-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, 1997

                      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 3, 1998, the aggregate market value of the voting
stock held by non-affiliates of the Registrant was $101,191,379.

  As  of  March 3, 1998, the number of shares outstanding of  the
Registrant's  Common  Stock,  par  value  $.01  per  share,   was
6,696,381.

              DOCUMENTS INCORPORATED BY REFERENCE
  Proxy  statement for the Annual Meeting of Shareholders  to  be
held on May 12, 1998, 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     24
Item 8.   Financial Statements and Supplementary Data         30
Item 9.   Changes In and Disagreements with Accountants on
            Accounting and Financial Disclosure               30

Part III                                                      31

Part IV

Item 14.  Exhibits, Financial Statement Schedules, and
            Reports on Form 8-K                               31
                                 PART I

              ITEM 1.  BUSINESS.

      (a)  General Development of Business.

         Gryphon   Holdings  Inc.  ("Gryphon"  or  the  "Company")   was
incorporated  under  the laws of the State of  Delaware  in  1983.   The
Company  is a holding company that operates through its main subsidiary,
Gryphon  Insurance Group ("GIG"), as a specialty property  and  casualty
underwriting organization. The Company's wholly owned insurance  company
subsidiaries    are    Associated   International   Insurance    Company
("Associated") and Calvert Insurance Company ("Calvert"). Associated,  a
California-domiciled insurance corporation, is an  admitted  carrier  in
California and an approved excess and surplus lines insurer in 48  other
states.   Calvert,  a Pennsylvania-domiciled insurance  corporation,  is
admitted in all states, the District of Columbia and Canada and  all  of
its provinces.

        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.

        In  February  1998,  the Company agreed  to  acquire  The  First
Reinsurance Company of Hartford ("FRH") and certain affiliated  entities
from  Dearborn  Risk  Management, Inc. for a  combination  of  cash  and
preferred stock valued at $43.6 million, plus certain other performance-
driven contingent consideration.

        The  purchase consideration of $43.6 million consists  of  $31.9
million  of cash and $11.7 million fair value of a new issue of  Gryphon
perpetual convertible preferred stock.  The preferred stock, which  will
have  a  face amount of $14.4 million, will be convertible into  643,672
shares  of the Company's common stock, reflecting a conversion price  of
$22.44  per  share.  No cash dividends will be paid or owed  during  the
first  four and one-half years; a cash dividend at the rate of  4.0%  of
the  face  amount will be paid thereafter.  The preferred shares,  which
are  non-callable  for three years, have no sinking  fund  or  mandatory
redemption  features.   In  connection  with  the  transaction,  Gryphon
intends  to  enter into a $55 million credit facility with  a  group  of
financial  institutions, the proceeds of which will be used to  pay  the
cash   portion  of  the  purchase  price  and  to  repay  existing  bank
borrowings.

        The  GAAP shareholders' equity of FRH at December 31,  1997  was
approximately  $35  million.  Its statutory surplus  at  that  date  was
approximately  $31  million.  FRH is currently rated A-  (excellent)  by
A.M. Best.

        The  transaction, which is subject only to regulatory  approvals
and  other customary conditions, is expected to close during the  second
quarter of 1998.

Business Plan

        Since  January 1, 1996, 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  the  effectiveness 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  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  GIG,  a  new  management  and   service
subsidiary.  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 most 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  specialty 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 Specialty Lines.  The Company focuses on specialty
     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 that 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  DIC  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 coverage.  The Company
     also  uses IRAS on an ongoing basis to monitor aggregate earthquake
     exposure.

                  Emphasis on Relationships with Producers.  The Company
     utilizes  select wholesale producers, including general agents  and
     excess  and  surplus  lines  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)
                            Year Ended December 31,
<CAPTION>

                    1997             1996            1995             1994             1993
              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   $17,704  12.1%   $17,843  11.4%   $14,452  9.2%    $15,910  11.4%   $16,677   14.9%
Casualty       28,549  19.6     29,234  18.6     26,902  17.2    21,286   15.3     20,003   17.9
Commercial
  Automobile   18,727  12.8     18,337  11.7     18,580  11.8    14,258   10.3      3,201    2.9
Difference in
  Conditions   36,572  25.0     38,500  24.5     45,213  28.8    43,259   31.1     34,035   30.5
Other Property 15,962  10.9     24,192  15.4     27,601  17.6    18,424   13.2     13,159   11.8
Specialty Lines28,612  19.6     28,831  18.4     24,232  15.4    26,014   18.7     24,588   22.0
Total        $146,126 100.0%  $156,937 100.0%  $156,980 100.0  $139,151  100.0%  $111,663  100.0%
</TABLE>
<TABLE>
                             Net Premiums Written by Principal
                                     Lines of Business
                                  (Dollars in thousands)
                                  Year Ended December 31,
<CAPTION>
                    1997             1996             1995             1994             1993
              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   $13,096  13.1%   $12,884  13.6%   $10,576  11.7%   $11,381  16.5%   $12,302  19.8%
Casualty       21,005  20.9     20,775  22.0     17,266  19.2     14,613  21.1     12,861  20.7
Commercial
  Automobile   14,904  14.9     13,947  14.7     13,111  14.5      6,022   8.7      2,341   3.7
Difference in
  Conditions   17,639  17.6     20,238  21.4     22,497  25.0     17,247  24.9     18,008  29.0
Other Property 15,102  15.0      9,843  10.4     10,454  11.6      4,916   7.1      3,724   6.0
Specialty Lines18,588  18.5     16,920  17.9     16,271  18.0     15,008  21.7     12,931  20.8
Total        $100,334 100.0%   $94,607 100.0%   $90,175 100.0%   $69,187 100.0%   $62,167 100.0%
</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 50.5%  and  49.0%  of  the  A&E
insurance  was  written for firms located in California  for  the
years ended December 31, 1997 and 1996, respectively.

        The  Company  has generated its A&E business  exclusively
through  Risk  Administration & Management Company ("RAMCO")  for
over 10 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  monoline  fire  and  all-risk  business
packages,  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, and utilities coverage including transmission lines.

        Specialty  Lines.   Other  specialty  insurance  products
provided  by  the  Company  include liquor  liability  insurance,
animal  mortality 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.

       Gross premiums written in the State of California amounted
to  approximately 40.9% and 43.7% of the aggregate gross premiums
written by the Company for the years ended December 31, 1997  and
1996,  respectively.  Gross premiums written in any  other  state
did not exceed 10% of gross premiums written during 1997 or 1996.

       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 39.9% and 35.6% of the Company's gross premiums for
the  years  ended December 31, 1997 and 1996, respectively,  were
produced 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,   1997,  the  Company's   thirty-two
underwriters   had  an  average  of  18  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 eleven claims examiners in  Woodland
Hills,  California  and seven 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 incurred  but
not  reported reserves ("IBNR").  Case reserves are estimates  of
losses  and  LAE for reported claims and are established  by  the
Company's  claims departments. IBNR reserves, include a provision
for  losses that have occurred but have not been reported to  the
Company,  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 IBNR  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 adequacy 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,
1997, the cumulative deficiency of $6,793,000 results principally
from  additional loss and LAE development, related to a  pre-1985
book  of  Casualty  business  and certain  pre-1987  reinsurance-
assumed business, both previously discontinued.

        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,
                       1987     1988     1989     1990     1991     1992     1993     1994     1995     1996     1997
<S>                    <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Gross liability for
 unpaid losses and LAE $109,557 $115,796 $151,952 $163,818 $201,057 $231,415 $275,660 $315,691 $308,886 $309,259 $328,911
Deduct: reinsurance
 recoverable on unpaid
 losses and LAE          58,396   57,097   83,574   77,334   87,927  104,352  133,783  169,889  152,975  137,952  140,810
Net liability for unpaid
 losses and LAE         $51,161  $58,699  $68,378  $86,484 $113,130 $127,063 $141,877 $145,802 $155,911 $171,307 $188,101
Liability re-estimated as of:
One year later           49,839   61,040   67,584   83,630  111,197  125,372  133,367  146,194  160,209  178,100
Two years later          52,808   58,037   66,774   82,672  110,056  118,354  128,675  143,131  167,572
Three years later        51,360   57,297   66,244   82,271  102,436  114,577  123,942  151,120
Four years later         51,188   56,583   65,745   76,339   98,812  110,989  131,942
Five years later         52,219   55,042   61,067   72,766   96,907  118,049
Six years later          50,122   51,921   58,220   71,686  103,176
Seven years later        48,719   48,290   58,509   77,009
Eight years later        45,261   50,370   65,004
Nine years later         48,154   57,036
Ten years later          54,879

Cumulative redundancy
    (deficiency)        $(3,718) $ 1,663  $ 3,374  $ 9,475  $ 9,954   $9,014 $  9,935 $(5,318) $(11,661)$(6,793) $      0
Cumulative liability paid as of:
One year later          $ 9,321  $ 8,854  $ 8,253  $ 2,692  $16,014  $16,692 $ 24,152 $28,911  $ 30,784 $40,289
Two years later          16,078   13,539   11,135   12,648   27,223   34,302   42,402  47,380    59,628
Three years later        20,020   15,143   17,906   20,788   39,657   45,587   53,752  65,835
Four years later         20,936   18,221   21,485   28,381   46,314   52,959   64,708
Five years later         23,453   19,748   26,127   33,633   51,038   60,471
Six years later          23,847   22,641   29,941   36,714   57,125
Seven years later        25,571   25,814   32,322   42,079
Eight years later        28,348   27,552   37,249
Nine years later         29,682   32,332
Ten years later          34,084
</TABLE>
          Prior to 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 exposure to 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 by 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 add 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 or reserved for 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.   The Company remainsliable 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; an
unfavorable resolution could have a material effect on the Company's
financial statements.

