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


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997.

                                       Or

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

      For the transition period ___________________ to _____________________

Commission file number:  0-26456

                           RISK CAPITAL HOLDINGS, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

               Delaware                                     06-1424716
 (State or other jurisdiction             (I.R.S. Employer Identification No.)
  of incorporation or organization)

           20 Horseneck Lane
         Greenwich, Connecticut                              06830
(Address of principal executive offices)                   (Zip Code)

Registrant's telephone number, including area code:         (203) 862-4300

- -----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes   X          No  
     ---             ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock.


        CLASS                                     OUTSTANDING AT JUNE 30, 1997
- ----------------------------                      ----------------------------
Common Stock, $.01 par value                                17,035,173

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





                           RISK CAPITAL HOLDINGS, INC.



                                      INDEX

                                                                          PAGE 
                                                                           NO.
                                                                        -------
PART I.  FINANCIAL INFORMATION

ITEM 1 -  CONSOLIDATED FINANCIAL STATEMENTS

           Review Report of Independent Accountants                         1

           Consolidated Statement of Income                                 2
             For the three and six month periods ended June 30, 1997 
             and 1996

           Consolidated Balance Sheet                                       3
             June 30, 1997 and December 31, 1996

           Consolidated Statement of Changes in Stockholders' Equity        4
             For the six month periods ended June 30, 1997 and 1996

           Consolidated Statement of Cash Flows                             5
             For the six month periods ended June 30, 1997 and 1996

           Notes to Consolidated Financial Statements                       6

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS                                         11

PART II.  OTHER INFORMATION

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

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                                  20

Signatures                                                                 21





                    REVIEW REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Risk Capital Holdings, Inc.

We have reviewed the accompanying interim consolidated balance sheet of Risk
Capital Holdings, Inc. and its subsidiary as of June 30, 1997, and the related
consolidated statements of income, of changes in stockholders' equity and of
cash flows for the period from January 1, 1997 to June 30, 1997. This financial
information is the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.

Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial information for it to be in
conformity with generally accepted accounting principles.

We previously audited, in accordance with generally accepted auditing standards,
the consolidated balance sheet as of December 31, 1996, and the related
consolidated statements of income, of retained earnings, and of cash flows for
the year then ended (not presented herein), and in our report dated February 7,
1997 we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 31, 1996, is fairly stated
in all material respects in relation to the consolidated balance sheet from
which it has been derived.

Price Waterhouse LLP

New York, New York
July 30, 1997




                   RISK CAPITAL HOLDINGS, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENT OF INCOME
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)






                                                              THREE MONTHS ENDED                       SIX MONTHS ENDED
                                                                   JUNE 30,                                JUNE 30,
                                                            1997                1996                1997                1996
                                                       ---------------      -------------      ----------------     -------------
                                                                                                            
PREMIUMS AND OTHER REVENUES
Net premiums written                                         $30,090            $16,468               $63,956           $23,571
Increase in unearned premiums                                (10,189)           (12,630)              (22,983)          (17,960)
                                                       ---------------      -------------      ----------------     -------------
Net premiums earned                                           19,901              3,838                40,973             5,611
Net investment income                                          3,525              3,136                 6,976             6,544
Net investment gains (losses)                                   (420)               448                  (445)              254
                                                       ---------------      -------------      ----------------     -------------
         Total revenues                                       23,006              7,422                47,504            12,409

EXPENSES

Claims and claims expenses                                    13,411              2,797                27,951             4,046
Commissions and brokerage                                      5,412                927                11,523             1,489
Other operating expenses                                       3,700              2,633                 7,445             5,124
                                                       ---------------      -------------      ----------------     -------------
         Total expenses                                       22,523              6,357                46,919            10,659

INCOME BEFORE INCOME TAXES AND EQUITY

  IN NET LOSSES OF INVESTEES                                     483              1,065                   585             1,750
Federal income taxes:
         Current                                                 387                809                   675               877
         Deferred                                               (463)              (729)                 (937)             (919)
                                                       ---------------      -------------      ----------------     -------------
Income tax expense (benefit)                                     (76)                80                  (262)              (42)
                                                       ---------------      -------------      ----------------     -------------

INCOME BEFORE EQUITY IN NET LOSS OF INVESTEES                    559                985                   847             1,792

Equity in net loss of investees                                 (215)                                    (305)

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

NET INCOME                                                      $344               $985                  $542            $1,792
                                                       ===============      =============      ================     =============

PER SHARE DATA
Primary and fully diluted:

