years; and, more generally, increases in earned  premium
exposures.   Such  increases  were partially  offset  by  reserve
redundancies  resulting from favorable development  of  A&E  case
reserves  and  a  re-estimate of other property liabilities.   In
1995,  the  Company recorded catastrophe losses of  $1.9  million
related to hailstorms and the Northridge earthquake of 1994.

         Underwriting,   Acquisition,  and  Insurance   Expenses.
Underwriting,  acquisition, and insurance expenses  increased  by
18.4% to $41.0 million for the year ended December 31, 1996  from
$34.6  million for the year ended December 31, 1995.  The expense
growth was primarily attributable to increased acquisition costs,
resulting from a change in the mix of business written; additions
to  staff,  related to new business; and new facilities  for  the
operating  companies.   Also, in 1996, the  Company  expensed  an
additional $1.4 million of deferred acquisition costs.

        Interest Expense.  Interest expense was $1.8 million  for
the  year ended December 31, 1996, compared with $0.6 million for
the year ended December 31, 1995.  Interest expense resulted from
a  term  loan  of $25.5 million borrowed in 1995 to  finance  the
purchase  of  1.5 million shares of the Company's  common  stock.
Interest  expense was lower in 1995 because it accrued only  from
the date of the take-down, in September.

        Income  Taxes.  Income taxes were $53,000  for  the  year
ended December 31, 1996, compared with $4.0 million for 1995.  In
1996,  income  taxes  were  reduced  by  the  tax  benefit   from
additional  reserve  strengthening  on  discontinued   lines   of
business,   increased   underwriting  expenses   and   tax-exempt
investment  income.  In 1995, the income tax expense was  reduced
by  the  tax  benefit  from  net claims costs  and  reinstatement
premiums  relating  to the Northridge earthquake  and  tax-exempt
investment income.

        Net  Income.   Net income was $6.2 million for  the  year
ended December 31, 1996, compared with $12.9 million for the year
ended December 31, 1995.

        Weighted  Average  Shares  Outstanding.   Average  shares
outstanding  were 6.7 million in 1996, compared with 7.6  million
in  1995, reflecting the effect of the purchase by the Company of
1.5 million shares of the Company's Common Stock in September  of
1995.

Year  Ended  December 31, 1995 Compared with Year Ended  December
31, 1994

        Material Event.  The Company writes a substantial  amount
of  DIC coverage in California, including the San Fernando Valley
area, which was struck by a major earthquake on January 17, 1994.
As  a  result  of  losses sustained in that  event,  the  Company
recorded  net  pre-tax costs of $8.2 million for the  year  ended
December 31, 1994.  The costs consisted of $4.3 million of claims
expense  and $3.9 million of reinsurance reinstatement  premiums.
In  1995, the Company recorded additional net pre-tax charges  of
$3.0  million  for  expected additional loss development.   These
charges  consisted  of  $0.8 million of  claims  costs  and  $2.2
million of reinsurance reinstatement premiums.

        Gross Premiums Written.  Gross premiums written increased
12.8% to $157.0 million for the year ended December 31, 1995 from
$139.2  million  for  the  year ended  December  31,  1994.   The
increase  in gross premiums written was attributable  to  a  $9.2
million  increase  in premiums from other property,  due  to  new
business  and  a  hardening of property markets; a  $5.6  million
increase in casualty premiums, resulting from additional  general
liability policies written; a $4.3 million increase in commercial
automobile premiums, resulting from new policies written;  and  a
$2.0 million increase in DIC premiums, resulting from changes  in
market conditions for earthquake coverages.  Such increases  were
partially  offset  by a $1.8 million decrease  in  premiums  from
specialty lines, due to the discontinuance of a used car  dealers
program,  and  a  $1.5  million decrease in  premiums  caused  by
competitive market conditions in the A&E business.

        Net  Premiums.  Net premiums written increased  30.3%  to
$90.2  million  for the year ended December 31, 1995  from  $69.2
million for the year ended December 31, 1994 as a result of  most
of  the factors described above, which were enhanced by increased
retention  levels  in commercial automobile  policies  and  plate
glass  policies.   Also,  catastrophe  reinsurance  reinstatement
premiums  ceded  with respect to DIC policies decreased  by  $1.7
million in 1995.

       Net premiums earned increased by 35.4% to $83.4 million in
the  year ended December 31, 1995 from $61.6 million in the  year
ended December 31, 1994.

        Net  Investment Income.  Net investment income  increased
20.9% to $15.8 million for the year ended December 31, 1995  from
$13.1  million for the year ended December 31, 1994. The increase
is  primarily due to additional funds available for investment in
1995.   To  a  lesser  extent, net investment  income,  which  is
reported  before  taxes,  increased as  a  result  of  a  greater
component of taxable securities in 1995 than in 1994.

        Net Realized Gains (Losses) on Investments.  For the year
ended December 31,  1995, the Company realized a net gain of $3.6
million compared to a net loss of $2.0 million for the year ended
December  31,  1994.  Portfolio sales were effected in each  year
to optimize the mix of taxable and tax-exempt securities.

        Losses  and  Loss Adjustment Expenses.   Losses  and  LAE
increased   by  25.4%  to  $50.8  million  for  the  year   ended
December  31,  1995  from  $40.5  million  for  the  year   ended
December  31, 1994, primarily due to increases in earned  premium
exposures  and  catastrophe losses of $1.9  million,  from  Texas
hailstorms and additional reserves for the Northridge earthquake.
In  1994,  the Company recorded net claims costs of $4.3  million
from  the  Northridge  earthquake  and  additional  reserves  for
specialty  lines,  partially offset by favorable  development  in
other property reserves, as well as A&E coverages.

         Underwriting,   Acquisition,  and  Insurance   Expenses.
Underwriting,  acquisition, and insurance expenses  increased  by
34.5% to $34.6 million for the year ended December 31, 1995  from
$25.7 million for the year ended December 31, 1994, primarily due
to  increased acquisition costs and additions to staff related to
new business.

        Interest Expense.  For the year ended December 31,  1995,
the Company recorded $0.6 million for interest expense associated
with a term loan of $25.5 million in connection with the purchase
of 1.5 million shares of its common stock in September of 1995.

       Income Taxes.  Income taxes were $4.0 million for the year
ended December 31, 1995, compared with $0.2 million for 1994.  In
1994, the income tax expense was impacted by net claims costs and
reinstatement premiums relating to the Northridge earthquake, net
realized losses on investments, and a shift from taxable to  tax-
exempt investments.

        Net  Income.  Net income was $12.9 million for  the  year
ended December 31, 1995, compared with $6.2 million for the  year
ended December 31, 1994.

        Weighted  Average  Shares  Outstanding.   Average  shares
outstanding  were 7.6 million in 1995, compared with 8.1  million
in  1994, reflecting the effect of the purchase by the Company of
1.5 million shares of the Company's  Common Stock in September of
1995.

Liquidity and Capital Resources

        The  Company receives cash from premiums and, to a lesser
extent,  investment income.  The principal cash outflows are  for
the  payment  of claims, reinsurance premiums, policy acquisition
costs and general and administrative expenses.  Net cash provided
by  operations was $24.7 million in 1996, $22.0 million in  1995,
and $17.8 million in 1994.

       At December 31, 1996, the Company maintained cash and cash
equivalents  of  $23.4 million to meet payment  obligations.   In
addition,   the   Company's   investment   portfolio   could   be
substantially  liquidated without any material financial  impact.
Substantially all of the cash and investments of the  Company  at
December 31, 1996 were held by its subsidiaries.

        Reinsurance  recoverables on unpaid  losses  were  $138.0
million  at December 31, 1996 and $153.0 million at December  31,
1995.   Because of the high limits on many policies  relative  to
the  Company's net retentions, reinsurance recoverable on  unpaid
losses  can fluctuate significantly depending upon the  emergence
and severity of reported and unreported losses.

        In  September  1995,  the Company purchased  1.5  million
shares  of  its  Common Stock from Willis  Corroon  for  a  total
purchase price of $25.5 million, including related expenses.  The
Company financed its purchase of such shares through the proceeds
of  borrowing from commercial lending institutions.  As a  result
of  the  interest  on this indebtedness, the Company's  corporate
overhead expenses increased by approximately $1.8 million.

        As a holding company, the Company depends principally  on
dividends  from  its  insurance  company  subsidiaries   to   pay
corporate overhead expenses, including principal and interest  on
its  borrowings.  The Company's subsidiaries are subject to state
insurance  laws  that restrict their ability to collectively  pay
dividends.   See  "Regulation  and  Other  Matters."   Under  the
insurance  code  of  Pennsylvania,  dividends  from  Calvert  are
limited to the greater of 10% of surplus as regards policyholders
as  of  the preceding year end or the net income for the previous
year, without prior approval from the Pennsylvania Department  of
Insurance.   Under  the  insurance code of California,  dividends
from   Associated  are  limited  to  the  greater   of   10%   of
policyholders' statutory surplus as of the preceding year end  or
the company's statutory net income for the previous year, without
prior  approval from the California Department of Insurance.   In
1996,  1995  and 1994, the aggregate dividends paid  by  the  two
subsidiaries  were $4.7 million, $2.0 million and  $1.3  million,
respectively.

        The  NAIC  has  adopted a risk-based capital  system  for
assessing the adequacy of statutory capital and surplus  for  all
property  and  casualty insurers.  Based on  the  guidelines  and
computations  made  by  the  Company  in  conformity  with   such
guidelines,  Associated and Calvert have  exceeded  the  required
levels  of  capital.   There  can be no  assurance  that  capital
requirements  applicable  to  the  Company's  business  will  not
increase in the future.

        The  Company has no present plans to make any significant
capital expenditures in the foreseeable future.

        The Company has no off-balance-sheet obligations that are
not  disclosed in its financial statements.  The Company believes
that  retained earnings will be sufficient to satisfy  its  long-
term capital requirements to fund growth.

Effects of Inflation

         There   was  no  significant  impact  on  the  Company's
operations as a result of inflation during 1996, 1995  and  1994.
However, there can be no assurance that inflation will not have a
material impact on the Company's operations in the future.

       ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

        An  index  to financial statements and required financial
statement schedules is set forth at Item 14.


        ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.

       None.

                            PART III

       The information required in Part III (Items 10, 11, 12 and
13)  is  hereby  incorporated  by reference  from  the  Company's
definitive  Proxy  Statement,  which  is  expected  to  be  filed
pursuant to Regulation 14A of the Securities Exchange Act of 1934
not  later than 120 days after the end of the fiscal year covered
by this report.

                             PART IV

        ITEM  14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES,  AND
REPORTS ON FORM 8-K.

    (a)      Financial   Statements.   See   the   index
             immediately following the signature pages.

    (b)      Reports on Form 8-K.  The Company did not file any
             reports  on Form 8-K during the last quarter  of  the
             year ended December 31, 1996.

    (c)      Exhibits.

        All  exhibits  listed below are filed  with  this  Annual
Report on Form 10-K unless specifically stated to be incorporated
by  reference  to  other  documents  previously  filed  with  the
Securities and Exchange Commission.

Exhibit No.

3.1     Amended  and Restated Certificate of Incorporation
       incorporated  herein by reference to Exhibit  3.1  to  the
       Registration  Statement  on Form  S-1  (the  "Registration
       Statement")   filed  with  the  Securities  and   Exchange
       Commission (the "SEC") on September 23, 1993.

3.2     Amended  and Restated By-Laws incorporated  herein
       by reference to Exhibit 3.2 of the 1995 Form 10-K.

4.1     Specimen  Common  Stock  certificate  incorporated
       herein by reference to Exhibit 4.1 to Amendment No.  3  to
       the  Registration Statement filed with the SEC on December
       14, 1993.

10.1    Loan  Agreement, dated September 8, 1995,  in  the
       principal  amount  of  $25,500,000 by  and  among  Gryphon
       Holdings  Inc.,  CIBC Inc. and Canadian Imperial  Bank  of
       Commerce incorporated herein by reference to Exhibit  10.1
       of the 1995 Form
       10-K.

10.2    Tax  Sharing Agreement among Willis Corroon  Group
       plc,   the  Company  and  certain  other  parties  thereto
       incorporated  herein  by  reference  to  Exhibit  10.2  to
       Amendment No. 1 to the Registration Statement.