         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 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, 1997, as
computed in accordance with GAAP.

<TABLE>
       Reconciliation of Liability for Loss and Loss Adjustment Expenses
                           (Dollars in thousands)
<CAPTION>

                                                 Year ended December 31,
                                             1997         1996          1995
<S>                                          <C>          <C>           <C>
Gross reserves for losses
  and LAE at the beginning of the year       $ 309,259    $ 308,886     $ 315,691
Ceded reserves for losses and LAE at
 the beginning of the year                     137,952      152,975       169,889
Net reserves for losses and LAE at
  the beginning of the year                    171,307      155,911       145,802
Add: Provision for losses and LAE
  for claims occurring in:
        The current year                        64,222       53,402        50,424
        Prior years                              6,793        4,298           392
           Total net incurred losses and LAE    71,015       57,700        50,816
Less: Losses and LAE payments for claims occurring in:
        The current year                        13,932       11,520        11,796
        Prior years                             40,289       30,784        28,911
           Total net paid losses and LAE        54,221       42,304        40,707
Reserves for net losses and LAE at end of year 188,101      171,307       155,911
Reinsurance recoverable on unpaid losses       140,810      137,952       152,975
Reserves for gross losses
  and LAE at end of year                     $ 328,911    $ 309,259     $ 308,886
</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,   1997   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                    1997     1996        1995
<S>                                                   <C>      <C>         <C>
Gross reserves for losses and LAE
  at the beginning of the year                        $12,981  $   11,938  $   14,200
Ceded reserves for losses and LAE
  at the beginning of the year                          4,177       3,958       5,100
Net reserves for losses and LAE
  at the beginning of the year                          8,804       7,980       9,100
Add: Provision for losses and LAE
  for claims occurring in prior years                    (845)      1,598           3
Less: Losses and LAE payments
  for claims occurring in prior years                   1,159         774       1,123
Reserves for net losses and LAE at end of year          6,800       8,804       7,980
Reinsurance recoverable on unpaid losses                5,200       4,177       3,958
Reserves for gross losses and LAE at end of year      $12,000     $12,981     $11,938


                                                        Year ended December 31,
Asbestos-related Liability                              1997        1996       1995

Gross reserves for losses and LAE
  at the beginning of the year                          $4,121      $1,700     $4,050
Ceded reserves for losses and LAE
  at the beginning of the year                           3,110       1,060      3,350
Net reserves for losses and LAE
  at the beginning of the year                           1,011         640        700
Add: Provision for losses and LAE
  for claims occurring in prior years                      847         583        612
Less: Losses and LAE payments for
  claims occurring in prior years                          143         212        672
Reserves for net losses and LAE at end of year           1,715       1,011        640
Reinsurance recoverable on unpaid losses                 2,500       3,110      1,060
Reserves for gross losses and LAE at end of year        $4,215      $4,121     $1,700
</TABLE>

         At   December   31,   1997,  the  reserve  for   unpaid   environmental
impairment   losses   and   related   LAE  was   approximately   $6.8   million,
net   of   reinsurance   recoverables   deemed   probable   of   collection   by
the   Company   of   approximately   $5.2   million.    The   range   of   gross
reserves   for   unpaid   environmental   impairment   losses   and    LAE    is
estimated   to   be   $12.0  million  to  $20.0  million  and   the   range   of
reserves,      net      of     reinsurance     recoverable,      for      unpaid
environmental    impairment   losses   and    LAE    is    estimated    to    be
approximately $6.8 million to $9.5 million.

          At   December   31,   1997,   the   reserve   for   unpaid   asbestos-
related    losses    and    related   LAE   was    $1.7    million,    net    of
reinsurance    recoverables   deemed   probable    of    collection    by    the
Company    of    approximately   $2.5   million.     The    range    of    gross
reserves   for   unpaid   asbestos-related   losses   and   LAE   is   estimated
to   be   $4.2  million  to  $9.4  million  and  the  range  of  reserves,   net
of    reinsurance    recoverable,    for    unpaid    asbestos-related    losses
and   LAE   is   estimated   to   be  approximately   $1.7   million   to   $3.3
million.

         At   December  31,  1997,  reserves  for  IBNR  losses  and   LAE   for
environmental    impairment   and   asbestos-related   claims,    included    in
the    net    reserves   above,   were   $3.5   million   and   $1.4    million,
respectively.

         The   range   of   reserves,  net  of  reinsurance   recoverable,   for
unpaid    environmental    impairment   and    asbestos-related    losses    and
LAE    is    estimated   to   be   approximately   $8.5   million    to    $12.8
million.

         At   December  31,  1997  and  1996,  the  Company  had  218  and   232
environmental    impairment    liability    claims,    respectively,    covering
146    and   154   policyholders,   respectively.    At   December   31,    1997
and     1996,    the    Company    had    72    and    66    asbestos    claims,
respectively, covering 57 and 53 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,   1997,  the  portfolio  had  an  estimated   effective
modified duration of approximately 4.8 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.

          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.

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

                            Investment Results
                          (Dollars in thousands)
<CAPTION>
                                                  Year ended December 31,
                                              1997         1996        1995
<S>                                           <C>          <C>         <C>
Average invested assets                       $302,628     $287,210    $263,674
Net investment income                           17,061       16,453      15,839
Realized gains on investments                    6,188        1,203       3,647
Pre-tax yield on average assets (excluding
      realized gains on investments)               5.6%         5.7%        6.0%
</TABLE>

           The     following    table    summarizes    the    Company's    fixed
maturity    portfolio,    excluding   short-term    investments,    by    sector
as of December 31, 1997.
<TABLE>
                     Fixed Maturity Portfolio by Sector
                         (Dollars in thousands)
<CAPTION>
                                                          December 31, 1997
                                                Amortized    Percent of   Fair
                                                  Cost          Total    Value
<S>                                            <C>           <C>         <C>
U.S. Government and government agencies         $78,623      28.6%       $  79,268
Debt securities issued by foreign governments     5,857       2.2            5,981
States and political subdivisions               108,194      39.4          112,516
Corporate securities                             34,344      12.5           34,846
Mortgage-backed securities                       47,488      17.3           47,942
Total                                          $274,506     100.0%        $280,553
</TABLE>

           The     following    table    summarizes    the    Company's    fixed
maturity portfolio by rating as of December 31, 1997.

<TABLE>
                      Fixed Maturity Portfolio by Rating (1)
                             (Dollars in thousands)
<CAPTION>
                                                       December 31, 1997

                                                      Fair      Percent of
                                                     Value         Total
<S>                                                  <C>        <C>
U.S. Government and government agencies              $  95,579    34.1%
Aaa                                                    106,792    38.1
Aa                                                      35,227    12.4
A                                                       26,586     9.5
Baa                                                     16,369     5.9
Total                                                 $280,553   100.0%
</TABLE>

(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.


           The     following    table    summarizes    the    Company's    fixed
maturity   portfolio   by  years  to  stated  maturity  as   of   December   31,
1997.
<TABLE>
                              (Dollars in thousands)
<CAPTION>
                                                   December 31, 1997
                                                 Fair         Percent of
                                                Value            Total
<S>                                             <C>             <C>
1 year or less                                  $    286          0.1%
Over 1 year through 5                             66,567         23.7
Over 5 years through 10 years                     97,677         34.8
Over 10 years through 20 years                    27,008          9.6
Over 20 years                                     41,073         14.7
Mortgage-backed securities                        47,942         17.1
Total                                           $280,553        100.0%

</TABLE>

          At    December    31,   1997,   investments   in   Federal    National
Mortgage     Association    securities    aggregating    approximately     $11.8
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,   1997,   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
1997,    1996    and    1995,   the   Company   ceded   premiums    of     $45.8
million,    $62.3    million    and   $66.8   million,    respectively,    which
constituted    31.3%,    39.7%,    and    42.6%    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,   1998,  The   Company   maintains   a   five-
layer    catastrophe   reinsurance   program   covering   its   DIC    writings.
The    catastrophe   reinsurance   program   covers   95%    of    the    annual
aggregate    amount    of   property   claims   up   to   $143    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   three-layer   per-event   reinsurance   program    that
provides   for   indemnity   of   $24.5   million   in   excess   of    a    net
retention    of    $500,000    per    risk.     In    addition    to    per-risk
coverage,   the   program   provides   casualty   clash   &   contingency    and
certain    non-DIC   property   catastrophe   protection   on   an    occurrence
basis,   subject   to   the   same   net   retention.   Effective   December 31,
1997,  the   Company   also  maintains  a  50%  quota   share   protection   to
limit its Commercial Auto exposure to $250,000 per policy.

         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    encourages
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.

Year 2000 Compliance

          Recently,    there    has   been   significant    public    discussion
regarding    the    potential    inability    of    computer    programs     and
systems   to   adequately   store   and  process   data   after   December   31,
1999,    due   to   the   inability   of   such   programs   and   systems    to
identify correctly dates subsequent to December 31, 1999.

          The    Company   has   completed   an   assessment   of    its    core
financial   and   operational   software   systems   and   believes   it will
be    in   compliance   with   the   requirements   necessary   to   avoid   the
foregoing    "Year    2000"   problem.    The   Company    will    test    these
systems   to   confirm   their   compliance.    If   for   any   reason    these
systems   are   not  in  compliance  by  December  31,  1999,  the   Year   2000
issue   could   have   a   material  impact  on   the   Company's   ability   to
meet    financial    and   reporting   requirements   and   to    support    its
insurance operations.