         Net income                                            $0.02              $0.06                 $0.03             $0.11
                                                       ===============      =============      ================     =============

         Operating income: net income
         excluding net investment losses and

         equity in net loss of investees                       $0.05              $0.04                 $0.07             $0.10
                                                       ===============      =============      ================     =============

         Average shares outstanding                       17,023,430         16,977,790           17,024,232         16,959,540
                                                       ===============      =============      ================     =============




                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                        2



                   RISK CAPITAL HOLDINGS, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET

                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                          (UNAUDITED)
                                                                            JUNE 30,                   DECEMBER 31,
                                                                              1997                         1996
                                                                        -------------------           ------------------
                                                                                                   
ASSETS
Investments:
Fixed maturities                                                               $120,555                    $140,381
     (amortized cost: 1997, $120,065; 1996, $140,128)
Publicly traded equity securities                                               173,534                     117,360
     (cost: 1997, $129,696; 1996, $108,580)
Privately held securities                                                        53,239                      28,847
     (cost: 1997, $43,698; 1996, $23,363)
Short-term investments                                                           94,675                     104,886
                                                                        -------------------           -----------------
     Total investments                                                          442,003                     391,474
                                                                        -------------------           -----------------

Cash                                                                              4,178                       1,466
Accrued investment income                                                         1,904                       2,151
Investment accounts receivable                                                    4,617                         560
Premiums receivable                                                              39,471                      23,669
Reinsurance recoverable on unearned premiums                                      1,177                         576
Reinsurance recoverable                                                             153                         522
Deferred policy acquisition costs                                                12,921                       7,018
Other assets                                                                      6,488                       5,050
                                                                        -------------------           -----------------
                                                                               $512,912                    $432,486
                                                                        ===================           =================

LIABILITIES

Claims and claims expenses                                                      $38,587                     $20,770

Unearned premiums                                                                60,932                      37,348

Reinsurance premiums payable                                                                                    536

Contingent commissions payable                                                    5,067                       2,734

Investment accounts payable                                                      10,061                      10,598
Deferred income tax liability                                                    15,698                       3,026
Other liabilities                                                                 3,358                       5,261
                                                                        -------------------           -----------------
     Total liabilities                                                          133,703                      80,273
                                                                        -------------------           -----------------

STOCKHOLDERS' EQUITY 
  Preferred stock, $.01 par value:

     20,000,000 shares authorized (none issued)

Common stock, $.01 par value:

     80,000,000 shares authorized

     (1997, 17,045,246; 1996, 17,031,246 shares issued)                             170                         170

Additional paid-in capital                                                      340,714                     340,435
Unrealized appreciation of investments, net of income tax                        35,015                       9,436
Deferred compensation under stock award plan                                     (2,194)                     (2,959)
Retained earnings                                                                 5,673                       5,131
Less treasury stock, at cost (1997, 10,073 shares)                                 (169)
                                                                        -------------------           -----------------
     TOTAL STOCKHOLDERS' EQUITY                                                 379,209                     352,213
                                                                        -------------------           -----------------
     TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                                  $512,912                    $432,486
                                                                        ===================           =================


                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                        3

                   RISK CAPITAL HOLDINGS, INC. AND SUBSIDIARY
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                                 (IN THOUSANDS)


                                                                              (UNAUDITED)
                                                                           SIX MONTHS ENDED
                                                                               JUNE 30,

                                                                         1997              1996
                                                                    ---------------    -------------
                                                                                    
COMMON STOCK
        Balance at beginning of year                                        $170            $169
        Issuance of common stock                                                               1
                                                                    ---------------    -------------
        Balance at end of period                                             170             170
                                                                    ---------------    -------------

ADDITIONAL PAID-IN CAPITAL
        Balance at beginning of year                                     340,435         338,737
        Issuance of common stock                                             279           1,067
                                                                    ---------------    -------------
        Balance at end of period                                         340,714         339,804
                                                                    ---------------    -------------

UNREALIZED APPRECIATION OF INVESTMENTS,
NET OF INCOME TAX
        Balance at beginning of year                                       9,436           3,731
        Change in unrealized appreciation (depreciation)                  25,579           (1,885)
                                                                    ---------------    -------------
        Balance at end of period                                          35,015           1,846
                                                                    ---------------    -------------

DEFERRED COMPENSATION UNDER STOCK AWARD PLAN
        Balance at beginning of year                                      (2,959)          (3,441)
        Restricted common stock issued                                      (279)          (1,065)
        Compensation expense recognized                                    1,044           1,008
                                                                    ---------------    -------------
        Balance at end of period                                          (2,194)          (3,498)
                                                                    ---------------    -------------