10.3    General Indemnity Agreement between Willis Corroon
       Group   plc   and  the  Company  incorporated  herein   by
       reference  to  Exhibit  10.3 to Amendment  No.  1  to  the
       Registration Statement.

10.4    Form  of  Indemnification  Agreement  between  the
       Company  and each of its directors and executive  officers
       incorporated herein by reference to Exhibit  10.4  to  the
       Registration Statement.

10.5    1993 Stock Option Plan of the Company incorporated
       herein by reference to Exhibit 10.5 to Amendment No. 1  to
       the Registration Statement.

10.6    Contractual Management Subsidiary Agreement, dated
       July  1,  1987, between Associated and RAMCO  incorporated
       herein  by  reference to Exhibit 10.6 to the  Registration
       Statement.

10.7     Non-Competition  and  Confidentiality  Agreement,
       dated  January  15, 1993, among Willis Corroon  Group  plc
       and   Stewart   Smith  (Canada)  Limited,  in   favor   of
       Wellington  Insurance  Company  incorporated   herein   by
       reference to Exhibit 10.7 to the Registration Statement.

10.8   Severance   and   Confidentiality  Agreement   among   the
       Company,  Willis  Corroon Group plc and John  F.  Iannucci
       incorporated  herein  by reference  to  Exhibit  10.30  of
       Amendment No. 1 to the Registration Statement.

10.9   Severance   and   Confidentiality  Agreement   among   the
       Company,  Willis  Corroon Group plc  and  John  H.  Walton
       incorporated  herein  by reference  to  Exhibit  10.31  of
       Amendment No. 1 to the Registration Statement.

10.10  Severance   and  Confidentiality  Agreement  between   the
       Company  and  Stephen  A.  Crane  incorporated  herein  by
       reference  to  Exhibit 10.32 of Amendment  No.  1  to  the
       Registration Statement.

10.11  Loan  Cancellation Agreement between Willis Corroon  Group
       plc  and  the Company incorporated herein by reference  to
       Exhibit  10.33  of  Amendment No. 1  to  the  Registration
       Statement.

10.12  Restricted  Stock Plan of the Company incorporated  herein
       by  reference to Exhibit 10.34 of Amendment No. 1  to  the
       Registration Statement.

10.13  Severance and Confidentiality Agreement dated as of  March
       21,  1994  between  the  Company and  Robert  P.  Cuthbert
       incorporated herein by reference to Exhibit 10.35  of  the
       Company's  Annual Report on Form 10-K for 1994 (the  "1994
       Form 10-K").

10.14  Severance  and  Confidentiality  Agreement  dated  as   of
       November  11,  1994  between the  Company  and  Robert  M.
       Coffee  incorporated herein by reference to Exhibit  10.36
       of the 1994 Form 10-K.

10.15  Amendment   to  Severance  and  Confidentiality  Agreement
       dated  as  of  November 11, 1994 between the  Company  and
       Stephen  A.  Crane  incorporated herein  by  reference  to
       Exhibit 10.37 of the 1994 Form 10-K.


10.16  Amendment   to  Severance  and  Confidentiality  Agreement
       dated  as  of  November 11, 1994 between the  Company  and
       Robert  P.  Cuthbert incorporated herein by  reference  to
       Exhibit 10.38 of the 1994 Form 10-K.

10.17  Amendment   to  Severance  and  Confidentiality  Agreement
       dated  as of November 11, 1994 by and among Willis Corroon
       Group  plc,  the Company and John F. Iannucci incorporated
       herein by reference to Exhibit 10.39 of the 1994 Form  10-
       K.

10.18  Amendment   to  Severance  and  Confidentiality  Agreement
       dated  as of November 11, 1994 by and among Willis Corroon
       Group  plc,  the  Company and John H. Walton  incorporated
       herein by reference to Exhibit 10.40 of the 1994 Form  10-
       K.

10.19  Casualty  First  Excess  of  Loss  Reinsurance  Agreement,
       effective   July  1,  1994,  among  Calvert  and   various
       reinsurers  incorporated herein by  reference  to  Exhibit
       10.41 of the 1994 Form 10-K.

10.20  Casualty  Second  Excess  of Loss  Reinsurance  Agreement,
       effective   July  1,  1994,  among  Calvert  and   various
       reinsurers  incorporated herein by  reference  to  Exhibit
       10.42 of the 1994 Form 10-K.

10.21  Casualty  Clash  and  Contingency, First  Excess  of  Loss
       Reinsurance   Agreement,  effective  July  1,   1993,   as
       amended,    among    Calvert   and   various    reinsurers
       incorporated herein by reference to Exhibit 10.43  of  the
       1994 Form 10-K.

10.22  Casualty  Clash  and Contingency, Second  Excess  of  Loss
       Reinsurance   Agreement,  effective  July  1,   1993,   as
       amended,    among    Calvert   and   various    reinsurers
       incorporated herein by reference to Exhibit 10.44  of  the
       1994 Form 10-K.

10.23  Casualty  Quota Share Treaty, effective December 1,  1994,
       among  Calvert and various reinsurers incorporated  herein
       by reference to Exhibit 10.45 of the 1994 Form 10-K.

10.24  Property Quota Share Reinsurance Contract, effective  July
       1,    1994,   among   Calvert   and   various   reinsurers
       incorporated herein by reference to Exhibit 10.46  of  the
       1994 Form 10-K.

10.25  Property Quota Share Reinsurance Contract, effective  July
       1,  1993, as amended, among Calvert and various reinsurers
       incorporated herein by reference to Exhibit 10.47  of  the
       1994 Form 10-K.

10.26  New  York  Trucking Quota Share Treaty, effective December
       31,   1993,   among   Calvert   and   various   reinsurers
       incorporated herein by reference to Exhibit 10.48  of  the
       1994 Form 10-K.

10.27  Property  Excess Per Risk Reinsurance Contract,  effective
       January  1,  1995, among Associated, Calvert  and  various
       reinsurers   stated   therein   incorporated   herein   by
       reference to Exhibit 10.49 of the 1994 Form 10-K.

10.28  Preliminary   Property   Excess   Per   Risk   Reinsurance
       Contract,  effective  January 1, 1996,  among  Associated,
       Calvert    and    various   reinsurers   stated    therein
       incorporated herein by reference to Exhibit 10.44  of  the
       1995 Form 10-K.

10.29  Combined  Coded  Inside Excess Per Risk  and  Quota  Share
       Reinsurance  Contract, effective October 1,  1992  through
       June  30,  1994,  among Associated and various  reinsurers
       stated   therein  incorporated  herein  by  reference   to
       Exhibit 10.50 of the 1994 Form 10-K.

10.30  Property   Excess   &  Surplus  Lines  Excess   Per   Risk
       Reinsurance  Contract,  effective  July  1,  1994,   among
       Associated, Calvert and various reinsurers stated  therein
       incorporated herein by reference to Exhibit 10.51  of  the
       1994 Form 10-K.

10.31  Excess   Catastrophe   Reinsurance   Contract,   effective
       January  1,  1994, among Associated, Calvert  and  various
       reinsurers   stated   therein   incorporated   herein   by
       reference to Exhibit 10.52 of the 1994 Form 10-K.

10.32  External    Third   through   Sixth   Excess   Catastrophe
       Reinsurance  Contract, effective January  1,  1996,  among
       Associated, Calvert and various reinsurers stated  therein
       incorporated herein by reference to Exhibit 10.53  of  the
       1994 Form 10-K.

10.32  External    Third   through   Sixth   Excess   Catastrophe
       Reinsurance  Contract, effective January  1,  1995,  among
       Associated, Calvert and various reinsurers stated  therein
       incorporated herein by reference to Exhibit 10.49  of  the
       1995 Form 10-K.

10.34  Casualty  Excess  of Loss Reinsurance Contract,  effective
       July  1,  1994,  among  Associated,  Calvert  and  various
       reinsurers   stated   therein   incorporated   herein   by
       reference to Exhibit 10.54 of the 1994 Form 10-K.

10.35  Casualty  Excess  of Loss Reinsurance Contract,  effective
       July   1,  1995,  among  Associated,  Calvert,  Timberline
       Insurance  Company and various reinsurers  stated  therein
       incorporated herein by reference to Exhibit 10.51  of  the
       1995 Form 10-K.

10.36  First   Excess   Multiple   Line   Reinsurance   Contract,
       effective  July  1,  1994, among Associated,  Calvert  and
       various  reinsurers stated therein incorporated herein  by
       reference to Exhibit 10.55 of the 1994 Form 10-K.

10.37  Second   Excess   Multiple  Line   Reinsurance   Contract,
       effective  July  1,  1994, among Associated,  Calvert  and
       various  reinsurers stated therein incorporated herein  by
       reference to Exhibit 10.56 of the 1994 Form 10-K.

10.38  Form  of  Stock  Option  Agreement  under  the  1995  Non-
       Employee  Directors Stock Option Plan incorporated  herein
       by reference to Exhibit 10.54 of the 1995 Form 10-K.

10.39  Combined  Casualty  1st Excess of  Loss  and  Quota  Share
       Reinsurance  Contract,  effective  July  1,  1995,   among
       Associated,  Calvert,  Timberline  Insurance  Company  and
       various  reinsurers stated therein incorporated herein  by
       reference to Exhibit 10.55 of the 1995 Form 10-K.

10.40  Casualty  Second  Excess  of Loss  Reinsurance  Agreement,
       effective   July  1,  1995,  among  Associated,   Calvert,
       Timberline   Insurance  Company  and  various   reinsurers
       stated   therein  incorporated  herein  by  reference   to
       Exhibit 10.56 of the 1995 Form 10-K.

10.41  Multi-Line Excess of Loss Reinsurance Contract,  effective
       July   1,  1995,  among  Associated,  Calvert,  Timberline
       Insurance  Company and various reinsurers  stated  therein
       incorporated herein by reference to Exhibit 10.57  of  the
       1995 Form 10-K.

10.42  First  Contingency  Excess of Loss  Reinsurance  Contract,
       effective   July  1,  1995,  among  Associated,   Calvert,
       Timberline   Insurance  Company  and  various   reinsurers
       stated   therein  incorporated  herein  by  reference   to
       Exhibit 10.58 of the 1995 Form 10-K.
       10.43   Second  Contingency  Excess  of  Loss  Reinsurance
       Contract,   effective  July  1,  1995,  among  Associated,
       Calvert,   Timberline   Insurance  Company   and   various
       reinsurers   stated   therein   incorporated   herein   by
       reference to Exhibit 10.59 of the 1995 Form 10-K.

10.44  First  Excess  Casualty Contingency Reinsurance  Contract,
       effective  July  1,  1994, among Associated,  Calvert  and
       various  reinsurers stated therein incorporated herein  by
       reference to Exhibit 10.60 of the 1995 Form 10-K.

10.45  Second  Excess Casualty Contingency Reinsurance  Contract,
       effective  July  1,  1994, among Associated,  Calvert  and
       various  reinsurers stated therein incorporated herein  by
       reference to Exhibit 10.61 of the 1995 Form 10-K.

10.46  Casualty  Excess  of Loss Reinsurance Contract,  effective
       July  1,  1993,  among  Associated,  Calvert  and  various
       reinsurers   stated   therein   incorporated   herein   by
       reference to Exhibit 10.62 of the 1995 Form 10-K.

10.47  First  Excess  Casualty Contingency Reinsurance  Contract,
       effective  October 1, 1992, among Associated  and  various
       reinsurers   stated   therein   incorporated   herein   by
       reference to Exhibit 10.63 of the 1995 Form 10-K.

10.48  Second  Excess Casualty Contingency Reinsurance  Contract,
       effective  October 1, 1992, among Associated  and  various
       reinsurers   stated   therein   incorporated   herein   by
       reference to Exhibit 10.64 of the 1995 Form 10-K.

10.49  First  Excess  Casualty Contingency Reinsurance  Contract,
       effective  July  1,  1993, among  Associated  and  various
       reinsurers   stated   therein   incorporated   herein   by
       reference to Exhibit 10.65 of the 1995 Form 10-K.

10.50  Second  Excess Casualty Contingency Reinsurance  Contract,
       effective  July  1,  1993, among  Associated  and  various
       reinsurers   stated   therein   incorporated   herein   by
       reference to Exhibit 10.66 of the 1995 Form 10-K.