         The   Company   is   in   the   process   of   initiating   discussions
with     significant    suppliers,    business    partners,    customers     and
other   third   parties   to  determine  the  extent  to   which   the   Company
may   be   vulnerable  to  the  failure  of  these  parties   to   address   and
correct   their   own   Year   2000  issues.    However,   there   can   be   no
guarantee   that   the   systems   of   other   companies   that   support   the
Company's   operations   will   be  timely   converted   or   that   a   failure
by   these   companies   to  correct  their  Year  2000   problems   would   not
have a material adverse effect on the Company.

          The   Company   is   currently   assessing   what   changes   may   be
appropriate   in   insurance   coverages   it   currently   markets   in   light
of    the   Year   2000   problem.    In   this   connection,   management    is
consulting    with    Insurance    Services   Offices,    Inc.    ("ISO")    and
others     regarding    possible    modifications    and/or    exclusions     to
policy   forms   that   could   be  implemented  in   connection   with   future
insurance   policies   that   will   extend   coverage   beyond   December   31,
1999.

         The   costs   incurred   to   date  by  the   Company   in   connection
with   its   Year   2000   compliance  initiative   have   been   nominal,   and
the   Company   currently   has  no  indication  that   the   costs   associated
with    any    remaining    remedial   actions   in   connection    with    this
matter will be material.

Employees

           As     of     December    31,    1997,    the    Company     employed
approximately   141   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 good.

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   has   adopted   a   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.    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   31,1997  and  1996,   as   furnished   by   the
NASDAQ National Market:

                              1997                    1996
                         High      Low        High      Low
First Quarter          $15 1/4   $13         $20 1/4   $16 7/8
Second Quarter           15 5/8    13 7/8      19 1/2    14 5/8
Third Quarter            17 3/4    15 1/4      15 1/4    12
Fourth Quarter           17 3/4    15 7/8      16        12 1/2

          As    of   February   10,   1998,   there   were   approximately    44
record    holders    of   the   Common   Stock,   which   does    not    include
beneficial   owners   of   shares  registered  in  nominee   or   street   name.
The   Company   has   not  paid  any  cash  dividends  on   its   Common   Stock
since   its   initial   public   offering  (the   "Offering")   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,   1997   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,
                                 1997       1996       1995       1994       1993
                          (Dollars and shares in thousands, except per-share amounts)
<S>                              <C>        <C>        <C>        <C>        <C>
Statement of Operations Data:
  Gross premiums written         $146,126   $156,937   $156,980   $139,151   $111,663
  Net premiums written           $100,334   $ 94,607   $ 90,175   $ 69,187   $ 62,167

  Net premiums earned            $104,246   $ 87,929   $ 83,399   $ 61,605   $ 57,933
  Net investment income            17,061     16,453     15,839     13,099     12,216
  Realized gains
     (losses) on investments        6,188      1,203      3,647     (2,046)     5,163
  Other income                        979      1,059
       Total revenues             128,474    106,644    102,885     72,658     75,312

  Losses and loss
      adjustment expenses          71,015     57,700     50,816     40,537     37,065
  Underwriting, acquisition,
      and insurance expenses       45,089     40,967     34,590     25,721     18,481
  Proposition 103 settlement expense                                            2,000 (1)
  Bonuses paid by
      Willis Corroon Group plc                                                  2,670 (2)
  Interest expenses                 1,607      1,761        595                   172
  Total expenses                  117,711    100,428     86,001     66,258     60,388

  Income before income taxes       10,763      6,216     16,884      6,400     14,924
  Provision for income taxes        1,969         53      3,959        169      2,772 (3)
  Net income                      $ 8,794    $ 6,163    $12,925    $ 6,231    $12,152

  Basic earnings per share(5)     $  1.32    $  0.93    $  1.69    $  0.77    $  1.62
  Weighted average
      shares outstanding            6,680      6,656      7,648      8,132      7,485

GAAP Ratios:
  Loss and loss adjustment
       expense ratio                 68.1 %     65.6 %     60.9 %     65.8 %     64.0 %
  Underwriting expense ratio,
       excluding Proposition 103
       settlement                    43.3       46.6       41.5       41.8       31.9
  Combined ratio, excluding
       Proposition 103 settlement   111.4      112.2      102.4      107.6       95.9
  Proposition 103 settlement                                                      3.5 (1)
           Combined ratio           111.4 %    112.2 %    102.4 %    107.6 %     99.4 %

Selected Statutory Data:
  Statutory net income            $11,013     $7,298    $13,876     $5,296     $7,459 (1)(4)
  Statutory surplus
      (at end of period)           87,705     82,566     83,433     72,220     69,161
  Ratio of net premiums
      written to surplus            1.1:1      1.1:1      1.1:1      1.0:1      0.9:1

Balance Sheet Data (at end of period):
  Investments, including cash
      and cash equivalents       $313,082   $303,869   $288,602   $245,242   $237,442
  Total assets                    538,985    526,984    530,989    492,717    432,080
  Loss and loss adjustment
      expense reserves            328,911    309,259    308,886    315,691    275,660
  Long-term debt                   21,125     24,625     25,500
  Stockholders' equity            104,509     95,136     93,222     93,773     91,489
  Book value per share              15.63      14.28      14.02      11.51      11.25


(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 Group plc
  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)        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%.

(5)        Prior period earnings per share were not affected by the
  adoption of Statement of Financial Accounting Standards No. 128.


       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, 1997 Compared with Year Ended  December
31, 1996

        Gross  Premiums  Written.  Gross  premiums  written  were
$146.1 million for the year ended December 31, 1997, compared  to
$156.9 million for the year ended December 31, 1996. In 1997, the
Company's  gross premiums written decreased due to business  lost
as  a result of competition for premiums, which has affected  the
following  lines of business: an $8.2 million decrease  in  Other
Property,  primarily in the Company's national accounts business;
a  $1.9  million  decrease  in  Difference  in  Conditions  (DIC)
premiums;  a $0.7 million decrease in Casualty premiums;  a  $0.2
million  decrease in Specialty Lines; and a $0.1 million decrease
in Architects' & Engineers' liability.

        Net  Premiums.   Net premiums written increased  6.1%  to
$100.3  million for the year ended December 31, 1997  from  $94.6
million  for  the  year  ended December 31,  1996.  Net  premiums
written  were  favorably affected in 1997 as a result  of  a  new
reinsurance program, which reduced reinsurance premiums ceded  by
increasing net retentions to $500,000 per risk in most  lines  of
business.  The benefit  of the reduced reinsurance premiums ceded
was offset by the effect of a decrease in gross written premiums,
which  was  caused by the competitive conditions in the  property
and casualty marketplace.

        Net  premiums earned increased by 18.6% to $104.2 million
in  the  year ended December 31, 1997 from $87.9 million  in  the
year  ended December 31, 1996, resulting from reduced reinsurance
premiums ceded due to increased net retentions from the Company's
new reinsurance program.

        Net  Investment Income.  Net investment income  increased
3.7%  to $17.1 million for the year ended December 31, 1997  from
$16.5 million for the year ended December 31, 1996. In 1997,  net
investment income was affected by additional funds available  for
investment,  but  also by lower average interest  rates  compared
with 1996.

        Net  Realized Gains on Investments.  For the  year  ended
December  31,  1997,  the Company realized a  net  gain  of  $6.2
million,  compared with a net gain of $1.2 million for  the  year
ended December 31,  1996.  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, 1997,  the
Company recorded $1.0 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  23.1%  to  $71.0  million  for  the  year   ended
December  31,  1997  from  $57.7  million  for  the  year   ended
December 31, 1996, due to increased earned premium exposures  and
reserve increases.  In 1997, the Company strengthened reserves by
$6.8 million, related to a pre-1985 book of Casualty business and
certain  pre-1987 reinsurance-assumed business,  both  previously
discontinued.   In 1996, the Company strengthened  reserves  with
respect to a truck leasing program ($5.3 million) and a used  car
dealers program ($2.2 million), each discontinued during 1995, as
well  as  environmental impairment and asbestos-related exposures
($2.2 million) on business written prior to 1985.  Losses and LAE
were 68.1% of net premiums earned for the year ended December 31,
1997, compared with 65.6% for the year ended December 31, 1996.

         Underwriting,   Acquisition,  and  Insurance   Expenses.
Underwriting,  acquisition, and insurance expenses  increased  by
10.1% to $45.1 million for the year ended December 31, 1997  from
$41.0  million for the year ended December 31, 1996.  The expense
growth was primarily attributable to increased acquisition costs,
resulting from a change in the mix of business written; additions
to staff; and new facilities for the operating companies.

        Interest Expense.  Interest expense was $1.6 million  for
the  year ended December 31, 1997, compared with $1.8 million for
the year ended December 31, 1996.  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.

       Income Taxes.  Income taxes were $2.0 million for the year
ended  December 31, 1997, compared with  $53 thousand  for  1996.
In  1997,  income  taxes were reduced by  the  tax  benefit  from
additional reserve strengthening, increased underwriting expenses
and  tax-exempt investment income.  The tax benefit was partially
offset  by  additional income taxes resulting from  net  realized
gains  on  the sale of investments.  In 1996, income  taxes  were
reduced by the tax benefit from additional reserve strengthening,
increased underwriting expenses and tax-exempt investment income.

        Net  Income.   Net income was $8.8 million for  the  year
ended December 31, 1997, compared with $6.2 million for the  year
ended December 31, 1996.

        Weighted  Average  Shares  Outstanding.   Average  shares
outstanding  were 6.7 million in 1997, compared with 6.7  million
in 1996.  In accordance with Financial Accounting Standards Board
Statement No. 128, "Earnings Per Share", implemented in 1997, the
Company's  basic  earnings per share are calculated  by  dividing
income  available to common stockholders by the weighted  average
number of common shares outstanding during the period.


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.