RETAINED EARNINGS
        Balance at beginning of year                                       5,131           1,019
        Net income                                                           542           1,792
                                                                    ---------------    -------------
        Balance at end of period                                           5,673           2,811
                                                                    ---------------    -------------

TREASURY STOCK, AT COST
        Balance at beginning of year
        Purchase of treasury shares                                         (169)
                                                                    ---------------    -------------
        Balance at end of period                                            (169)
                                                                    ---------------    -------------

TOTAL STOCKHOLDERS' EQUITY

        Balance at beginning of year                                     352,213         340,215
        Issuance of common stock                                             279           1,068
        Change in unrealized appreciation (depreciation)
              of investments, net of income tax                           25,579          (1,885)
        Change in deferred compensation                                      765             (57)
        Net income                                                           542           1,792
        Purchase of treasury stock                                          (169)
                                                                    ---------------    -------------
        Balance at end of period                                        $379,209        $341,133
                                                                    ===============    =============


                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                        4


                   RISK CAPITAL HOLDINGS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)






                                                                               (UNAUDITED)
                                                                             SIX MONTHS ENDED
                                                                                 JUNE 30,

                                                                        1997                  1996
                                                                   ----------------      ---------------
                                                                                    
OPERATING ACTIVITIES
Net income                                                                $542               $1,792
  Adjustments to reconcile net income
  to net cash provided by operating activities:
       Liability for claims and claims expenses, net                    17,817                3,533
       Unearned premiums                                                23,584               17,960
       Premiums receivable                                             (15,802)             (11,302)
       Accrued investment income                                           247                   26
       Contingent commissions payable                                    2,333
       Reinsurance balances, net                                          (768)                  34
       Deferred policy acquisition costs                                (5,903)              (2,221)
       Net investment (gains)/losses                                       445                 (254)
       Deferred income tax asset                                        (1,101)                (919)
       Other liabilities                                                (1,903)                  99
       Other items, net                                                 (2,179)              (1,676)
                                                                   ----------------      ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                               17,312                7,072
                                                                   ----------------      ---------------

INVESTING ACTIVITIES
Purchases of fixed maturity investments                                (86,234)            (168,771)
Sales of fixed maturity investments                                    101,194              156,125
Net sales of short-term investments                                     12,956               70,830
Purchases of equity securities                                         (54,028)             (69,931)
Sales of equity securities                                              12,018                9,017
Purchases of furniture and equipment                                      (337)                (142)
                                                                   ----------------      ---------------
NET CASH USED FOR INVESTING ACTIVITIES                                 (14,431)              (2,872)
                                                                   ----------------      ---------------

FINANCING ACTIVITIES
Common stock issued                                                        279                1,068
Purchase of treasury stock                                                (169)
Deferred compensation on restricted stock                                 (279)              (1,065)
                                                                   ----------------      ---------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES                      (169)                   3
                                                                   ----------------      ---------------

Increase in cash                                                         2,712                4,203
Cash beginning of year                                                   1,466                  982
                                                                   ----------------      ---------------
Cash end of period                                                      $4,178               $5,185
                                                                   ================      ===============




                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                        5






                   RISK CAPITAL HOLDINGS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  ORGANIZATION

Risk Capital Holdings, Inc. ("RCHI"), incorporated in March 1995 under the laws
of the State of Delaware, is a holding company whose wholly owned subsidiary,
Risk Capital Reinsurance Company ("Risk Capital Reinsurance"), a Nebraska
corporation, was formed to provide, on a global basis, property and casualty
reinsurance and other forms of capital, either on a stand-alone basis or as part
of integrated capital solutions for insurance companies with capital needs that
cannot be met by reinsurance alone. (RCHI and Risk Capital Reinsurance are
collectively referred to herein as the "Company.") In September 1995, through
its initial public offering, related exercise of the underwriters'
over-allotment option and direct sales of an aggregate of 16,750,625 shares of
RCHI's common stock, par value $.01 per share (the "Common Stock"), at $20 per
share, and the issuance of warrants, RCHI was capitalized with net proceeds of
approximately $335.0 million, of which $328.0 million was contributed to the
statutory capital of Risk Capital Reinsurance.