10.51  External    Third   through   Fifth   Excess   Catastrophe
       Reinsurance  Contract, effective January  1,  1994,  among
       Associated, Calvert and various reinsurers stated  therein
       incorporated herein by reference to Exhibit 10.67  of  the
       1995 Form 10-K.

10.52  Preliminary Property Excess and Surplus Lines  Excess  Per
       Risk  Reinsurance  Contract, effective  January  1,  1996,
       among  Associated, Calvert, all other subsidiaries of  the
       Company   (the  "Subsidiaries")  and  various   reinsurers
       stated   therein  incorporated  herein  by  reference   to
       Exhibit 10.68 of the 1995 Form 10-K.

10.53  Preliminary  Property  Excess  and  Surplus  Lines  Excess
       Carve  Out  Reinsurance  Contract,  effective  January  1,
       1996,  among  Associated, Calvert,  the  Subsidiaries  and
       various  reinsurers stated therein incorporated herein  by
       reference to Exhibit 10.69 of the 1995 Form 10-K.

10.54  Preliminary   Franchise   Excess   of   Loss   Reinsurance
       Contract,  effective  January 1, 1996,  among  Associated,
       Calvert,  the  Subsidiaries and various reinsurers  stated
       therein incorporated herein by reference to Exhibit  10.70
       of the 1995 Form 10-K.

10.55  Property Quota Share Reinsurance Agreement, dated July  1,
       1995,  among Calvert and various reinsurers stated therein
       incorporated herein by reference to Exhibit 10.71  of  the
       1995 Form 10-K.

10.56  Property  First  Per  Risk Excess  Reinsurance  Agreement,
       dated  July  1, 1995, among Calvert and various reinsurers
       stated   therein  incorporated  herein  by  reference   to
       Exhibit 10.72 of the 1995 Form 10-K.

10.57  First  Catastrophe  Excess  Reinsurance  Agreement,  dated
       July  1, 1995, among Calvert and various reinsurers stated
       therein incorporated herein by reference to Exhibit  10.73
       of the 1995 Form 10-K.

10.58  Second  Catastrophe  Excess Reinsurance  Agreement,  dated
       July  1, 1995, among Calvert and various reinsurers stated
       therein incorporated herein by reference to Exhibit  10.74
       of the 1995 Form 10-K.

10.59  Third  Catastrophe  Excess  Reinsurance  Agreement,  dated
       July  1, 1995, among Calvert and various reinsurers stated
       therein incorporated herein by reference to Exhibit  10.75
       of the 1995 Form 10-K.

10.60  Fourth  Catastrophe  Excess Reinsurance  Agreement,  dated
       July  1, 1995, among Calvert and various reinsurers stated
       therein incorporated herein by reference to Exhibit  10.76
       of the 1995 Form 10-K.

10.61  Casualty First Excess of Loss Reinsurance Contract,  dated
       July  1,  1995,  among  Calvert, the Company  and  various
       reinsurers   stated   therein   incorporated   herein   by
       reference to Exhibit 10.77 of the 1995 Form 10-K.

10.62  Casualty  Second  Excess  of  Loss  Reinsurance  Contract,
       dated  July  1,  1995,  among  Calvert,  the  Company  and
       various  reinsurers stated therein incorporated herein  by
       reference to Exhibit 10.78 of the 1995 Form 10-K.

10.63  Casualty Third Excess of Loss Reinsurance Contract,  dated
       July  1,  1995,  among  Calvert, the Company  and  various
       reinsurers   stated   therein   incorporated   herein   by
       reference to Exhibit 10.79 of the 1995 Form 10-K.

10.64  Casualty  Fourth  Excess  of  Loss  Reinsurance  Contract,
       dated  July  1,  1995,  among  Calvert,  the  Company  and
       various  reinsurers stated therein incorporated herein  by
       reference to Exhibit 10.80 of the 1995 Form 10-K.

10.65  Property  Excess  Per  Risk  Reinsurance  Contract,  dated
       January  1,  1997 between the subsidiaries of the  Company
       and various reinsurers stated therein.

10.66  Property   Excess  and  Surplus  Lines  Excess  Per   Risk
       Reinsurance  Contract, dated January 1, 1997  between  the
       subsidiaries of the Company and various reinsurers  stated
       therein.

10.67  Franchise Excess Loss Reinsurance Contract, dated  January
       1,  1997  between  the subsidiaries  of  the  Company  and
       various reinsurers stated therein.

10.68  External   Third   Through  Seventh   Catastrophe   Excess
       Reinsurance  Contract, dated January 1, 1997  between  the
       subsidiaries of the Company and various reinsurers  stated
       therein.

10.69  Aggregate  Excess  of  Loss  Reinsurance  Contract,  dated
       January  1,  1997 between the subsidiaries of the  Company
       and various reinsurers stated therein.

10.70  Per  Event  Reinsurance Contract, dated  October  1,  1996
       between  the  subsidiaries  of  the  Company  and  various
       reinsurers stated therein.

10.71  "Working"  Per  Event Reinsurance Contract, dated  October
       1,  1996  between  the subsidiaries  of  the  Company  and
       various reinsurers stated therein.

10.72  Excess  Per  Event Reinsurance Contract, dated October  1,
       1996  between the subsidiaries of the Company and  various
       reinsurers stated therein.

21.1   Subsidiaries  of  the Company (included in  Notes  to  the
       Consolidated Financial Statements).

23.1   Consent of KPMG Peat Marwick LLP.

23.2   Consent of Ernst & Young LLP.

27.1   Financial Data Schedule


          (d)  Financial Statement Schedules

            The   financial  statement  schedules   required   by
Regulation S-K are incorporated by reference to Item 14(a).

                           SIGNATURES


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



                              GRYPHON HOLDINGS INC.

Dated:  March  25, 1997

                              By: Stephen A. Crane
                                    Stephen A. Crane
                                    President


      Pursuant to the requirements of the Securities Exchange  Act  of
1934,  this  Report has been signed below by the following persons  on
behalf  of  the  Registrant and in the capacities  and  on  the  dates
indicated:

  Signature                  Title                    Date



Stephen  A.  Crane          Director and President    March 25, 1997
Stephen  A.  Crane          (Chief  Executive Officer)



Robert  P.  Cuthbert        Chief Financial Officer   March 25, 1997
Robert P. Cuthbert          and Chief Accounting Officer



John  F.  Iannucci          Executive  Vice President March 25, 1997
John F. Iannucci            and Director



Robert  M. Baylis           Director                  March 25, 1997
Robert M. Baylis



Franklin  L. Damon          Director                  March 25, 1997
Franklin L. Damon



Robert  R. Douglass         Director                  March 25, 1997
Robert R. Douglass



David  H. Elliott           Director                  March 25, 1997
David H. Elliott



Hadley C. Ford               Director                 March 25, 1997
Hadley C. Ford



Richard  W. Hanselman        Director                 March 25, 1997
Richard W. Hanselman



Joe M. Rodgers               Director                 March 25, 1997
Joe M. Rodgers



George  L. Yeager            Director                 March 25, 1997
George L. Yeager

                                   
                Form 10-K--Item 14(a)(1) and (2)
                                
             Gryphon Holdings Inc. and Subsidiaries
                                
 Index of Financial Statements and Financial Statement Schedules


                                                             Page

Reports of Independent Auditors:
 KPMG Peat Marwick LLP                                        F-2
 Ernst & Young LLP                                            F-3

The following audited consolidated financial statements of
Gryphon Holdings Inc. and subsidiaries are included in Item 8:

Consolidated Balance Sheets at December 31, 1996 and 1995     F-4
Consolidated   Statements   of  Income   for   the   Years   Ended
    December 31, 1996, 1995 and 1994                          F-5
Consolidated Statements of Stockholders' Equity for the
    Years Ended December 31, 1996, 1995 and 1994              F-6
Consolidated  Statements  of  Cash  Flows  for  the  Years   Ended
December 31, 1996, 1995 and 1994                              F-7
Notes to Consolidated Financial Statements                    F-8

The following consolidated financial statement schedules of
Gryphon   Holdings  Inc.  and  subsidiaries  are  included   in   Item
14(d):

Schedules

I     Summary of Investments -- Other Than Investments in Related
      Parties                                                      S-1
II    Condensed  Financial  Information  of  Registrant            S-2
III   Supplemental   Insurance   Information                       S-4
IV    Reinsurance                                                  S-5
VI    Supplemental Information Concerning Property/Casualty
      Insurance Operations                                         S-6


All other schedules to the consolidated financial statements required
by Article 7 of Regulation S-X are not required under the related
instructions or are not applicable and, therefore, have been omitted.


                          
                               
                                
      REPORT OF KPMG PEAT MARWICK LLP, INDEPENDENT AUDITORS
                                

Board of Directors and Shareholders
Gryphon Holdings Inc.

We  have  audited  the  accompanying consolidated  balance  sheets  of
Gryphon  Holdings  Inc.  and subsidiaries  as  of  December  31,  1996
and   1995,  and  the  related  consolidated  statements  of   income,
stockholders'  equity, and cash flows for each of  the  years  in  the
two-year  period  then ended.  In connection with our  audits  of  the
consolidated   financial  statements,  we  have   also   audited   the
financial  statement  schedules,  as  of  and  for  the  years   ended
December  31,  1996  and  1995, as listed in the  accompanying  index.
These   consolidated  financial  statements  and  financial  statement
schedules   are  the  responsibility  of  the  Company's   management.
Our  responsibility  is  to express an opinion on  these  consolidated
financial  statements  and  financial  statement  schedules  based  on
our audits.

We   conducted  our  audits  in  accordance  with  generally  accepted
auditing  standards.   Those  standards  require  that  we  plan   and
perform  the  audit  to  obtain  reasonable  assurance  about  whether
the  financial  statements  are  free of  material  misstatement.   An
audit  includes  examining,  on  a  test  basis,  evidence  supporting
the   amounts  and  disclosures  in  the  financial  statements.    An
audit  also  includes  assessing the accounting  principles  used  and
significant  estimates  made  by management,  as  well  as  evaluating
the   overall  financial  statement  presentation.   We  believe  that
our audits provide a reasonable basis for our opinion.

In  our  opinion,  the consolidated financial statements  referred  to
above   present  fairly,  in  all  material  respects,  the  financial
position  of  Gryphon Holdings Inc. and subsidiaries  as  of  December
31,  1996  and  1995,  and the results of their operations  and  their
cash  flows  for  each  of  the  years in  the  two-year  period  then
ended,    in    conformity   with   generally   accepted    accounting
principles.    Also,   in   our   opinion,   the   related   financial
statement  schedules  as  of  and for  the  year  ended  December  31,
1996   and   1995,   when  considered  in  relation   to   the   basic
consolidated   financial  statements  taken  as   a   whole,   present
fairly,   in  all  material  respects,  the  information   set   forth
therein.





                                   KPMG Peat Marwick LLP


New York, New York
February 14, 1997
                                
                                
        REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


Board of Directors
Gryphon Holdings Inc.

We   have   audited  the  accompanying  consolidated   statements   of
income,  stockholders'  equity, and cash  flows  of  Gryphon  Holdings
Inc.   and   subsidiaries  (the  "Company")   for   the   year   ended
December   31,   1994.    Our  audit  also  included   the   financial
statement  schedules  for  the year ended  December  31,  1994  listed
in   the  Index  at  Item  14(a).   These  financial  statements   and
schedules   are  the  responsibility  of  the  Company's   management.
Our  responsibility  is  to  express an  opinion  on  these  financial
statements and schedules based on our audit.

We   conducted  our  audit  in  accordance  with  generally   accepted
auditing  standards.   Those  standards  require  that  we  plan   and
perform  the  audit  to  obtain  reasonable  assurance  about  whether
the  financial  statements  are  free of  material  misstatement.   An
audit  includes  examining,  on  a  test  basis,  evidence  supporting
the   amounts  and  disclosures  in  the  financial  statements.    An
audit  also  includes  assessing the accounting  principles  used  and
significant  estimates  made  by management,  as  well  as  evaluating
the   overall  financial  statement  presentation.   We  believe  that
our audit provides a reasonable basis for our opinion.