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 $8.1 million in 1997, $24.7 million  in  1996,
and $22.0 million in 1995.

       At December 31, 1997, the Company maintained cash and cash
equivalents of $32.3 million to meet current 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, 1997 were held by its subsidiaries.

       Reinsurance  recoverables on unpaid  losses  were  $140.8
million  at December 31, 1997 and $138.0 million at December  31,
1996.   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.

       Net cash provided by operating activities declined to $8.1
million  for the year ended December 31, 1997, from $24.7 million
for  the  year  ended  December 31, 1996,  primarily  due  to  an
increase in gross claims payments during the year.  Such payments
will be recoverable from reinsurers in subsequent periods.

        In  September  1995,  the Company purchased  1.5  million
shares  of its Common Stock from Willis Corroon Group plc  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 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
1997,  1996  and 1995, the aggregate dividends paid  by  the  two
subsidiaries  were $6.7 million, $4.7 million and  $2.0  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.

        Recently,  there  has been significant public  discussion
regarding  the  potential  inability  of  computer  programs  and
systems  to adequately store and process data after December  31,
1999,  due  to  the  inability of such programs  and  systems  to
identify correctly dates subsequent to December 31, 1999.

        The  Company  has  completed an assessment  of  its  core
financial and operational software systems and believes  it will
be  in  compliance with the requirements necessary to  avoid  the
foregoing  "Year  2000"  problem.  The Company  will  test  these
systems  to  confirm their compliance.  If for any  reason  these
systems are not in compliance by December 31, 1999, the Year 2000
issue  could have a material impact on the Company's  ability  to
meet  financial  and reporting requirements and  to  support  its
insurance operations.

        The  Company is in the process of initiating  discussions
with  significant  suppliers, business  partners,  customers  and
other  third parties to determine the extent to which the Company
may  be vulnerable to the failure of these parties to address and
correct  their own Year 2000 issues.  However, there  can  be  no
guarantee  that the systems of other companies that  support  the
Company's  operations will be timely converted or that a  failure
by  these companies to correct their Year 2000 problems would not
have a material adverse effect on the Company.

        The  Company is currently assessing what changes  may  be
appropriate in insurance coverages it currently markets in  light
of  the  Year  2000 problem.  In this connection,  management  is
consulting  with ISO and others regarding possible  modifications
and/or  exclusions to policy forms that could be  implemented  in
connection  with  future  insurance  policies  that  will  extend
coverage beyond December 31, 1999.

        The  costs  incurred to date by the Company in connection
with  its Year 2000 compliance initiative have been nominal,  and
the Company currently has no indication that the costs associated
with  any  remaining  remedial actions in  connection  with  this
matter will be material.

        In February 1998, the Company agreed to acquire The First
Reinsurance  Company of Hartford ("FRH") and  certain  affiliated
entities from Dearborn Risk Management, Inc. for a combination of
cash  and  preferred stock valued at $43.6 million, plus  certain
other performance-driven contingent consideration.

        The  purchase consideration of $43.6 million consists  of
$31.9 million of cash and $11.7 million fair value of a new issue
of  Gryphon perpetual convertible preferred stock.  The preferred
stock,  which will have a face amount of $14.4 million,  will  be
convertible  into 643,672 shares of the Company's  common  stock,
reflecting  a  conversion price of $22.44  per  share.   No  cash
dividends will be paid or owed during the first four and one-half
years;  a  cash dividend at the rate of 4.0% of the  face  amount
will  be  paid thereafter.  The preferred shares, which are  non-
callable  for  three  years, have no sinking  fund  or  mandatory
redemption features.  In connection with the transaction, Gryphon
intends to enter into a $55 million credit facility with a  group
of  financial institutions, the proceeds of which will be used to
pay  the cash portion of the purchase price and to repay existing
bank borrowings.

        The  acquisition will be accounted for  by  the  purchase
method   of   accounting   under  Opinion   No.   16,   "Business
Combinations", of the Accounting Principles Board of the American
Institute of Certified Public Accountants.  Under this accounting
method,  any excess of purchase price over the fair market  value
of  identifiable assets acquired less liabilities assumed will be
recorded as goodwill.

        The  transaction,  which is subject  only  to  regulatory
approvals  and other customary conditions, is expected  to  close
during the second quarter of 1998.

        The  Company  regularly evaluates opportunities  for  the
acquisitions  of  books  of  business,  of  specialty   insurance
companies  or  companies in related businesses and  for  business
combinations  or  joint ventures with other  specialty  insurance
companies.  There can be no assurance, however, that any suitable
business  opportunities  will arise.   In  the  event  that  such
opportunities  do  arise, the Company may incur indebtedness  for
borrowed  money in connection with the consummation of  any  such
transaction.   Such  indebtedness, under  certain  circumstances,
could  adversely  affect  the  Company's  liquidity  and  capital
resources.

        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 1997, 1996  and  1995.
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, 1997.

             (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.

      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    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.

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

      10.12 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").

      10.13 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.

      10.14 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.

      10.15 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.

      10.16 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.

      10.17 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.

      10.18 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.

      10.19 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.

      10.20 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.

      10.21 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.

      10.22 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.

      10.23 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.

      10.24 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.

      10.25 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.

      10.26 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.

      10.27 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.

      10.28 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.

      10.29 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.

      10.30 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.

      10.31 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.

      10.32 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.

      10.33 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.

      10.34 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.

      10.35 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.

      10.36 Property Excess Per Risk Reinsurance Contract, dated January
      1,  1998 between the subsidiaries of the Company and various
      reinsurers stated therein.

      10.37 Property   Excess   and  Surplus  Lines  Excess   Per   Risk
      Reinsurance  Contract, dated January  1,  1998  between  the
      subsidiaries  of  the Company and various reinsurers  stated
      therein.

      10.38 Franchise Excess of Loss Reinsurance Contract, dated January
      1,  1998 between the subsidiaries of the Company and various
      reinsurers stated therein incorporated herein.

      10.39 External   Third   Through   Seventh   Catastrophe    Excess
      Reinsurance  Contract, dated January  1,  1998  between  the
      subsidiaries  of  the Company and various reinsurers  stated
      therein.

      10.40 Aggregate Excess of Loss Reinsurance Contract, dated January
      1,  1997 between the subsidiaries of the Company and various
      reinsurers  stated therein incorporated herein by  reference
      to Exhibit 10.69 of the 1997 Form 10-K.

      10.41 Per  Event  Reinsurance  Contract,  dated  October  1,  1996
      between   the  subsidiaries  of  the  Company  and   various
      reinsurers  stated therein incorporated herein by  reference
      to Exhibit 10.70 of the 1997 Form 10-K.

      10.42 "Working"  Per Event Reinsurance Contract, dated October  1,
      1996  between  the subsidiaries of the Company  and  various
      reinsurers  stated therein incorporated herein by  reference
      to Exhibit 10.71 of the 1997 Form 10-K.

      10.43 Excess Per Event Reinsurance Contract, dated October 1, 1996
      between   the  subsidiaries  of  the  Company  and   various
      reinsurers  stated therein incorporated herein by  reference
      to Exhibit 10.72 of the 1997 Form 10-K.

      10.44 "Working"  Per Event Reinsurance Contract, dated January  1,
      1998  between  the subsidiaries of the Company  and  various
      reinsurers stated therein.

      10.45 Excess Per Event Reinsurance Contract, dated January 1, 1998
      between   the  subsidiaries  of  the  Company  and   various
      reinsurers stated therein.

      10.46 Quota  Share  Reinsurance Contract, dated  January  1,  1998
      between   the  subsidiaries  of  the  Company  and   Redland
      Insurance Co.

      10.47 Property  Facultative Binding Agreement dated June  1,  1996
      between   the  subsidiaries  of  the  Company  and   various
      reinsurers stated therein.

      10.48 Excess  of  Loss, Blanch Catastrophe Plan, dated January  1,
      1998   between   the  subsidiaries  of   the   Company   and
      Scandinavian Reinsurance Co.

      10.49 Commercial  Automobile  Quota  Share  Reinsurance  Contract,
      dated  January  1,  1998  between the  subsidiaries  of  the
      Company and various reinsurers stated therein.

      10.50 Entertainment  Quota  Share Treaty, dated  January  1,  1998
      between   the  subsidiaries  of  the  Company  and   various
      reinsurers stated therein.

      10.51 Entertainment Excess of Loss Treaty, dated January  1,  1998
      between   the  subsidiaries  of  the  Company  and   various
      reinsurers stated therein.

      10.52 Stock  Purchase Agreement, dated as of February 9, 1998,  by
      and  between  the Company of Dearborn Risk Management,  Inc.
      incorporated therein by reference to Exhibit 10.1 to Form 8-
      K filed by the Company with the SEC on February 19, 1998.