In  our  opinion,  the  consolidated financial statements  of  Gryphon
Holdings  Inc.  and  subsidiaries referred to  above  present  fairly,
in   all   material  respects,  the  consolidated  results  of   their
operations  and  their  cash flows for the  year  ended  December  31,
1994,    in    conformity    with   generally   accepted    accounting
principles.    Also,   in   our   opinion,   the   related   financial
statement  schedules,  when  considered  in  relation  to  the   basic
financial  statements  taken  as  a  whole,  present  fairly  in   all
material respects the information set forth therein.

As  discussed  in  Note  1 to the consolidated  financial  statements,
the Company made an accounting change in 1994.



                                          Ernst & Young LLP
New York, New York
February 21, 1995

<TABLE>
             Gryphon Holdings Inc. and Subsidiaries
                                
                   Consolidated Balance Sheets
<CAPTION>
                                                                   December 31,
                                                               1996           1995
                                                               (Dollars in thousands)
<S>                                                        <C>           <C>
  Assets
  Investments:
  Fixed maturities, available for sale, at fair value
     (amortized cost: 1996 - $274,515; 1995 - $248,324)    $280,164      $260,728
  Short-term investments, at cost, which approximates market    307           537
  Total investments                                         280,471       261,265
  Cash and cash equivalents                                  23,398        27,337
  Accrued investment income                                   3,919         4,080
  Premiums receivable                                        18,509        17,475
  Reinsurance recoverable on paid losses                     14,326        24,489
  Reinsurance recoverable on unpaid losses                  137,952       152,975
  Prepaid reinsurance premiums                               18,965        20,434
  Deferred policy acquisition costs                          12,415        12,182
  Deferred income taxes                                      10,282         6,582
  Other assets                                                6,747         4,170
  Total assets                                             $526,984      $530,989
  
  Liabilities and Stockholders' Equity
  Policy liabilities:
  Unpaid losses and loss adjustment expenses               $309,259      $308,886
  Unearned premiums                                          68,683        63,472
  Total policy liabilities                                  377,942       372,358
  Reinsurance balances payable                               16,207        29,373
  Income taxes payable                                           55           387
  Long-term debt                                             24,625        25,500
  Other liabilities                                          13,019        10,149
  Total liabilities                                         431,848       437,767
  Commitments and contingencies
  Stockholders' equity:
  Preferred stock, $.01 par value; 1,000,000 shares
    authorized; none issued or outstanding
  Common stock, $.01 par value; 15,000,000 shares
    authorized; 8,148,050 shares issued                         81             81
  Additional paid-in capital                                30,847         30,850
  Foreign currency translation adjustment, net of tax         (219)          (209)
  Net unrealized investment gains, net of tax                3,672          8,063
  Deferred compensation                                       (257)          (193)
  Retained earnings                                         86,271         80,108
  Treasury stock, at cost; shares 1996: 1,487,075: 
    1995: 1,500,000                                        (25,259)       (25,478)
  Total stockholders' equity                                95,136         93,222
  Total liabilities and stockholders' equity              $526,984       $530,989
  
  See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
  
           Gryphon Holdings Inc. and Subsidiaries
                                
                Consolidated Statements of Income
<CAPTION>
                                                             Year ended December 31,
                                                             1996        1995        1994
                                                           (Dollars and shares in thousands,
                                                               except per-share data)
<S>                                                     <C>          <C>          <C>   
  Revenues
  Net premiums earned                                     $87,929      $83,399      $61,605
  Net investment income                                    16,453       15,839       13,099
  Realized gains (losses) on investments                    1,203        3,647       (2,046)
  Other income                                              1,059
  Total revenues                                          106,644      102,885       72,658
  
  Expenses
  Losses and loss adjustment expenses                      57,700       50,816       40,537
  Underwriting,   acquisition,   and  insurance   expenses 40,967       34,590       25,721
  Interest expense                                          1,761          595
  Total expenses                                          100,428       86,001       66,258
  
  Income before income taxes                                6,216       16,884        6,400
  Provision for income taxes (benefit):
    Current                                                 1,389        2,969          507
    Deferred                                               (1,336)         990         (338)
  Total income taxes                                           53        3,959          169
  Net income                                               $6,163      $12,925       $6,231
  
  Net income per-share                                       $.93        $1.69         $.77
  Weighted average shares outstanding                       6,656        7,648        8,132
  
  See accompanying notes to consolidated financial statements.
</TABLE>
  
<TABLE>
           Gryphon Holdings Inc. and Subsidiaries
                                
         Consolidated Statements of Stockholders' Equity

<CAPTION>
                                                          Foreign
                                            Additional    Currency      Unrealized
                               Common       Paid-in       Translation   Investment     Deferred      Retained   Treasury
                               Stock        Capital       Adjustment   Gains (Losses)  Compensation  Earnings    Stock     Total
------------------------------------------------------------------------------------------------------------------------------------
                                                              (Dollars in thousands)
<S>                            <C>          <C>           <C>           <C>            <C>           <C>        <C>        <C>

Balances at January 1, 1994    $81          $30,602       $(146)                                     $60,952               $91,489
Add (deduct):
 Net income                                                                                            6,231                 6,231
 Translation adjustment                                    (113)                                                              (113)
 Cumulative effect of a change
     in accounting principle                                             $6,143                                              6,143
 Net unrealized investment
     losses, net of tax                                                  (9,983)                                            (9,983)
 Stock award plans                             248                                      $(242)                                   6
Balances at December 31, 1994  81           30,850         (259)         (3,840)         (242)        67,183                93,773
Add (deduct):
 Net income                                                                                           12,925                12,925
 Translation adjustment                                      50                                                                 50
 Stock award plans                                                                         49                                   49
 Net unrealized investment
     gains, net of tax                                                   11,903                                             11,903
 Purchase of common stock
     for treasury                                                                                               $(25,478)  (25,478)
Balances at December 31, 1995  81           30,850         (209)          8,063          (193)        80,108     (25,478)   93,222
Add (deduct):
 Net income                                                                                            6,163                 6,163
 Translation adjustment                                     (10)                                                               (10)
 Stock award plans                              (3)                                       (64)                       219       152
 Net unrealized investment
       losses,   net   of   tax                                          (4,391)                                            (4,391)
Balances at December 31, 1996 $81          $30,847        $(219)         $3,672         $(257)       $86,271    $(25,259)  $95,136


See accompanying notes to consolidated financial statements.
</TABLE>

<TABLE>
             Gryphon Holdings Inc. and Subsidiaries
                                
              Consolidated Statements of Cash Flows

<CAPTION>
                                                         Year ended December 31,
                                                             1996        1995        1994
                                                           (Dollars in thousands)
<S>                                                      <C>         <C>         <C>
Operating activities
Net income                                                  $6,163     $12,925      $6,231
Adjustments to reconcile net income to net cash provided
  by operating activities:
    Increase in net policy liabilities                      32,239       4,958       2,854
    Increase in premiums receivable                         (1,034)     (3,196)     (3,073)
    Increase  in  deferred policy acquisition  costs          (233)     (2,388)     (2,853)
    Deferred income tax provision                           (1,336)        990        (338)
    Decrease  (increase)  in other assets  and  liabilities  1,543        (539)      5,169
    Amortization and depreciation                              595         402         389
    Amortization of bond discount, net                         944         370       1,332
    Realized (gains) losses on investments                  (1,203)     (3,647)      2,046
    Increase  (decrease) in reinsurance balances payable   (13,166)     12,341       5,874
    Decrease  (increase) in accrued investment  income         161        (175)        169
Net  cash  provided  by  operating activities               24,673      22,041      17,800
  
Investing activities
Sales of fixed maturities                                  281,728     221,026     159,484
Purchases of fixed maturities                             (310,660)   (249,119)   (185,184)
Maturities or calls of fixed maturities                      3,000       4,775       3,010
Net sales of Short-term investments                            230
Capital expenditures                                        (2,111)       (366)       (540)
Net cash used by investing activities                      (27,813)    (23,684)    (23,230)
  
Financing activities
Proceeds from long-term debt                                            25,500
Common stock acquired for treasury                                     (25,478)
Principal payment on long-term debt                           (875)
Issuance of common stock                                       217
Deferred compensation                                         (131)
Net cash provided by financing activities                     (789)         22
  
Effect  of exchange rate changes on cash                       (10)         50        (113)
  
Decrease in cash and cash equivalents                       (3,939)     (1,571)     (5,543)
Cash  and cash equivalents at beginning of year             27,337      28,908      34,451
Cash and cash equivalents at end of year                   $23,398     $27,337     $28,908
Supplemental disclosure of cash flow information
    Income taxes paid                                       $1,701      $2,783        $245
    Interest paid                                            1,761         586
  
See accompanying notes to consolidated financial statements.
</TABLE>

1.     Summary of Significant Accounting Policies

        The  significant accounting policies followed by  Gryphon
Holdings Inc. (the "Company") are summarized below.

  Basis of Presentation and Principles of Consolidation

        Gryphon  Holdings  Inc.'s wholly owned insurance  company
subsidiaries  are  Associated  International  Insurance   Company
("Associated")  and Calvert Insurance Company ("Calvert"),  which
operate   in  the  property  and  casualty  insurance   industry.
Associated  writes  the  majority of its  property  and  casualty
insurance  policies in the State of California.   Calvert  writes
property  and casualty insurance policies throughout  the  United
States and Canada.

        The  accompanying consolidated financial statements  have
been  prepared  on  the  basis of generally  accepted  accounting
principles  ("GAAP"), which as to the two insurance  subsidiaries
differ from the statutory accounting practices ("SAP") prescribed
or  permitted by regulatory authorities, and include the accounts
of   the   Company   and  its  subsidiaries.    All   significant
intercompany  accounts and transactions have been  eliminated  in
consolidation.

        The preparation of the financial statements in conformity
with  GAAP  requires  the use of estimates and  assumptions  that
affect  amounts  reported  in the financial  statements  and  the
accompanying  notes.   Actual  results  could  differ  from  such
estimates.

Premium Revenues

       Direct, assumed and ceded property and liability insurance
premiums  written are recognized as earned on a  pro  rata  basis
over the terms of the policies.  Unearned premiums are calculated
principally  by  the  application  of  pro  rata  fractions   and
represent  the portion of premiums written that is applicable  to
unexpired terms of policies in force.

        Recoverable policy acquisition costs that vary  with  and
are directly related to the production of business, consisting of
commissions,  premium  taxes  and  other  underwriting   expenses
incurred, net of ceding allowances, are deferred and amortized to
income as the related premiums are earned.  The Company does  not
consider  anticipated  investment  income  when  determining  the
recoverability  of  amounts  deferred.   Amortization  of  policy
acquisition  costs amounted to $30.1 million, $26.7 million,  and
$18.1  million  for the years ended December 31, 1996,  1995  and
1994, respectively.

Reinsurance

        Assumed  reinsurance  premiums written,  commissions  and
unpaid  losses  and  loss adjustment expenses are  accounted  for
based  principally  on  the  reports  received  from  the  ceding
insurance companies and in a manner consistent with the terms  of
the related reinsurance agreements.

        To  limit  its  risks,  the Company acquires  reinsurance
coverage with retentions and limits that management believes  are
appropriate  for  the  circumstances.   Reinsurance  arrangements
effected  under quota-share reinsurance contracts and  excess-of-
loss reinsurance contracts provide for greater diversification of
business,  allow  management  to control  exposure  to  potential
losses  arising from large risks, and provide additional capacity
for  growth.  The accompanying consolidated financial  statements
reflect  premiums  earned,  losses and loss  adjustment  expenses
(LAE)  and underwriting, acquisition and insurance expenses,  net
of  reinsurance  ceded.  Amounts recoverable from reinsurers  are
estimated  in  a  manner  consistent  with  the  claim  liability
associated with the reinsured policies.

        Contingent commissions and retrospectively-rated premiums
are  accounted  for  on  an  earned basis  and  are  accrued,  in
accordance   with   the  terms  of  the  applicable   reinsurance
agreement, based on the estimated ultimate level of profitability
relating   to   such   reinsured   business.   Accordingly,   the
profitability  of the reinsured business is continually  reviewed
and   as  adjustments  become  necessary,  such  adjustments  are
reflected in current operations.

Cash and Cash Equivalents

       The Company considers all highly liquid investments with a
maturity  of  three  months or less when  purchased  to  be  cash
equivalents.

Investments

        Effective January 1, 1994, the Company changed its method
of  accounting for investments, in accordance with  Statement  of
Financial  Accounting Standards (SFAS) No. 115,  "Accounting  for
Certain  Investments in Debt and Equity Securities."   Under  the
accounting   pronouncement,  the  Company's   debt   and   equity
securities  are classified as available for sale and reported  at
fair  value,  with unrealized gains and losses, net  of  deferred
income taxes, included in stockholders' equity.

        Fair  values  are  based on quoted  market  prices,  when
available,  or  estimates  based on  market  prices  for  similar
securities,   when   quotes   are  not   available.    Short-term
investments  are carried at cost, which approximates  their  fair
value.   Realized gains and losses from sales or liquidations  of
investments   are  determined  on  the  basis  of  the   specific
identification method and are included in net income.  Investment
income  is  recognized when earned.  The amortization of  premium
and  accretion  of  discount for fixed  maturity  securities  are
computed utilizing the interest method.

Losses and Loss Adjustment Expenses

        The  liabilities  for unpaid losses and  loss  adjustment
expenses  are  based on the Company's estimates of  the  ultimate
cost  of  unpaid  losses  reported prior  to  the  close  of  the
accounting  period,  incurred but not reported  losses,  and  the
related   loss   adjustment  expenses.   These  liabilities   are
estimated by management utilizing methods and procedures which it
believes are reasonable and necessarily are subject to the impact
of  future  changes in claim severity and frequency, as  well  as
numerous  other factors.  Although management believes  that  the
estimated liabilities for losses and loss adjustment expenses are
reasonable,  because of the extended period of  time  over  which
such  losses are reported and settled, the subsequent development
of  these liabilities may not conform to the assumptions inherent
in  their  determination  and, accordingly,  may  vary  from  the
estimated  amounts  included  in  the  accompanying  consolidated
financial  statements.  To the extent that  the  actual  emerging
loss   experience  varies  from  the  assumptions  used  in   the
determination of these liabilities, they are adjusted to  reflect
actual  experience.  Such adjustments, to the extent they  occur,
are reported in the period recognized.

        The  Company's  liabilities for unpaid  losses  and  loss
adjustment expenses include estimates for certain types of latent
exposures,  such as environmental impairment and asbestos-related
claims, relating to business written prior to 1985 and which  are
generally  difficult  to  establish  with  traditional  reserving
techniques.

         The   Company   wrote   environmental   impairment   and
asbestos-related coverages at high attachment levels and obtained
reinsurance  coverage reducing its net retention to  $50,000  per
occurrence.  Among the complications of reserving for  this  type
of  business  are  a  lack of sufficient  historical  data,  long
reporting  delays, uncertainty as to the number and  identity  of
insureds  with potential exposure, and complex, unresolved  legal
issues regarding policy coverage and the extent and timing of any
such  contractual liability.  Courts have reached  different  and
sometimes inconsistent conclusions as to when a loss occurred and
which  policies  provide  coverage,  which  claims  are  covered,
whether  there  is  an insured obligation to defend,  how  policy
limits  are  determined, how policy exclusions  are  applied  and
interpreted, and whether clean-up costs are includible as insured
property  damage.   These  legal issues  are  not  likely  to  be
resolved in the near future.

       The establishment of appropriate reserves is an inherently
uncertain  process,  and  there can  be  no  assurance  that  the
ultimate liability, particularly with respect to latent exposures
such   as   environmental  impairment  and  asbestos,  will   not
materially exceed the Company's current liability for unpaid loss
and loss adjustment expense reserve estimates and have a material
adverse  effect on its future results of operations and financial
condition.   Furthermore,  due  to the  inherent  uncertainty  of
estimating  such liabilities, particularly with respect  to  such
latent exposures, it has been, and may over time continue to  be,
necessary to revise such estimated liabilities.  However, on  the
basis  of the Company's internal procedures, which analyze, among
other  things,  its experience with similar cases and  historical
trends  such as reserving patterns, loss payments, pending levels
of  unpaid  claims, and product mix, as well as court  decisions,
economic  conditions  and public attitudes,  management  believes
that   adequate  provision  has  been  made  for  the   Company's
liabilities for unpaid losses and loss adjustment expenses.

Foreign Currency

         Transactions  denominated  in  foreign  currencies   are
translated  at  the  rate of exchange at  the  transaction  date.
Revenues  and expenses are translated at average exchange  rates.
Assets  and liabilities are translated at the exchange  rates  in
effect at the balance sheet date.
Earnings per Share

        Earnings per common share are based on the average  number
of   shares   outstanding  during  each  year;  the  exercise   of
outstanding  stock  options  would have  no  significant  dilutive
effect on earnings per share.

2.     Investments
<TABLE>
         The  major  categories  of  net  investment  income   are
summarized as follows:
<CAPTION>
                                            Year ended December 31
                                             1996      1995       1994
                                              (Dollars in thousands)
<S>                                       <C>        <C>        <C>
Fixed maturities                          $16,256    $15,245    $12,471
Cash, cash equivalents and 
   short-term investments                   1,117      1,610      1,455
Total investment income                    17,373     16,855     13,926
Less related expenses                        (920)    (1,016)      (827)
Net investment income                     $16,453    $15,839    $13,099
</TABLE>

<TABLE>
        The  gross realized gains and losses from sales  of  fixed
maturity securities are as follows:
<CAPTION>
                                               Year ended December 31
                                             1996      1995      1994
                                              (Dollars in thousands)
<S>                                       <C>        <C>       <C>
   Gross realized gains                   $3,074     $4,306    $1,666
   Gross realized losses                  (1,871)      (659)   (3,712)
   Net realized gains (losses) on sales   $1,203     $3,647   $(2,046)
</TABLE>

<TABLE>
   
        At  December  31, 1996 and 1995, the amortized  cost  and
estimated  fair  values of investments in  fixed  maturities,  by
categories  of  securities, and short-term  investments  were  as
follows:

<CAPTION>
                                                                              Gross       Gross       Estimated
                                                                   Amortized  Unrealized  Unrealized  Fair
                                                                   Cost       Gains       Losses      Value
                                                                           (Dollars in thousands)
<S>                                                                <C>        <C>         <C>         <C>
  December 31, 1996
  U.S. Treasury securities and obligations of
  U.S.  government corporations and agencies                         $55,845    $826        $(87)       $56,584
  Debt  securities  issued by foreign governments                      5,747     186         (10)         5,923
  Tax-exempt  obligations of states and political  subdivisions      141,686   4,718         (69)       146,335
  Mortgage-backed securities                                          43,381     294        (214)        43,461
  Corporate securities                                                27,856     345        (340)        27,861
                                                                     274,515   6,369        (720)       280,164
  Short-term investments                                                 307                                307
                                                                    $274,822  $6,369       $(720)      $280,471
<CAPTION>
                                                                              Gross       Gross       Estimated
                                                                   Amortized  Unrealized  Unrealized  Fair
                                                                   Cost       Gains       Losses      Value
                                                                           (Dollars in thousands)
<S>                                                                <C>        <C>         <C>         <C>
December 31, 1995
  U.S. Treasury securities and obligations of
  U.S.  government  corporations and agencies                        $48,292   $3,101         $(8)       $51,385
  Debt securities issued by foreign
  governments                                                          4,078      158                      4,236
  Tax-exempt obligations of states and
  political subdivisions                                             124,073    6,702         (40)       130,735
  Mortgage-backed securities                                          36,616      976                     37,592
  Corporate securities                                                35,265    1,571         (56)        36,780
                                                                     248,324   12,508        (104)       260,728
  Short-term investments                                                 537                                 537
                                                                    $248,861  $12,508       $(104)      $261,265
</TABLE>
  
        At  December  31, 1996, the amortized cost and  estimated
fair  value  of  fixed maturities, by contractual  maturity,  are
shown below.  Expected maturities, which are best estimates, will
differ from contractual maturities because borrowers may have the
right  to  call or prepay obligations with or without  prepayment
penalties.

                                          December 31, 1996
                                       Amortized         Fair
                                          Cost          Value
                                       (Dollars in thousands)
Due in one year or less                  $5,108         $5,148
Due after one year through five years    46,142         47,012
Due after five years through ten years   76,941         78,610
Due after ten years                     102,943        105,933
                                        231,134        236,703
Mortgage-backed securities               43,381         43,461
Total                                  $274,515       $280,164

        At  December  31,  1996, investments in Federal  National
Mortgage   Association  securities  aggregating   $24.7   million
represented the only investments in any entity in excess of 10.0%
of  stockholders' equity other than those investments  issued  or
guaranteed by the U.S.  government.

  Securities on Deposit

        At  December 31, 1996 and 1995, securities  with  a  fair
value   of   approximately  $18.6  million  and  $16.2   million,
respectively  were on deposit with various state or  governmental
insurance departments in order to comply with statutory insurance
laws.

3.   Losses and Loss Adjustment Expenses

       The following table provides a reconciliation of beginning
and  ending loss and LAE reserve balances of the Company for each
of  the years in the three-year period ended December 31, 1996 as
computed in accordance with GAAP.

<TABLE>
Reconciliation of Liability for Loss and Loss Adjustment Expenses
                     (Dollars in thousands)
<CAPTION>
                                                                  Year ended December 31,
                                                                    1996        1995        1994
<S>                                                                 <C>         <C>         <C>
Gross reserves for losses and LAE at the beginning of the year      $308,886    $315,691    $275,660
Ceded reserves for losses and LAE at the beginning of the year       152,975     169,889     133,783
Net reserves for losses and LAE at the beginning of the year         155,911     145,802     141,877
Add:Provision for losses and LAE for claims occurring in:
  The current year                                                    53,402      50,424      49,047
  Prior years                                                          4,298         392      (8,510)
     Total net incurred losses and LAE                                57,700      50,816      40,537
Less:Losses and LAE payments for claims occurring in:
  The current year                                                    11,520      11,796      12,460
  Prior years                                                         30,784      28,911      24,152
     Total net paid losses and LAE                                    42,304      40,707      36,612
Reserves for net losses and LAE at end of year                       171,307     155,911     145,802
Reinsurance recoverable on unpaid losses                             137,952     152,975     169,889
Reserves for gross losses and LAE at end of year                    $309,259    $308,886    $315,691
  
</TABLE>
        The provision for losses and LAE for claims occurring  in
prior  years shows an unfavorable development of $4.3 million  in
1996.   The  unfavorable  development resulted  principally  from
additional  losses and reserve strengthening for a truck  leasing
program  ($5.3  million)  and  used-car  dealers  program   ($2.2
million), each discontinued during 1995;  and an increase of $2.2
million  in  reserves for environmental impairment and  asbestos-
related  exposures  on  business written  prior  to  1985.   Such
increases were partially offset by favorable development  of  A&E
reserves and a re-estimation of IBNR reserves pertaining to other
property business.

       The following table provides a reconciliation of beginning
and  ending loss and LAE reserve balances of the Company for each
of the years in the three-year period ended December 31, 1996 for
environmental impairment and asbestos-related liabilities.