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

      23.1  Consent of KPMG Peat Marwick 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, 1998

                              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, 1998
Stephen  A.  Crane   (Chief  Executive Officer)




Robert P. Cuthbert     Chief Financial Officer       March 25, 1998
Robert P. Cuthbert   and Chief Accounting Officer




Robert  M. Baylis             Director               March 25, 1998
Robert M. Baylis




Franklin  L. Damon            Director               March 25, 1998
Franklin L. Damon




Robert  R. Douglass           Director                March 25, 1998
Robert R. Douglass




David  H. Elliott             Director                March 25, 1998
David H. Elliott




Hadley C. Ford                Director                March 25, 1998
Hadley C. Ford




Richard  W. Hanselman         Director                March 25, 1998
Richard W. Hanselman




Joe M. Rodgers                Director                March 25, 1998
Joe M. Rodgers




George  L. Yeager             Director                March 25, 1998
George L. Yeager



                Form 10-K--Item 14(a)(1) and (2)

             Gryphon Holdings Inc. and Subsidiaries

Index of Consolidated Financial Statements and Financial Statement Schedules


                                                                     Page

Reports of Independent Auditors:
 KPMG Peat Marwick LLP                                                F-2

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

  Consolidated Balance Sheets at December 31, 1997 and 1996           F-3
  Consolidated   Statements   of  Income
     for the Years Ended December 31, 1997, 1996 and 1995             F-4
  Consolidated Statements of Stockholders' Equity for the
     Years Ended December 31, 1997, 1996 and 1995                     F-5
  Consolidated  Statements  of  Cash  Flows  for  the
     Years   Ended December 31, 1997, 1996 and 1995                   F-6
  Notes to Consolidated Financial Statements                          F-7

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,  1997
and   1996,  and  the  related  consolidated  statements  of   income,
stockholders'  equity, and cash flows for each of  the  years  in  the
three-year  period  ended  December  31,  1997.   In  connection  with
our  audits  of the consolidated financial statements,  we  have  also
audited  the  financial  statement  schedules,  as  of  December   31,
1997  and  1996  and  for each of the years in the  three-year  period
ended  December  31,  1997,  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,  1997  and  1996,  and the results of their operations  and  their
cash  flows  for  each  of  the years in the three-year  period  ended
December   31,   1997,   in   conformity   with   generally   accepted
accounting   principles.    Also,  in   our   opinion,   the   related
financial  statement  schedules  as of  December  31,  1997  and  1996
and  for  each  of the years in the three-year period  ended  December
31,  1997,  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 24, 1998



</TABLE>
<TABLE>
                       Consolidated Balance Sheets
<CAPTION>
                                                             December 31,
                                                         1997           1996
                                                        (Dollars in thousands)
<S>                                                      <C>            <C>
Assets
Investments:
  Fixed maturities, available for sale, at fair value
   (amortized cost: 1997 - $274,506; 1996 - $274,515)    $    280,553   $    280,164
  Short-term investments, at cost, which
   approximates market                                            257            307
Total investments                                             280,810        280,471
Cash and cash equivalents                                      32,272         23,398
Accrued investment income                                       4,071          3,919
Premiums receivable                                            16,151         18,509
Reinsurance recoverable on paid losses                         18,261         14,326
Reinsurance recoverable on unpaid losses                      140,810        137,952
Prepaid reinsurance premiums                                   16,573         18,965
Deferred policy acquisition costs                              11,849         12,415
Deferred income taxes                                          10,569         10,282
Other assets                                                    7,619          6,747
Total assets                                             $    538,985   $    526,984

Liabilities and Stockholders' Equity
Policy liabilities:
     Unpaid losses and loss adjustment expenses          $    328,911   $    309,259
     Unearned premiums                                         62,351         68,683
Total policy liabilities                                      391,262        377,942
Reinsurance balances payable                                   12,179         16,207
Income taxes payable                                              389             55
Long-term debt                                                 21,125         24,625
Other liabilities                                               9,521         13,019
Total liabilities                                             434,476        431,848
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                                30,742         30,847
     Foreign currency translation adjustment, net of tax         (346)          (219)
     Net unrealized investment gains, net of tax                3,931          3,672
     Deferred compensation                                       (151)          (257)
     Retained earnings                                         95,065         86,271
     Treasury stock, at cost; shares
        1997: 1,461,169: 1996:1,487,075                       (24,813)       (25,259)
Total stockholders' equity                                    104,509         95,136
Total liabilities and stockholders' equity               $    538,985   $    526,984

See accompanying notes to consolidated financial statements.

</TABLE>


<TABLE>
                  Consolidated Statements of Income
<CAPTION>
                                                         Year ended December 31,
                                                         1997        1996          1995
                                                      (Dollars and shares in thousands,
                                                            except per-share data)
<S>                                                      <C>         <C>           <C>
Revenues
Net premiums earned                                      $  104,246  $    87,929   $    83,399
Net investment income                                        17,061       16,453        15,839
Realized gains on investments                                 6,188        1,203         3,647
Other income                                                    979        1,059
Total revenues                                              128,474      106,644       102,885

Expenses
Losses and loss adjustment expenses                          71,015       57,700        50,816
Underwriting, acquisition, and insurance expenses            45,089       40,967        34,590
Interest expense                                              1,607        1,761           595
Total expenses                                              117,711      100,428        86,001

Income before income taxes                                   10,763        6,216        16,884
Provision for income taxes (benefit):
   Current                                                    2,395        1,389         2,969
   Deferred                                                    (426)      (1,336)          990
Total income taxes                                            1,969           53         3,959

Net income                                              $     8,794  $     6,163   $    12,925

Basic earnings per share                                $      1.32  $      0.93   $      1.69

Weighted average shares outstanding                           6,680        6,656         7,648

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

<TABLE>

                      Consolidated Statements of Stockholders' Equity

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

Balances at
   January 1, 1995   $   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

Add (deduct):
  Net income                                                                8,794              8,794
  Translation adjustment                 (127)                                                  (127)
  Stock award plans             (105)                              106                 446       447
  Net unrealized investment
    gains, net of tax                                   259                                      259
Balances at
    December 31, 1997 $  81 $ 30,742  $  (346)     $  3,931   $   (151)  $ 95,065 $(24,813) $104,509


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

<TABLE>
                   Consolidated Statements of Cash Flows

<CAPTION>
                                                          Year ended December 31,
                                                 1997            1996             1995
                                                          (Dollars in thousands)
<S>                                              <C>             <C>              <C>
Operating activities
Net income                                       $     8,794     $     6,163      $    12,925
Adjustments to reconcile net income to
  net cash provided by operating activities:
      Increase in net policy liabilities               8,919          32,239            4,958
      Decrease (increase) in premiums receivable       2,358          (1,034)          (3,196)
      Decrease (increase) in deferred
        policy acquisition costs                         566            (233)          (2,388)
      Deferred income tax provision                     (426)         (1,336)             990
      Decrease (increase) in other
        assets and liabilities                        (3,009)          1,543             (539)
      Amortization and depreciation                      781             595              402
      Amortization of bond discount, net                 498             944              370
      Realized gains on investments                   (6,188)         (1,203)          (3,647)
      Increase (decrease) in
        reinsurance balances payable                  (4,028)        (13,166)          12,341
      Decrease (increase) in accrued
        investment income                               (152)            161             (175)
Net cash provided by operating activities              8,113          24,673           22,041

Investing activities
Sales of fixed maturities                            438,021         281,728          221,026
Purchases of fixed maturities                       (434,292)       (310,660)        (249,119)
Maturities or calls of fixed maturities                1,800           3,000            4,775
Net sales of Short-term investments                       50             230
Capital expenditures                                  (1,568)         (2,111)            (366)
Net cash provided by (used in) investing activities    4,011          (27,813)        (23,684)

Financing activities
Proceeds from long-term debt                                                           25,500
Common stock acquired for treasury                                                    (25,478)
Principal payment on long-term debt                   (3,500)            (875)
Issuance of common stock                                 340              217
Deferred compensation                                     37             (131)
Net cash provided by (used in) financing activities   (3,123)            (789)             22

Effect of exchange rate changes on cash                 (127)             (10)             50

Increase (decrease) in cash and cash equivalents       8,874           (3,939)         (1,571)
Cash and cash equivalents at beginning of year        23,398           27,337          28,908
Cash and cash equivalents at end of year         $    32,272      $    23,398     $    27,337
Supplemental disclosure of cash flow information
   Income taxes paid                             $     1,855      $     1,701     $     2,783
   Interest paid                                       1,607            1,761             586

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


1.     Summary of Significant Accounting Policies

        The  significant  accounting  policies  followed  by  the
Company are summarized below.

  Basis of Presentation and Principles of Consolidation

         Gryphon   Holdings  Inc.  operates  through   its   main
subsidiary, Gryphon Insurance Group Inc., as a specialty property
and  casualty  underwriting organization.  The  Company'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 consolidated financial statements
in conformity with  GAAP  requires  the use of estimates and
assumptions  that affect  amounts  reported  in the consolidated
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  deferred
policy  acquisition  costs  amounted  to  $34.0  million,   $30.1
million, and $26.7 million for the years ended December 31, 1997,
1996 and 1995, 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

        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.

        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 LAE are based on the
Company's  estimates  of  the  ultimate  cost  of  unpaid  losses
reported  prior  to  the  close of the  accounting  period,  IBNR
losses, and the related LAE.  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 LAE 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  LAE
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 policies with environmental impairment
and  asbestos-related  exposures 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 LAE as of December 31, 1997.

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

       In February 1997, the Financial Accounting Standards Board
("FASB")  issued  Statement  of  Financial  Accounting  Standards
(SFAS)   No.  128,  "Earnings  Per  Share",  which  the   Company
implemented  in  1997.   SFAS No. 128 establishes  standards  for
computing  and  presenting earnings per share.  Primary  earnings
per  share  have been replaced by basic earnings  per  share  and
calculated by dividing income available to common stockholders by
the  weighted average number of common shares outstanding  during
the  period.  Fully diluted earnings per share have been replaced
by  diluted  earnings  per  share  and  calculated  by  including
additional  common  shares that would have  been  outstanding  if
potentially  dilutive shares had been issued during  the  period.
Prior period earnings per share were not affected by the adoption
of SFAS No. 128.

New Accounting Standards

        In  June  1997, the FASB issued SFAS No. 130,  "Reporting
Comprehensive  Income",  which requires enterprises  to  disclose
comprehensive  income and its components in a prominent  position
on  the  face  of  the  financial statement.   The  Company  will
implement  this  statement in 1998.  This  statement  relates  to
presentation of information and will have no impact on results of
operations or financial condition.