<TABLE>
Reconciliation of Environmental Impairment and Asbestos-related
        Liability for Loss and Loss Adjustment Expenses
                     (Dollars in thousands)
<CAPTION>
                                                                 Year ended December 31,
Environmental Impairment Liability                                   1996        1995         1994
<S>                                                               <C>         <C>          <C>
Gross reserves for losses and LAE at the beginning of the year    $11,938     $14,200      $15,000
Ceded reserves for losses and LAE at the beginning of the year      3,958       5,100        5,000
Net reserves for losses and LAE at the beginning of the year        7,980       9,100       10,000
Add:  Provision for losses and LAE for claims
      occurring in prior years                                      1,598           3          (58)
Less: Losses and LAE payments for claims 
      occurring in prior years                                        774       1,123          842
Reserves for net losses and LAE at end of year                      8,804       7,980        9,100
Reinsurance recoverable on unpaid losses                            4,177       3,958        5,100
Reserves for gross losses and LAE at end of year                  $12,981     $11,938      $14,200

<CAPTION>

                                                                      Year ended December 31,
Asbestos-related Liability                                           1996        1995        1994
<S>                                                                <C>        <C>         <C>
Gross reserves for losses and LAE at the beginning of the year     $1,700     $4,050      $5,000
Ceded reserves for losses and LAE at the beginning of the year      1,060      3,350       4,250
Net reserves for losses and LAE at the beginning of the year          640        700         750
Add:  Provision for losses and LAE for claims occurring in the
      prior years                                                     583        612        (158)
Less: Losses and LAE payments for claims occurring in the prior
      years                                                           212        672        (108)
Reserves for net losses and LAE at end of year                      1,011        640         700
Reinsurance recoverable on unpaid losses                            3,110      1,060       3,350
Reserves for gross losses and LAE at end of year                   $4,121     $1,700      $4,050
</TABLE>

       At December 31, 1996, the reserve for unpaid environmental
impairment  losses  and  related  loss  adjustment  expenses  was
approximately  $8.8  million,  net  of  reinsurance  recoverables
deemed  probable  of collection by the Company  of  approximately
$4.2   million.    The  range  of  gross  reserves   for   unpaid
environmental impairment losses and loss adjustment  expenses  is
estimated to be $13.0 million to $22.0 million and the  range  of
reserves,   net   of   reinsurance   recoverable,   for    unpaid
environmental impairment losses and loss adjustment  expenses  is
estimated to be approximately $8.8 million to $13.3 million.

        At  December  31, 1996, the reserve for unpaid  asbestos-
related  losses  and related loss adjustment  expenses  was  $1.0
million,  net  of  reinsurance recoverables  deemed  probable  of
collection  by  the Company of approximately $3.1  million.   The
range  of  gross reserves for unpaid asbestos-related losses  and
loss  adjustment expenses is estimated to be $4.1 million to $8.3
million   and   the  range  of  reserves,  net   of   reinsurance
recoverable,   for  unpaid  asbestos-related  losses   and   loss
adjustment expenses is estimated to be approximately $1.0 million
to $2.0 million.

        There  are  significant uncertainties in  estimating  the
amount  of  the Company's environmental impairment and  asbestos-
related  liabilities  resulting from a lack of  historical  data,
long  reporting delays, uncertainty as to the number and identity
of  insureds  with  potential exposure, and  complex,  unresolved
legal  issues regarding policy coverage and the extent and timing
of any such contractual liability.  Courts have reached different
and sometimes inconsistent conclusions as to when a loss occurred
and  what  policies  provide coverage, what claims  are  covered,
whether  there  is  an insured obligation to defend,  how  policy
limits  are  determined, how policy exclusions  are  applied  and
interpreted, and whether cleanup costs are includible as  insured
property  damage.  These issues are not likely to be resolved  in
the  near  future.   As  a result of these issues,  the  ultimate
number  and  cost of these claims may generate losses  that  vary
materially from the amounts currently recorded and could  have  a
material  adverse effect on the Company's results  of  operations
and financial condition.  While management believes the Company's
reserves  for  these  coverages  are  appropriately  established,
because  of  the  uncertainty of circumstances  surrounding  many
critical   factors  that  affect  environmental  impairment   and
asbestos-related liabilities, there can be no assurance that  the
Company's  reserves  for and losses from these  claims  will  not
increase in the future.


4.     Reinsurance

        Certain premiums and losses are assumed from and ceded to
other  insurance companies under various reinsurance  agreements.
The  Company cedes a portion of its business through quota  share
treaties, excess of loss treaties and facultative placements, and
generally  retains net amounts of risk ranging from  $100,000  to
$500,000 per risk.

        The Company continually evaluates the credit risk related
to  its reinsurers and has established a minimum A.M. Best rating
of  "A-"  for its domestic and Bermuda-based reinsurers and  also
requires  at  least $50 million of policyholder surplus  for  all
domestic   and  foreign  reinsurers.   The  Company  works   with
intermediaries to continually monitor the financial condition  of
its  reinsurers, as appropriate.  If a reinsurer of  the  Company
were  to  become insolvent or unable to make payments  under  the
terms  of  a  reinsurance agreement, it  could  have  a  material
adverse effect on the Company.

       The following table sets forth the significant reinsurance
receivables due from reinsurers as of December 31, 1996.
                                      Year ended December 31, 1996
                                         (Dollars in thousands)

                                          Reinsurance    A.M. Best's
Reinsurer                                 Receivables    Rating
Munich American Reinsurance Company         $18,411         A+
Kemper Reinsurance Company                   13,590         A-
Odyssey Reinsurance Corporation              11,454         A-
St. Paul Fire and Marine Insurance Company   11,366         A+
Lloyd's Underwriters                         11,329         *
Signet Star Reinsurance Corporation          10,994         A
American Re-Insurance Company                 9,653         A+
Western Atlantic Reinsurance Corporation      7,869         A

*  A.M. Best does not assign ratings to Lloyd's syndicates.

       The  amount and cost of reinsurance available to companies
specializing in property and casualty insurance are  subject,  in
large part, to prevailing market conditions beyond the control of
the  Company.   The  Company's ability to  provide  insurance  at
competitive  premium rates and coverage limits  on  a  continuing
basis  depends to a significant extent upon its ability to obtain
adequate  reinsurance  in amounts and  at  rates  that  will  not
adversely affect its competitive position.

       For  the  years  ended December 31, 1996, 1995  and  1994,
amounts  relating  to  assumed  and  ceded  reinsurance  premiums
written  and  earned  and  losses and  loss  adjustment  expenses
incurred reflected in the accompanying consolidated statements of
income approximated the following:

                                         Year ended December 31,
                                          1996    1995    1994
                                         (Dollars in thousands)
  Premiums Written:
    Assumed                             $2,390   $2,076   $3,638
    Ceded                               62,330   66,805   69,964
  Premiums Earned:
    Assumed                             $2,209   $1,715   $3,661
    Ceded                               63,824   66,064   68,221
  Losses & LAE Incurred:
    Assumed                             $4,455   $2,585   $4,803
    Ceded                               42,052   52,089   92,796

       At December 31, 1996 the Company held letters of credit of
approximately $9.1 million securing amounts due from reinsurers.

        During  1996, Associated maintained a five-layer property
catastrophe reinsurance program which covered 95% of  the  annual
aggregate  amount  of property claims up to  $115.0  million  per
occurrence,   subject  to  a  retention  of  $2.5   million   per
occurrence.

        During  1996,  Calvert maintained a  four-layer  property
catastrophe  reinsurance program which covered  95%  of  any  one
property  loss  occurrence exceeding $0.6  million,  up  to  $5.5
million  of any one occurrence, and up to a $10.0 million  annual
aggregate loss.

        Associated limits its net retention to $100,000 per  risk
for  difference  in conditions ("DIC").  Until October  1,  1996,
Associated  retained $250,000 per risk for casualty,  architects'
and  engineers'  professional  liability,  specialty  lines,  and
commercial auto and up to $500,000 per risk for non-DIC  property
policies.   Calvert reinsured various lines of  business  through
quota  share  treaties, excess of loss treaties  and  facultative
placements which limited Calvert's net retention per  risk  to  a
maximum of $200,000 for property and casualty.

        Effective  October  1,  1996, the  Company's  reinsurance
program  was  restructured to provide protection for loss  events
covering property and casualty classes of business, excluding DIC
and  certain  other property business.  The program provides  for
$24.5 million of coverage in excess of the Company's retention of
$500,000  for each and every event.  Certain businesses that  are
excluded  from this agreement are covered by quota share treaties
that  limit the Company's net retention per risk to a maximum  of
$250,000.

        Reinsurance ceded contracts do not relieve the Company of
its obligations to policyholders.  The Company remains liable  to
its  policyholders for the portion reinsured to the  extent  that
any reinsurer does not meet its obligations for reinsurance ceded
to it under the reinsurance agreements.  Failure of reinsurers to
honor  their  obligations could result in losses to the  Company.
In  addition,  as  is  often the case in  the  normal  course  of
business,  the  Company is involved in disputes  with  reinsurers
regarding   certain  loss  recoverables.  Although  the   Company
believes  that  such  issues will be resolved  in  the  Company's
favor, there can be no assurance that the Company will prevail.

5.     Federal Income Taxes

        Effective  January  1,  1993, the  Company  adopted  SFAS
No.  109, "Accounting for Income Taxes." SFAS No. 109 establishes
an  asset  and  liability approach for financial  accounting  and
reporting for income taxes as compared to the concept of matching
tax  expense  to  pretax  income.  Under  the  liability  method,
deferred  tax  assets and liabilities are recorded based  on  the
difference  between  the financial statement  and  tax  bases  of
assets  and  liabilities and the tax rates in effect  when  these
temporary  differences  are expected to reverse.   The  principal
assets  and liabilities giving rise to such differences are  loss
and  LAE reserves, unearned premiums, deferred policy acquisition
costs, and net unrealized investment gains (losses).

       The components of the net deferred income tax asset are as
follows:

                                        Year ended December 31,
                                        1996            1995
                                       (Dollars in thousands)

  Discount on loss reserves            $12,270        $12,239
  Unearned premium reserve               3,477          3,015
  Alternative minimum tax credit         1,099             56
  Other, net                               129            110
  Deferred income tax asset             16,975         15,420
  Deferred policy acquisitions costs   (4,345)        (4,264)
  Unrealized gains on investments      (1,977)        (4,341)
  Other, net                             (371)          (233)
  Deferred income tax liability        (6,693)        (8,838)
  Net deferred income tax asset        $10,282         $6,582

        The  Company  has  not established  a  valuation  reserve
because the Company believes it is more likely than not that  the
net deferred tax asset will be fully realized.

<TABLE>
       A reconciliation of income taxes computed at the statutory
federal  income tax rate to the income tax provision is presented
below:

<CAPTION>
                                      1996                1995                1994
                                          % of Pre-Tax        % of Pre-Tax       % of Pre-Tax
                                Amount      Income    Amount    Income    Amount   Income
                               -------    ---------   ------   --------   ------  --------  
                                               (Dollars in thousands)
<S>                              <C>        <C>        <C>       <C>       <C>       <C>
  Taxes based on statutory
     federal  income tax rate    $2,176     35.0%       $5,909    35.0%     $2,240    35.0%
  Add (deduct):
     Tax-exempt interest         (2,338)   (37.6)       (2,131)  (12.6)     (2,230)  (34.8)
     Other, net                     215      3.5           181     1.1         159     2.4
  Total income taxes                $53       .9%       $3,959    23.5%       $169     2.6%

</TABLE>

6.     Long-Term Debt

        In  September  1995,  the Company purchased  1.5  million
shares  of its common stock beneficially owned by Willis  Corroon
for   a  purchase  price  of  $25.5  million,  including  related
expenses.  The Company financed its purchase through an unsecured
term  loan  from  commercial  lending  institutions.   This  loan
matures in varying amounts through 2002 with interest payable  at
least  quarterly.  The term loan interest rate is  equivalent  to
either the bank's prime rate or the London Interbank Offered Rate
("LIBOR")  plus 1%, at the discretion of the Company.  The  term 
loan  agreement contains certain restrictive covenants, including
restrictions on the Company's ability to declare or pay any  cash
dividends  to  its shareholders.  As of December  31,  1996,  the
weighted  average interest rate was 6.91%, and the fair value  of
the loan approximated the carrying value.

       Principal payments due on the term loan are as follows:

  Year ending December 31,                 Principal Amount
                                        (Dollars in thousands)
    1997                                      $3,500
    1998                                       3,625
    1999                                       4,125
    2000                                       4,625
    2001                                       5,000
    Thereafter                                 3,750
     Total                                   $24,625

        In  October of 1995, the Company entered into an interest
rate  swap  agreement  with a commercial lending  institution  in
order  to reduce the impact of interest rate fluctuations on  the
Company's   term loan.  The interest rate swap was effected  with
respect  to  the  first  $15.5  million  of  scheduled  principal
amortizations of the $25.5 million loan.  The impact of the  swap
was  to  create  an effective fixed rate of 6.97%  on  the  $15.5
million  principal  amount.  As of December 31,  1996,  the  fair
value of the interest rate swap approximated the carrying value.

7.     Fair Value of Financial Instruments

        The Financial Accounting Standards Board issued Statement
of  Financial  Accounting Standards ("SFAS") No. 119  "Disclosure
about   Derivative  Financial  Instruments  and  Fair  Value   of
Financial  Instruments." SFAS No. 119 requires disclosure  of  an
estimate  of  the  fair  value  of  financial  instruments.   The
Statement defines the fair value of financial instruments as  the
amount  at which the instruments could be exchanged in a  current
transaction   between  willing  parties.   The  following   table
summarizes  the carrying amount and estimated fair value  of  the
Company's financial instruments at December 31, 1996 and 1995.

                                  Year ended December 31
                                 1996                1995
                                   (Dollars in thousands)
                          Carrying Estimated  Carrying Estimated
                           Amount  Fair Value  Amount  Fair Value
Financial assets:
 Investments and cash     $303,869  $303,869  $288,602  $288,602
Financial liabilities:
 Long-term debt             24,625    24,651    25,500    25,713

        The  following  methods  and  assumptions  were  used  to
estimate the fair value of each class of financial instrument:

Investments and cash

        The  fair values of fixed maturities are based on  quoted
market  prices.  The fair value of short-term instruments 
approximate  amortized cost.   The  fair value of cash and cash 
equivalents approximates amortized cost.

Long-term debt

        The  fair  value  of  the  Company's  long-term  debt  is
estimated  based  on the quoted market prices  for  the  same  or
similar  issues  or on current rates offered to the  Company  for
debt  of  the same maturities.  The fair value includes
the effect of the interest rate swap.

8.     Commitments and Contingencies

  Leases

        The  Company  and its subsidiaries lease  certain  office
facilities and computer equipment. Minimum rental commitments for
these  leases, exclusive of escalations due to real estate  taxes
and operating expenses, are as follows:
  
  Year ending December 31,              (Dollars in thousands)
    1997                                      $1,157
    1998                                       1,163
    1999                                       1,130
    2000                                         964
    2001                                         755
    Thereafter                                 5,512
                                             $10,681

       Total rent expense for all leases was $1,310,000, $959,000
and $856,000 in 1996, 1995 and 1994, respectively.

9.     Dividends and Stockholders' Equity

Dividends

       Associated, a California domiciled company, and Calvert, a
Pennsylvania  domiciled company, are required to  file  with  the
Department  of  Insurance of various states an annual  convention
statement,  which  is  prepared  in  conformity  with  accounting
practices  prescribed  or  permitted by  the  respective  states.
These  practices  vary  from  GAAP  principally  in  that  policy
acquisition costs are charged to expense when incurred,  deferred
federal  income  taxes  are  not  recognized,   investments   are
reflected at amortized cost, and nonadmitted assets are  excluded
from the balance sheet.

        Under  state insurance laws of Pennsylvania, the  maximum
amount  of  dividends which can be paid by Pennsylvania domiciled
insurance  companies  without prior  approval  of  the  Insurance
Commissioner  is  limited to the greater of  10%  of  surplus  as
regards  policyholders  as  of the  preceding  year  end  or  the
insurance  company's  net income for the  previous  year.   Under
state  insurance laws of California, Associated is  permitted  to
pay  as  dividends to the Company, after advance  notice  to  the
California  Insurance Department, an amount equal to the  greater
of  10%  of Associated's policyholders surplus at the end of  the
preceding  year  or  its statutory net income for  the  preceding
year.   Dividends  in excess of these amounts require  the  prior
approval  of the California Insurance Department.  Dividends  may
be  paid  only  out of earned surplus.  As such, at December  31,
1996,  the maximum amount of dividends that Associated could  pay
in 1997 without California Insurance Department approval amounted
to approximately $6.6 million and the maximum amount of dividends
that  Calvert  could  pay in 1997 without Pennsylvania  Insurance
Department approval amounted to approximately $1.7 million.

Stockholders' Equity

<TABLE>
        A  reconciliation of the two insurance subsidiaries'  net
income  and  stockholders' equity for each of the  years  in  the
three  years ended December 31, 1996 and as of December 31,  1996
and  1995,  as reported to the various regulatory authorities  in
accordance with SAP, to the related GAAP amounts included in  the
accompanying consolidated financial statements is as follows:

<CAPTION>
                                                                        Stockholders'
                                               Net Income                  Equity
                                          1996     1995     1994       1996      1995
                                                        (Dollars in thousands)
<S>                                      <C>      <C>      <C>        <C>       <C>
Associated's and Calvert's statutory-
  basis amounts                          $7,298   $13,876  $5,296     $82,566   $83,433
Add (deduct):
   Deferred policy acquisition costs        233     2,388   2,853      12,415    12,182
  Deferred income taxes                     341      (728)    (12)     11,175    10,835
  Nonadmitted assets                                                    3,090       950
  Unauthorized reinsurance                                              3,980     1,977
  Foreign currency translation adjustment   (68)     (110)    (74)
   Unrealized investment gains              816                         3,672     8,063
  Other, net                                (67)       25                 (33)
Associated's and Calvert's
  GAAP amounts                            8,553    15,451   8,063     116,865   117,440
Holding Company:
  Non-insurance company expenses         (2,390)   (2,526) (1,832)
   GAAP equity                                                        (21,729)  (24,218)
Consolidated  amounts -- GAAP basis      $6,163   $12,925  $6,231     $95,136   $93,222

</TABLE>

10.    Shareholder Rights Plan

        In  June 1995, the Board of Directors declared a dividend
of  one  right for each outstanding share of Common Stock.   Each
right  entitles  the holder to purchase from the Company  a  unit
consisting of 1/100 of a share of Junior Participating Cumulative
Preferred  Stock  at  a  price of $50 per unit.   Initially,  the
rights  will  not be exercisable and will trade with  the  Common
Stock.   In the event a person or group acquires 20% or  more  of
the Common Stock, or commences a tender offer for the outstanding
shares, the rights become exercisable.

        If  a  person or group acquires 20% or more of the Common
Stock, the rights will entitle a holder (other than the acquiring
person  or  group of acquiring persons) to buy shares  of  Common
Stock  having a market value of twice the exercise price  of  the
right.   If  the Company is subsequently involved in a merger  or
other  business combination with a holder of 20% or more  of  the
stock  of  the Company, the rights will entitle a holder  to  buy
shares  of  common  stock of the acquiring corporation  having  a
market value of twice the exercise price of the right.

        The  rights may be redeemed by the Company at  $.001  per
right at any time prior to the acquisition by any person or group
of  20%  or  more  of the Company's shares.  The rights  have  no
voting  power  and  will expire in June 2005, if  not  previously
redeemed.

11.    Property and Equipment

        Property and equipment is classified with other assets in
the  accompanying balance sheets and is stated at  cost,  net  of
accumulated  depreciation  and  amortization.   Depreciation   is
computed using the straight-line method over the estimated useful
lives   of   the  related  property  and  equipment  and   ranges
principally from three to seven years.
        Property and equipment, included in other assets  in  the
balance sheet, is comprised of the following:
                                        Year ended December 31,
                                            1996       1995
                                         (Dollars in thousands)

  Furniture, fixtures and 
     leasehold improvements             $2,475      $1,168
  Computers                               1,011       1,328
  Office equipment                          354         273
                                          3,840       2,769
  Less: Accumulated depreciation
        and amortization                  1,116       1,690
                                         $2,724      $1,079

12.    Stock Option and Restricted Stock Plans

        The Company's stock option plans provide for granting  of
stock  options  to  key  employees  and  non-employee  directors.
Options are granted at a price not less than the market price  on
the  date  of  grant.  Options that have been granted  under  the
plans will become exercisable in four annual installments of  25%
each  commencing on the second anniversary of the date  of  grant
and will expire ten years from the date of grant.

       The Company's restricted stock award plan provides for the
granting  of  up  to  100,000  shares  of  common  stock  to  key
employees,  subject  to restrictions as to continuous  employment
except  in  the case of death or normal retirement.  Restrictions
generally  expire  over a five-year period from  date  of  grant.
Compensation  expense is recognized over the restriction  period.
As of December 31, 1996, 26,000 shares were outstanding under the
plan.

        The  Financial Accounting Standards Board has issued SFAS
No.  123 "Accounting for Stock-Based Compensation."  SFAS No. 123
provides  an  option  either to continue  the  Company's  current
method  of accounting for stock-based compensation, or  to  adopt
the  fair  value  method of accounting for  stock-based  employee
compensation  plans, which would require the Company  to  expense
the fair value of its stock options at the date of grant over the
vesting period.

        The  Company  has elected to follow Accounting  Principle
Board  Opinion  ("APB") No. 25, "Accounting for Stock  Issued  to
Employees"  and  related interpretations in  accounting  for  its
stock  option  and  restricted  stock  plans.   Accordingly,   no
compensation  expense  has been recognized  for  its  stock-based
compensation  plans  other  than  for  restricted  stock  awards.
Although the Company elected to continue to follow APB No. 25, it
is required to provide additional disclosures including pro forma
net  income and earnings per share as if the Company adopted  the
new fair value method for recognition purposes in 1995.

<TABLE>

        A summary of stock option activity during the three years
ended December 31, 1996, follows:

<CAPTION>
                                  Available                  Weighted
                                  for Grant   Outstanding    Average of
                                                             Exercise Price
                                                             of Outstanding
                                                             Options
                                  --------    -----------    ------------- 
<S>                               <C>         <C>               <C>
Balance, December 31, 1993          92,500     307,500           $13.00
 Granted                           (59,500)     59,500            14.11
 Canceled                            1,000      (1,000)           13.88

Balance, December 31, 1994          34,000     366,000            13.18
 Authorized                        100,000
 Granted                          (114,000)    114,000            14.89
 Canceled                           21,000     (21,000)           13.07

Balance, December 31, 1995          41,000     459,000            13.61
 Authorized                        250,000
 Granted                          (162,500)    162,500            17.44
 Exercised                                      (3,925)           13.00
 Canceled                           59,250     (59,250)           15.03

Balance, December 31, 1996         187,750     558,325           $14.58

</TABLE>

<TABLE>
       The following table summarizes outstanding and exercisable
options as of  December 31, 1996.

<CAPTION>
               Options Outstanding                        Options Excersiable
              ---------------------                       --------------------- 
                              Weighted                            
Year   Range     Number       Average      Weighted       Number       Weighted
of     of        Outstanding  Remaining    Average        Exercisable  Average
Grant  Exercise               Contractual  Exercise                    Exercise
       Prices                 Life         Price                       Price

<S>    <C>        <C>         <C>          <C>           <C>          <C>           
1993   $13        254,825     7.00         $13.00        125,450     $13.00
1994   $13 - $15   57,500     7.45          14.11         14,375      14.11
1995   $13 - $16  109,000     8.49          14.92                     14.92
1996   $14 - $20  137,000     9.36          17.44                     17.44
                  558,325                                139,825
</TABLE>

       The pro forma net income and earnings per share determined
consistent with SFAS No. 123 is as follows:

 Pro forma (1)             1996      1995
 Net income               $5,974   $12,880
 Earnings per share         $.90     $1.68

(1) During the initial phase-in period of SFAS No. 123, the
effects of applying the standard for either recognizing
compensation cost or providing pro forma disclosures are not
likely to be representative of the effects on reported net income
for future years, based on the fact that options vest over
several years and additional awards generally are made each year.

        The weighted average fair value of options granted during
1996  and  1995 were $7.64 and $6.29, respectively.   The  Black-
Scholes option-pricing model was used with the following weighted
average assumptions: volatility of 24.3%, risk-free interest rate
of 6.81% in 1996 and 6.18% in 1995, and expected life of 7 years.

13.    Employee Benefits and Incentive Bonus Plans

        The  Company maintains a defined contribution  retirement
401(k)  &  Profit Sharing Plan.  Participation  in  the  plan  is
available  to all employees upon their satisfaction of  specified
eligibility  requirements.  Under the  401(k)  component  of  the
plan,  the  Company matches, on a dollar-for-dollar  basis,  each
employee's contribution up to 3% of eligible compensation.  Under
the  profit  sharing component of the plan, annual  contributions
may  be  authorized  by  the Board of Directors  based  upon  the
Company's performance for the relevant year.  The Company's costs
are  charged to income and amounted to $0.5 million in 1996, $0.4
million in 1995 and $0.3 million in 1994.