        In  June  1997, the FASB issued SFAS No. 131, "Disclosure
about  Segments of an Enterprise and Related Information",  which
will  be  effective for the Company beginning  January  1,  1998.
SFAS No. 131 redefines how operating segments are determined  and
requires   disclosure  of  certain  financial   and   descriptive
information about a company's operating segments.  This statement
relates to presentation of information and will have no impact on
results  of operations or financial condition.  Interim financial
information  will be required beginning in 1999 (with comparative
1998  information).   The  Company is  currently  evaluating  the
segment information disclosures required by SFAS No. 131.

        In December of 1997, the American Institute of Certified
Public Accountants issued Statement of Position No. 97-3
"Accounting by Insurance and Other Enterprises for Insurance-
related Assessments" ("SOP 97-3").  SOP 97-3 establishes standards
for accounting for guaranty-fund and certain other insurance related
assessments.  SOP 97-3 is effective for fiscal years beginning after
December 15, 1998 and requires any impact of adoption to be reported
as a change in accounting principle.  The adoption of this statement
is not expected to have a material effect on the Company's results
of operations or financial condition.

2.     Investments

         The  major  categories  of  net  investment  income   are
summarized as follows:
<TABLE>
<CAPTION>
                                            Year ended December 31
                                       1997         1996          1995
                                            (Dollars in thousands)
<S>                                    <C>          <C>           <C>
Fixed maturities                       $16,384      $  16,256     $  15,245
Cash, cash equivalents
  and short-term investments             1,684          1,117         1,610
Total investment income                 18,068         17,373        16,855
Less related expenses                   (1,007)          (920)       (1,016)
Net investment income                  $17,061      $  16,453     $  15,839
</TABLE>



        The  gross realized gains and losses from sales of  fixed
maturity securities are as follows:

<TABLE>
<CAPTION>
                                               Year ended December 31
                                           1997         1996          1995
                                               (Dollars in thousands)
<S>                                        <C>          <C>           <C>
Gross realized gains                       $    7,530   $    3,074    $    4,306
Gross realized losses                          (1,342)      (1,871)         (659)
Net realized gains on sales                $    6,188   $    1,203    $    3,647
</TABLE>


        At  December  31, 1997 and 1996, the amortized  cost  and
estimated  fair  values of investments in  fixed  maturities,  by
categories  of  securities, and short-term  investments  were  as
follows:
<TABLE>
<CAPTION>
                                                  Gross       Gross       Estimated
                                   Amortized    Unrealized   Unrealized      Fair
                                     Cost          Gains       Losses       Value
                                            (Dollars in thousands)
<S>                                <C>          <C>          <C>           <C>
December 31, 1997
U.S. Treasury securities
  and obligations of
    U.S. government
       corporations and agencies   $  78,623    $     667    $    (22)     $  79,268
Debt securities issued
    by foreign governments             5,857          130          (6)         5,981
Tax-exempt obligations of states
    and political subdivisions       108,194        4,322                    112,516
Mortgage-backed securities            47,488          501         (47)        47,942
Corporate securities                  34,344          617        (115)        34,846
                                     274,506        6,237        (190)       280,553
Short-term investments                   257                                     257
                                  $  274,763    $   6,237    $   (190)     $ 280,810
</TABLE>

<TABLE>
<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
</TABLE>
        At  December  31, 1997, 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.

<TABLE>
<CAPTION>
                                                        December 31, 1997
                                                  Amortized                Fair
                                                    Cost                  Value
                                                      (Dollars in thousands)
<S>                                               <C>                     <C>
Due in one year or less                           $     279               $     286
Due after one year through five years                65,562                  66,567
Due after five years through ten years               95,153                  97,677
Due after ten years                                  66,024                  68,081
                                                    227,018                 232,611
Mortgage-backed securities                           47,488                  47,942
Total                                              $274,506                $280,553
</TABLE>

        At  December  31,  1997, investments in Federal  National
Mortgage   Association  securities  aggregating   $11.8   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, 1997 and 1996, securities  with  a  fair
value   of   approximately  $19.3  million  and  $18.6   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, 1997 as
computed in accordance with GAAP.

<TABLE>
<CAPTION>
                                                1997         1996         1995
<S>                                             <C>          <C>          <C>
Gross reserves for losses and
  LAE at the beginning of the year              $ 309,259    $ 308,886    $ 315,691
Ceded reserves for losses and
  LAE at the beginning of the year                137,952      152,975      169,889
Net reserves for losses and
  LAE at the beginning of the year                171,307      155,911      145,802
Add: Provision for losses and
  LAE for claims occurring in:
     The current year                              64,222       53,402       50,424
     Prior years                                    6,793        4,298          392
        Total net incurred losses and LAE          71,015       57,700       50,816
Less: Losses and LAE payments
  for claims occurring in:
     The current year                              13,932       11,520       11,796
     Prior years                                   40,289       30,784       28,911
        Total net paid losses and LAE              54,221       42,304       40,707
Reserves for net losses and
  LAE at end of year                              188,101       171,307      155,911
Reinsurance recoverable on unpaid losses          140,810       137,952      152,975
Reserves for gross losses
  and LAE at end of year                        $ 328,911     $ 309,259    $ 308,886
</TABLE>

        The provision for losses and LAE for claims occurring  in
prior  years shows an unfavorable development of $6.8 million  in
1997.   The unfavorable development resulted principally  from  a
pre-1985   book   of  Casualty  business  and  certain   pre-1987
reinsurance-assumed business, both previously discontinued.

       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, 1997 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
                                                    1997         1996         1995
<S>                                                 <C>          <C>          <C>
Gross reserves for losses and
  LAE at the beginning of the year                  $ 12,981     $ 11,938     $ 14,200
Ceded reserves for losses and
  LAE at the beginning of the year                     4,177        3,958        5,100
Net reserves for losses and
  LAE at the beginning of the year                     8,804        7,980        9,100
Add: Provision for losses and
  LAE for claims occurring in prior years               (845)       1,598            3
Less: Losses and LAE payments
  for claims occurring in prior years                  1,159          774        1,123
Reserves for net losses and LAE at end of year         6,800        8,804        7,980
Reinsurance recoverable on unpaid losses               5,200        4,177        3,958
Reserves for gross losses and LAE at end of year    $ 12,000     $ 12,981     $ 11,938


                                                       Year ended December 31,
Asbestos-related Liability
                                                    1997         1996         1995
Gross reserves for losses and
  LAE at the beginning of the year                  $  4,121     $  1,700     $  4,050
Ceded reserves for losses and
  LAE at the beginning of the year                     3,110        1,060        3,350
Net reserves for losses and
  LAE at the beginning of the year                     1,011          640          700
Add: Provision for losses and
  LAE for claims occurring in prior years                847          583          612
Less: Losses and LAE payments for
  claims occurring in prior years                        143          212          672
Reserves for net losses and LAE at end of year         1,715        1,011          640
Reinsurance recoverable on unpaid losses               2,500        3,110        1,060
Reserves for gross losses and LAE at end of year    $  4,215     $  4,121     $  1,700
</TABLE>

       At December 31, 1997, the reserve for unpaid environmental
impairment losses and related LAE was approximately $6.8 million,
net of reinsurance recoverables deemed probable of collection  by
the  Company of approximately $5.2 million.  The range  of  gross
reserves  for unpaid environmental impairment losses and  LAE  is
estimated to be $12.0 million to $20.0 million and the  range  of
reserves,   net   of   reinsurance   recoverable,   for    unpaid
environmental  impairment  losses and  LAE  is  estimated  to  be
approximately $6.8 million to $9.5 million.

        At  December  31, 1997, the reserve for unpaid  asbestos-
related  losses  and  related  LAE  was  $1.7  million,  net   of
reinsurance  recoverables deemed probable of  collection  by  the
Company  of  approximately  $2.5 million.   The  range  of  gross
reserves  for unpaid asbestos-related losses and LAE is estimated
to be $4.2 million to $9.4 million and the range of reserves, net
of  reinsurance  recoverable, for unpaid asbestos-related  losses
and  LAE  is estimated to be approximately $1.7 million  to  $3.3
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 following table sets forth the significant reinsurance
receivables due from reinsurers as of December 31, 1997.

<TABLE>
<CAPTION>

                                                  Year ended December 31, 1997
                                                       (Dollars in thousands)
                                                   Reinsurance      A.M. Best's
Reinsurer                                          Receivables        Rating
<S>                                                <C>              <C>
American Re-Insurance Company                      $   19,684       A+
Signet Star Reinsurance Corporation                    10,853       A
Odyssey Reinsurance Corporation                        10,507       A -
St. Paul Fire and Marine Insurance Company             10,224       A+
First Excess & Reinsurance Corporation                  9,430       A
Lloyd's Underwriters                                    9,310       *
Great Lakes American Reinsurance Company                8,884       A -
Swiss Reinsurance America Corp.                         7,589       A

*  A.M. Best does not assign ratings to Lloyd's syndicates.
</TABLE>
        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, 1997, 1996  and  1995,
amounts  relating  to  assumed  and  ceded  reinsurance  premiums
written and earned and losses and LAE incurred reflected  in  the
accompanying  consolidated statements of income approximated  the
following:

<TABLE>
<CAPTION>
                                                     Year ended December 31,
                                                 1997          1996         1995
                                                     (Dollars in thousands)
<S>                                              <C>           <C>          <C>
Premiums Written:
  Assumed                                        $     3,315   $     2,390  $     2,076
  Ceded                                               45,792        62,330       66,805
Premiums Earned:
  Assumed                                        $     3,715   $     2,209  $     1,715
  Ceded                                               48,179        63,824       66,064
Losses & LAE Incurred:
  Assumed                                        $    14,617    $    4,455  $     2,585
  Ceded                                               46,569        42,052       52,089
</TABLE>

       At December 31, 1997 the Company held letters of credit of
approximately $7.7 million securing amounts due from reinsurers.