        The Company maintains an annual incentive bonus plan  for
officers  and  other  key  employees.   Bonuses  are  based  upon
predetermined   objectives  established   by   the   Compensation
Committee.  The Company's total incentive bonus plan expense  for
the  years  ended  December 31, 1996,  1995  and  1994  was  $0.6
million, $1.6 million and $1.2 million, respectively.

14.    Concentrations of Business

       Gross premiums written in the State of California amounted
to  approximately  $68,663,000, $76,396,000  and  $73,943,000  in
1996, 1995 and 1994, respectively.  In the State of New York, the
Company's  gross  premiums written were $11,975,000,  $20,141,000
and  $16,821,000 for the years ended December 31, 1996, 1995  and
1994, respectively.  Gross premiums written in any other state do
not exceed 10% of gross premiums written.

        The  Company's  architects' and  engineers'  professional
liability  insurance business is produced by Risk  Administration
and   Management  Company  ("RAMCO"),  an  unaffiliated  managing
general  agent.  For the years ended December 31, 1996, 1995  and
1994,  direct premiums written by RAMCO for the Company  amounted
to   approximately  $17,843,000,  $14,452,000  and   $15,910,000,
respectively.

15.    Quarterly Financial Information (unaudited)

<TABLE>

        Quarterly financial information (unaudited) for the  year
ended December 31, 1996 is presented below:

<CAPTION>
                                      Three months ended
                           March 31,   June 30,   Sept. 30,    Dec. 31,
                              1996       1996       1996        1996
               (Dollars and shares in thousands, except per share amounts)
<S>                        <C>        <C>         <C>         <C>
Gross premiums written     $34,919    $39,017     $44,807     $38,194
Net premiums written        21,213     22,585      28,165      22,644
Net premiums earned         21,951     21,180      22,292      22,506
Net investment income        4,159      3,921       4,065       4,308
Realized gains (losses) 
    on investments             802       (190)          4         587
Other income                   270        285         389         115
        Total revenues      27,182     25,196      26,750      27,516
Income (loss) before 
    income taxes             4,658       (294)      2,249        (397)
Net income                   3,505        337       1,986         335
Net income per share          $.53       $.05        $.30        $.05
Weighted average shares
    outstanding              6,648      6,656       6,660       6,661

</TABLE>
<TABLE>
       Quarterly financial information (unaudited) for  the  year
ended December 31, 1995 is presented below:

<CAPTION>
                                       Three months ended
                           March 31,  June 30,  Sept. 30,  Dec. 31,
                             1995       1995      1995      1995
               (Dollars and shares in thousands, except per share amounts)
<S>                        <C>        <C>        <C>       <C>
Gross premiums written     $35,209    $43,444    $43,747   $34,580
Net premiums written        17,872     25,703     25,086    21,514
Net premiums earned         17,697     21,019     20,324    24,359
Net investment income        3,666      4,133      4,030     4,010
Realized gains on investments  276      1,554        736     1,081
   Total revenues           21,639     26,706     25,090    29,450
Income before income taxes   3,738      4,614      2,670     5,862
Net income                   3,002      3,485      2,355     4,083
Net income per share          $.37       $.43       $.31      $.61
Weighted  average  shares 
     outstanding             8,148      8,148      7,648     6,648
                             
                               
  As  a  result of the Company's purchase of its Common Stock,
  the average number of shares outstanding varies from quarter
  to quarter, and the sum of the quarterly earnings per common
  share may not equal the total for the year.
</TABLE>
  
                                

                         At December 31, 1996


SCHEDULE  I  --  SUMMARY OF INVESTMENTS -- OTHER THAN  INVESTMENTS  IN
RELATED PARTIES


          COLUMN                          COLUMN    COLUMN    COLUMN
            A                               B         C         D
                                                            Amount at
                                                              which
                                                             shown in
                                                           the balance
    Type of Investment                     Cost     Value     sheet
                                             (Dollars in thousands)

Fixed  maturities:
  Bonds:
   United  States Government and 
     government agencies and  authorities $55,845   $56,584   $56,584
   States,  municipalities and political
     subdivisions                         141,686   146,335   146,335
  Foreign governments                       5,747     5,923     5,923
  Mortgage-backed securities               43,381    43,461    43,461
  Corporate bonds                          27,856    27,861    27,861
     Total fixed maturities               274,515   280,164   280,164
  Short-term investments                      307       307       307
     Total investments                   $274,822  $280,471  $280,471

      SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                            Balance Sheets

                                            December 31,
                                       1996            1995
                                      (Dollars in thousands)
Assets
Cash and cash equivalents                 $289           $469
Investment in subsidiaries             118,336        118,970
Income tax recoverable                     439            660
Deferred income taxes                    1,084             89
Other assets                               268            215
       Total assets                   $120,416       $120,403

Liabilities and stockholders' equity
Liabilities:
  Other liabilities                        655         $1,681
 Long-term debt                         24,625         25,500
 Total liabilities                      25,280         27,181
Stockholders' equity:
 Preferred stock, $.01 par value; 1,000,000 shares
   authorized; none issued or outstanding
 Common stock, $.01 par value; 15,000,000 shares authorized;
   8,148,050 shares issued                  81             81
 Additional paid-in capital             30,847         30,850
 Foreign currency translation 
   adjustment, net of tax                 (219)          (209)
 Net unrealized gains, net of tax        3,672          8,063
 Deferred compensation                   (257)          (193)
 Retained earnings                      86,271         80,108
 Treasury  stock,  at cost; 
   shares 1996: 1,487,075:
   1995: 1,500,000                     (25,259)       (25,478)
 Total stockholders' equity             95,136         93,222
   Total liabilities and 
    stockholders' equity              $120,416       $120,403

                         Statements of Income

                                        Year ended December 31,
                                      1996      1995     1994
                                        (Dollars in thousands)

Revenue
Net investment income                  $24      $28       $11
      Total revenues                    24       28        11

Expenses
Operating expenses                   1,921    3,282     2,563
Interest expense                     1,761      595
  Total expenses                     3,682    3,877     2,563
Loss before income taxes 
  and equity in undistributed
  income of subsidiaries            (3,658)  (3,849)   (2,552)
Income tax benefit                   1,268    1,323       720
Loss before equity in undistributed income
  of subsidiaries                   (2,390)  (2,526)   (1,832)
Equity in undistributed income 
  of subsidiaries                    8,553   15,451     8,063

Net income                          $6,163  $12,925    $6,231

<TABLE>
   SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                
                    Statements of Cash Flows

<CAPTION>
                                                Year ended December 31,
                                               1996      1995      1994
                                                (Dollars in thousands)
<S>                                          <C>        <C>        <C>
Operating activities
  Loss  before  equity  in undistributed 
   income  of  subsidiaries                  $(2,390)   $(2,526)   $(1,832) 
Adjustments to reconcile net income to 
   net cash provided by operating activities:
     Decrease (increase) in 
       income tax recoverable                              (487)       796
     Deferred income tax provision              (995)       261       (350)
     Amortization and depreciation                68         85         88
     Decrease (increase) in other 
       assets and liabilities                   (798)       825        (80)
     Net cash used by operating activities    (4,115)    (1,842)    (1,378)
Investing activities
 Capital expenditures                             (2)        (5)      (114)
 Net cash used by investing activities            (2)        (5)      (114)
Financing activities
 Dividends received                            4,726      2,000      1,250
 Proceeds from long-term debt                            25,500
 Common  stock acquired for treasury                    (25,478)
 Issuance of common stock                        217
 Deferred compensation                          (131)
       Principal payment on long term debt      (875)
 Net cash provided
by financing activities                        3,937      2,022      1,250
Increase (decrease) in cash and cash equivalents(180)       175       (242)
Cash and cash equivalents at beginning of year   469        294        536
Cash and cash equivalents at end of year        $289       $469       $294

</TABLE>

<TABLE>
                             Year ended December 31,
                SCHEDULE III--SUPPLEMENTAL INSURANCE INFORMATION

<CAPTION>

  COLUMN A       COLUMN B   COLUMN C   COLUMN D   COLUMN E   COLUMN F   COLUMN G   COLUMN H   COLUMN I   COLUMN J
                            Future
                            Policy                Other
                            Benefits,             Policy                           Benefits,  Underwriting,
                 Deferred   Losses,               Claims                           Claims     Acquisition,
                 Policy     Claims                and                    Net       Losses &   and
 Year and        Acquisition and Loss  Unearned   Benefits   Premium   Investment  Settlement Insurance   Premiums
 Segment         Costs      Expenses   Premiums   Payable    Revenue   Income      Expenses   Expense     Written
--------        ---------   --------   --------   --------   -------    --------   ---------  ---------   --------
                             (Dollars in thousands)
<S>               <C>       <C>        <C>        <C>       <C>        <C>         <C>        <C>         <C>    
1996
Property/Casualty $12,415   $309,259   $68,683     $0       $87,929    $16,453     $57,700     $40,967     $94,607
 Total            $12,415   $309,259   $68,683     $0       $87,929    $16,453     $57,700     $40,967     $94,607

1995
Property/Casualty $12,182   $308,886   $63,472     $0       $83,399    $15,839     $50,816     $34,590     $90,175
  Total           $12,182   $308,886   $63,472     $0       $83,399    $15,839     $50,816     $34,590     $90,175

1994
Property/Casualty  $9,794   $315,691   $55,979     $0       $61,605    $13,099     $40,537     $25,721     $69,187
  Total            $9,794   $315,691   $55,979     $0       $61,605    $13,099     $40,537     $25,721     $69,187

</TABLE>

<TABLE>
                        Year ended December 31,
                                   
                                   
                       SCHEDULE IV--REINSURANCE
                                   
<CAPTION>

COLUMN A               COLUMN B   COLUMN C   COLUMN D   COLUMN E   COLUMN F
                                                                   Percentage
                                             Assumed               of Amount
                                  Ceded to    from                 Assumed
                       Direct     Other       Other      Net         to
                       Amount     Companies  Companies  Amount       Net
                                  (Dollars in thousands)
<S>                    <C>        <C>         <C>        <C>        <C>          

1996
Premiums:
 Property/Casualty
   Insurance           $154,547    $62,330     $2,390     $94,607      2.5%
      Total Premiums   $154,547    $62,330     $2,390     $94,607      2.5%


1995
Premiums:
 Property/Casualty
   Insurance           $154,904    $66,805     $2,076     $90,175      2.3%
      Total Premiums   $154,904    $66,805     $2,076     $90,175      2.3%


1994
Premiums:
 Property/Casualty
   Insurance           $135,513    $69,964     $3,638     $69,187      5.3%
      Total Premiums   $135,513    $69,964     $3,638     $69,187      5.3%

</TABLE>

<TABLE>
                             Year ended December 31,

       SCHEDULE VI--SUPPLEMENTAL INFORMATION CONCERNING PROPERTY/CASUALTY
                                  INSURANCE OPERATIONS

<CAPTION>
COLUMN A               COLUMN B  COLUMN C    COLUMN D  COLUMN E  COLUMN F  COLUMN G   COLUMN H    COLUMN I     COLUMN J   COLUMN K
                                Reserves for                                      Claims & Claim  Amortization
                                Unpaid     Discount,                          Adjustment Expenses  of
                     Deferred   Claims     if any,                           Incurred Related to   Deferred  Paid Claims
Affiliation          Policy     and Claim  Deducted                      Net     (1)      (2)      Policy    and Claim
with               Acquisition  Adjustment in       Unearned Earned  Investment Current   Prior   Acquisition Adjustment Premiums
Company             Costs       Expenses   Column C Premiums Premiums Income    Year      Years   Costs       Expenses   Written

                                 (Dollars in thousands)
<S>                <C>        <C>        <C>       <C>       <C>       <C>       <C>       <C>     <C>        <C>        <C>
1996
Consolidated Property/
  Casualty Entities $12,415   $309,259    $-0-     $68,683   $87,929   $16,453   $53,402   $4,298  $30,062    $42,304    $94,607

1995
Consolidated Property/
  Casualty Entities $12,182   $308,886    $-0-     $63,472   $83,399   $15,839   $50,424     $392  $26,706    $40,707    $90,175

1994
Consolidated Property/
  Casualty Entities  $9,794   $315,691    $-0-     $55,979   $61,605   $13,099   $49,047  $(8,510) $18,085    $36,612    $69,187

</TABLE>