        During  1997, Associated maintained a six-layer  property
catastrophe reinsurance program which covered 95% of  the  annual
aggregate  amount  of property claims up to  $138.0  million  per
occurrence,   subject  to  a  retention  of  $2.5   million   per
occurrence.

        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  a  new  retention  of
$500,000  for each and every event.  Certain business is  covered
by  a  quota share treaty that limits 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; an unfavorable resolution could have a material
effect on the Company's financial statements.

5.     Federal Income Taxes

        The  Company  uses  an asset and liability  approach  for
financial  accounting and reporting for income taxes.  Under  the
asset  and  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:

<TABLE>
<CAPTION>
                                                    Year ended December 31,
                                                 1997                     1996
                                                    (Dollars in thousands)
<S>                                              <C>                      <C>
Discount on loss reserves                        $   12,769               $   12,270
Unearned premium reserve                              3,204                    3,477
Alternative minimum tax credit                        1,099                    1,099
Other, net                                              130                      129
Deferred income tax asset                            17,202                   16,975
Deferred policy acquisitions costs                   (4,147)                  (4,345)
Unrealized gains on investments                      (2,117)                  (1,977)
Other, net                                             (369)                    (371)
Deferred income tax liability                        (6,633)                  (6,693)
Net deferred income tax asset                    $   10,569               $   10,282
</TABLE>

        The  Company  has  not established  a  valuation  reserve
because  it  believes, based on its tax-planning  strategies  and
projected  future  earnings, that  it  is  likely  that  the  net
deferred tax asset will be fully realized.

       A reconciliation of income taxes computed at the statutory
federal  income tax rate to the income tax provision is presented
below:
<TABLE>
<CAPTION>
                                1997                   1996                   1995
                                   % 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  $ 3,767  35.0%         $ 2,176  35.0%         $ 5,909  35.0%
Add (deduct):
   Tax exempt interest     (1,994)(18.5)          (2,338)(37.6)          (2,131)(12.6)
   Other, net                 196   1.8              215   3.5              181   1.1
Total income taxes        $ 1,969  18.3%         $    53   0.9%         $ 3,959  23.5%
</TABLE>

6.     Long-Term Debt

        In  September  1995,  the Company purchased  1.5  million
shares  of its common stock beneficially owned by Willis  Corroon
Group  plc  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, 1997, the weighted average interest rate  was
6.89%,  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)
       1998                          $ 3,625
       1999                            4,125
       2000                            4,625
       2001                            5,000
       2002                            3,750
       Total                         $21,125

       In October 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, 1997, the fair value of the interest
rate swap approximated the carrying value.

7.     Fair Value of Financial Instruments

        The  Company  follows  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, 1997 and 1996.

<TABLE>
<CAPTION>

                                           Year ended December 31
                                   1997                          1996
                                           (Dollars in thousands)
                           Carrying     Estimated        Carrying    Estimated
                            Amount      Fair Value        Amount     Fair Value
<S>                        <C>          <C>              <C>         <C>
Financial assets:
 Investments and cash      $313,082     $313,082         $303,869    $303,869
Financial liabilities:
 Long-term debt              21,125       21,129           24,625      24,651
</TABLE>

        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
approximates  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)
         1998                                 $1,163
         1999                                  1,130
         2000                                    964
         2001                                    755
         2002                                    784
         Thereafter                            4,728
                                              $9,524

         Total  rent  expense  for  all  leases  was  $1,469,000,
$1,310,000 and $959,000 in 1997, 1996 and 1995, 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,
1997,  the maximum amount of dividends that Associated could  pay
in 1998 without California Insurance Department approval amounted
to approximately $9.0 million and the maximum amount of dividends
that  Calvert  could  pay in 1998 without Pennsylvania  Insurance
Department approval amounted to approximately $2.0 million.

Stockholders' Equity

        A  reconciliation of the two insurance subsidiaries'  net
income  and  stockholders' equity for each of the  years  in  the
three  years ended December 31, 1997 and as of December 31,  1997
and  1996,  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:

<TABLE>
<CAPTION>
                                                                       Stockholders'
                                       Net Income                          Equity
                             1997      1996       1995               1997        1996
                                                   (Dollars in thousands)
<S>                          <C>       <C>        <C>                <C>         <C>
Associated's and Calvert's
  statutory basis amounts    $ 11,013  $  7,298   $ 13,876           $ 87,705    $ 82,566
Add (deduct):
  Deferred policy
     acquisition costs           (566)      233      2,388             11,849      12,415
     Deferred income taxes        426       341       (728)            11,602      11,175
     Nonadmitted assets                                                 2,781       3,090
     Unauthorized reinsurance                                           3,862       3,980
     Foreign currency
        translation adjustment      7       (68)      (110)
     Unrealized investment gains                                        3,931       3,672
     Net income - non
        insurance subsidiaries    794       816
     Other, net                  (197)      (67)        25                 98         (33)
Associated's and Calvert's
     GAAP amounts              11,477     8,553     15,451            121,828     116,865
Holding Company:
     Non-insurance
        company expenses       (2,683)   (2,390)    (2,526)
     GAAP equity                                                      (17,319)    (21,729)
Consolidated amounts
     -- GAAP basis             $8,794    $6,163    $12,925           $104,509     $95,136
</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 consolidated 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:
<TABLE>
<CAPTION>
                                                        Year ended December 31,
                                                        1997              1996
                                                        (Dollars in thousands)
<S>                                                     <C>               <C>
Furniture, fixtures and leasehold improvements          $  2,539          $  2,475
Computers                                                  2,074             1,011
Office equipment                                             416               354
                                                           5,029             3,840
Less:  Accumulated depreciation and amortization           1,715             1,116
                                                        $  3,314          $  2,724
</TABLE>

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, 1997, 76,500 shares are available for issuance
under the plan.

        The Financial Accounting Standards Board 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 continued to elect to follow  Accounting
Principle  Board  ("APB") Opinion 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
fair value method for recognition purposes in 1995.

        A  summary  of stock option activity as of  December  31,
1997, follows:

<TABLE>
<CAPTION>
                                                            Weighted Average of
                               Available                     Exercise Price of
                              for Option     Outstanding    Outstanding Options
<S>                           <C>            <C>            <C>

Balance, December 31, 1994      34,000       366,000        $13.18
  Authorized                   100,000
  Granted                     (114,000)      114,000         14.89
  Cancelled                     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
  Cancelled                     59,250       (59,250)        15.03

Balance, December 31, 1996     187,750       558,325         14.58
  Granted                      (46,500)       46,500         16.02
  Exercised                        -         (32,500)        13.00
  Cancelled                     41,250       (41,250)        15.18

Balance, December 31, 1997     182,500       531,075         14.76

</TABLE>


       The following table summarizes outstanding and exercisable
options as of December 31, 1997.
<TABLE>
<CAPTION>
                                 Options Outstanding                       Options Exercisable
                                     Weighted
          Range of                    Average         Weighted                         Weighted
Year of   Exercise      Number       Remaining         Average            Number        Average
of Grant   Prices    Outstanding  Contractual Life  Exercise Price      Exercisable Exercise Price
<S>       <C>        <C>          <C>               <C>                 <C>         <C>
1993         $13     209,825      6.00              $13.00              148,263     $13.00
1994      $13 - $15   57,500      6.45               14.11               28,750      14.11
1995      $13 - $16  100,250      7.48               14.88               50,125      14.88
1996      $14 - $20  122,000      8.36               17.44               30,500      17.44
1997      $13 - $17   41,500      9.85               16.31                  -        16.31
                     531,075                                            257,638
</TABLE>

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


       Pro forma (1)               1997       1996      1995
       Net income                  $8,583     $5,974    $12,880
       Basic earnings per share    $1.28      $.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
1997,  1996  and 1995 were $6.62, $7.64 and $6.29,  respectively.
The   Black-Scholes  option-pricing  model  was  used  with   the
following weighted average assumptions: volatility of 22.8%,  and
risk-free  interest rate of 5.99% in 1997; volatility  of  24.3%,
and  risk-free  interest  rate of 6.81% in  1996;  volatility  of
24.3%,  and  risk-free interest rate of 6.18% in 1995.   For  all
periods, a seven-year life is assumed.

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 1997, $0.5
million in 1996 and $0.4 million in 1995.

        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, 1997,  1996  and  1995  was  $0.4
million, $0.6 million and $1.6 million, respectively.

14.    Concentrations of Business

       Gross premiums written in the State of California amounted
to  approximately  $59,696,000, $68,663,000  and  $76,396,000  in
1997, 1996 and 1995, respectively.  In the State of New York, the
Company's  gross  premiums written were $11,190,000,  $11,975,000
and  $20,141,000 for the years ended December 31, 1997, 1996  and
1995, 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, 1997, 1996  and
1995,  direct premiums written by RAMCO for the Company  amounted
to   approximately  $17,704,000,  $17,843,000  and   $14,452,000,
respectively.

15.    Quarterly Financial Information (unaudited)

        Quarterly financial information (unaudited) for the  year
ended December 31, 1997 is presented below:
<TABLE>
<CAPTION>
                                        Three months ended
                                    March 31,    June 30,    Sept. 30,      Dec. 31,
                                      1997         1997         1997          1997
                              (Dollars and shares in thousands, except per share amounts)
<S>                                 <C>          <C>         <C>            <C>
Gross premiums written              $  35,651    $  40,747   $  37,290      $  32,438
Net premiums written                   24,423       27,209      28,223         20,479
Net premiums earned                    23,101       25,917      27,783         27,445
Net investment income                   4,170        4,315       4,344          4,232
Realized gains on investments              17           12       2,601          3,558
Other income                              242          256         296            185
  Total revenues                       27,530       30,500      35,024         35,420
Income before income taxes              2,740        2,475       5,019            529
Net income                              2,171        2,167       3,697            759
Basic earnings per share            $    0.33     $   0.32    $   0.55      $    0.11
Weighted average shares outstanding     6,663        6,68        6,688          6,686
</TABLE>

      Quarterly financial information (unaudited) for the year
ended December 31, 1996 is presented below:
<TABLE>
<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
Basic earnings per share (1)        $   0.53      $   0.05    $   0.30      $   0.05
Weighted average shares outstanding    6,648         6,656       6,660         6,661


(1)   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.



16.    Subsequent Event

        In February 1998, the Company agreed to acquire The First
Reinsurance  Company of Hartford ("FRH") and  certain  affiliated
entities from Dearborn Risk Management, Inc. for a combination of
cash  and  preferred stock valued at $43.6 million, plus  certain
other performance-driven contingent consideration.

        The  purchase consideration of $43.6 million consists  of
$31.9 million of cash and $11.7 million fair value of a new issue
of  Gryphon perpetual convertible preferred stock.  The preferred
stock,  which will have a face amount of $14.4 million,  will  be
convertible  into 643,672 shares of the Company's  common  stock,
reflecting  a  conversion price of $22.44  per  share.   No  cash
dividends will be paid or owed during the first four and one-half
years;  a  cash dividend at the rate of 4.0% of the  face  amount
will  be  paid thereafter.  The preferred shares, which are  non-
callable  for  three  years, have no sinking  fund  or  mandatory
redemption features.  In connection with the transaction, Gryphon
intends to enter into a $55 million credit facility with a  group
of  financial institutions, the proceeds of which will be used to
pay  the cash portion of the purchase price and to repay existing
bank borrowings.

        The  acquisition will be accounted for  by  the  purchase
method   of   accounting   under  Opinion   No.   16,   "Business
Combinations," of the Accounting Principles Board of the American
Institute of Certified Public Accountants.  Under this accounting
method,  any excess of purchase price over the fair market  value
of  identifiable assets acquired less liabilities assumed will be
recorded as goodwill.

        The  transaction,  which is subject  only  to  regulatory
approvals  and other customary conditions, is expected  to  close
during the second quarter of 1998.


</TABLE>
<TABLE>
                           At December 31, 1997

                   SCHEDULE I -- SUMMARY OF INVESTMENTS --
                  OTHER THAN INVESTMENTS IN RELATED PARTIES
<CAPTION>

            COLUMN                                 COLUMN      COLUMN        COLUMN
               A                                      B           C             D
                                                                            Amount at
                                                                              which
                                                                           shown in the
       Type of Investment                            Cost       Value      balance sheet
                                                           (Dollars in thousands)
<S>                                                <C>         <C>         <C>
Fixed  maturities:
  Bonds:
   United States Government and
      government agencies and authorities          $ 78,623    $ 79,268    $ 79,268
   States, municipalities and
      political subdivisions                        108,194       5,981       5,981
   Foreign  governments                               5,857     112,516     112,516
   Mortgage-backed securities                        47,488      47,942      47,942
   Corporate bonds                                   34,344      34,846      34,846
   Total fixed maturities                           274,506     280,553     280,553
   Short-term investments                               257         257         257
   Total investments                               $274,763    $280,810    $280,810
</TABLE>

<TABLE>
             SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                                 Balance Sheets
<CAPTION>

                                                                 December 31,
                                                               1997          1996
                                                             (Dollars in thousands)
<S>                                                            <C>           <C>
Assets
Cash and cash equivalents                                      $     517     $    289
Investment in subsidiaries                                       123,235      118,336
Income tax recoverable                                             1,574          439
Deferred income taxes                                              1,084        1,084
Other assets                                                         (99)         268
  Total assets                                                 $ 126,311     $120,416

Liabilities and stockholders' equity
Liabilities:
  Other liabilities                                            $     677     $    655
    Long-term debt                                                21,125       24,625
    Total liabilities                                             21,802       25,280
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                                    30,742       30,847
    Foreign currency translation adjustment, net of tax             (346)        (219)
    Net unrealized gains, net of tax                               3,931        3,672
    Deferred compensation                                           (151)        (257)
    Retained earnings                                             95,065       86,271
    Treasury stock, at cost; shares
       1997: 1,487,075: 1996: 1,500,000                          (24,813)     (25,259)
    Total stockholders' equity                                   104,509       95,136
       Total liabilities and stockholders' equity              $ 126,311     $120,416
</TABLE>

<TABLE>

                         Statements of Income
<CAPTION>

                                                         Year ended December 31,
                                                       1997       1996       1995
                                                         (Dollars in thousands)
<S>                                                    <C>        <C>        <C>
Revenue
Net investment income                                  $    28   $     24    $    28
 Total revenues                                             28         24         28

Expenses
Operating expenses                                       2,521      1,921      3,282
Interest expense                                         1,607      1,761        595
 Total expenses                                          4,128      3,682      3,877
Loss before income taxes and equity in
 undistributed income of subsidiaries                   (4,100)    (3,658)    (3,849)
Income tax benefit                                       1,417      1,268      1,323
Loss before equity in undistributed
  income of subsidiaries                                (2,683)    (2,390)    (2,526)
Equity in undistributed income
  of subsidiaries                                       11,477      8,553     15,451

Net income                                             $ 8,794   $  6,163    $12,925
</TABLE>




<TABLE>


                  SCHEDULE II--CONDENSED FINANCIAL INFORMATION OF REGISTRANT

                                 Statements of Cash Flows
<CAPTION>
                                                       Year ended December 31,
                                                      1997       1996       1995
                                                        (Dollars in thousands)
<S>                                                   <C>        <C>        <C>
Operating activities
  Loss before equity in undistributed
     income of subsidiaries                           $ (2,683)  $ (2,390)  $ (2,526)
  Adjustments to reconcile net income to net cash
     provided by operating activities:
  Increase in income tax recoverable                                            (487)
  Deferred income tax provision                                      (995)       261
  Amortization and depreciation                             79         68         85
  Decrease (increase) in other
     assets and liabilities                               (684)      (798)       825
  Net cash used by operating activities                 (3,288)    (4,115)    (1,842)
Investing activities
  Capital expenditures                                     (11)        (2)        (5)
  Net cash used by investing activities                    (11)        (2)        (5)
Financing activities
  Dividends  received                                    6,650      4,726      2,000
  Proceeds from long-term debt                                                25,500
  Common stock acquired for treasury                                         (25,478)
  Issuance of common stock                                 340        217
  Deferred compensation                                     37       (131)
  Principal payment on long term debt                   (3,500)      (875)
  Net cash provided by financing activities              3,527      3,937      2,022
Increase (decrease) in cash
    and cash equivalents                                   228       (180)       175
Cash and cash equivalents at
    beginning of year                                      289        469        294
Cash and cash equivalents at end of year               $   517     $  289     $  469
</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
                                Benefits               Other Policy                           Benefits     Underwriting,
             Deferred Policy  Losses, Claims            Claims and                          Claims Losses   Acquisition,
               Acquisition       and Loss    Unearned    Benefits   Premium  Net Investment & Settlement   and Insurance  Premiums
Year&Segment      Costs          Expenses    Premiums    Payable    Revenue      Income       Expenses       Expense       Written
<S>          <C>              <C>            <C>       <C>          <C>      <C>            <C>            <C>            <C>
                                                             (Dollars in thousands)
1997
Property/
   Casualty  $    11,849      $    328,911   $ 62,351  $        0   $104,246 $ 17,061       $ 71,015       $ 45,089       $100,334
Total        $    11,849      $    328,911   $ 62,351  $        0   $104,246 $ 17,061       $ 71,015       $ 45,089       $100,334

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

</TABLE>


<TABLE>
                                  Year ended December 31,

                                  SCHEDULE IV--REINSURANCE
<CAPTION>

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

                                          (Dollars in thousands)

1997
Premiums:
Property/ Casualty
 Insurance      $ 142,811          $  45,792          $   3,315          $ 100,334        3.3%
  Total Premiums$ 142,811          $  45,792          $   3,315          $ 100,334        3.3%


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%

</TABLE>



<TABLE>
                                                Year ended December 31,

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

COLUMN A   COLUMN B   COLUMN C   COLUMN D   COLUMN E   COLUMN F   COLUMN G   COLUMN H   COLUMN I   COLUMN J   COLUMN K

                                                                               Claims & Claim
                                                                             Adjustment Expenses
                                                                             Incurred Related to
                                                                                 (1)    (2)
                          Reserves for                                                        Amortization
Affiliation  Policy       Claim       any,                            Net                     Policy      and Claim
   with      Acquisition  Adjustment  Deducted in Unearned Earned   Investment Current Prior  Acquisition Adjustment Premiums
 Company     Costs        Expenses    Column C    Premiums Premiums Income     Year    Years  Costs       Expenses   Written
<S>          <C>          <C>         <C>         <C>      <C>      <C>        <C>     <C>    <C>         <C>        <C>
                                                             (Dollars in Thousands)

1997
Consolidated
  Property/Casualty
     Entities   $11,849 $328,911 $   - $62,351 $104,246 $17,061  $64,222 $ 6,793 $34,006 $54,221 $100,334

1996
Consolidated
Property/Casualty
     Entities   $12,415 $309,259 $   - $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 $   - $63,472 $83,399  $15,839  $50,424 $   392 $26,706 $40,707 $ 90,175
</TABLE>