Class A warrants to purchase an aggregate of 2,531,079 shares of Common Stock
and Class B warrants to purchase an aggregate of 1,920,601 shares of Common
Stock were issued in connection with the direct sales. Class A warrants are
immediately exercisable at $20 per share and expire September 19, 2002. Class B
warrants are exercisable at $20 per share during the seven year period
commencing September 19, 1998, provided that the Common Stock has traded at or
above $30 per share for 20 out of 30 consecutive trading days.

2. GENERAL

The accompanying interim consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and in the opinion of
management, reflect all adjustments necessary (consisting of normal recurring
accruals) for a fair presentation of results for such periods. These
consolidated financial statements should be read in conjunction with the 1996
consolidated financial statements and related notes contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996.

3. PER SHARE DATA

Earnings per share are computed based on the weighted average number of shares
of Common Stock and common stock equivalents outstanding during the period using
the modified treasury stock method. Stock options and Class A and B warrants to
purchase Common Stock are considered to be common stock equivalents. The common
stock equivalents were anti-dilutive, and thus not included in the weighted
average shares outstanding.

                                        6





In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share." This statement replaces the historical presentation of "primary"
earnings per share with the caption "basic" earnings per share. Basic earnings
per share excludes dilution and is computed by dividing net income by the
weighted average number of shares outstanding for the period. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997, with early adoption prohibited. Upon adoption, all prior period earnings
per share amounts will be restated.

The Company's primary and fully diluted earnings per share amounts as previously
reported are not expected to differ materially from the basic and diluted
amounts required by SFAS No. 128.

In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income".
This statement establishes standards for the reporting of comprehensive income
and its components. Comprehensive income is defined as the change in equity
during a period resulting from transactions and other events from nonowner
sources. SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The Company will apply the provisions of the
statement beginning in 1998.

Currently, comprehensive income for the Company would consist of net income and
the change in unrealized appreciation or depreciation of investments, net of
income tax, as follows:





                                                   (IN THOUSANDS)                   (IN THOUSANDS)
                                                 SIX MONTHS ENDED                     YEAR ENDED
                                                     JUNE 30,                        DECEMBER 31,
                                          -----------------------------    ------------------------------
                                             1997              1996             1996          1995 (1)
                                          ------------     -----------     ------------    ------------
                                                                                   
Net income                                       $542         $1,792          $4,112           $1019
Change in unrealized appreciation
   (depreciation), net of income tax           25,579         (1,885)          5,705           3,731
                                          ------------     -----------     ------------    ------------
Comprehensive income (loss)                   $26,121           ($93)         $9,817          $4,750
                                          ============     ===========     =============   ============

PER SHARE AMOUNTS:
Net income                                      $0.03           $0.11           $0.24          $0.06
Change in unrealized appreciation
    (depreciation), net of income tax            1.50           (0.11)           0.34            0.22
                                          ------------     -----------     ------------    ------------
Comprehensive income (loss)                     $1.53               -           $0.58          $0.28
                                          ============     ===========     =============   ============




(1)  For the period from June 23, 1995 (date of inception) to December 31, 1995



                                        7



4. INVESTMENT INFORMATION

The Company classifies all of its publicly traded fixed maturity and equity
securities as "available for sale" and accordingly, they are carried at
estimated fair value. The fair value of publicly traded fixed maturity
securities and publicly traded equity securities is estimated using quoted
market prices or dealer quotes. Short-term investments, which have a maturity of
one year or less at the date of acquisition, are carried at cost, which
approximates fair value.

All of the Company's publicly traded equity securities and privately held
securities were issued by insurance and reinsurance companies or companies
providing services to the insurance industry. At June 30, 1997, the publicly
traded equity portfolio consisted of 12 investments, with estimated fair values
ranging individually from $1.5 million to $22.6 million.

Investments in privately held securities, issued by privately and publicly held
companies, may include both equity securities and securities convertible into,
or exercisable for, equity securities (some of which may have fixed maturities).
Privately held securities are subject to trading restrictions or are otherwise
illiquid and do not have readily ascertainable market values. The risk of
investing in such securities is generally greater than the risk of investing in
securities of widely held, publicly traded companies. Lack of a secondary market
and resale restrictions may result in the Company's inability to sell a security
at a price that would otherwise be obtainable if such restrictions did not exist
and may substantially delay the sale of a security which the Company seeks to
sell. Such investments are classified as "available for sale" and carried at
estimated fair value, except for investments in which the Company believes it
has the ability to exercise significant influence (generally defined as
investments in which the Company owns 20% or more of the outstanding voting
common stock of the issuer), which are carried under the equity method of
accounting. Under this method, the Company records its proportionate share of
income or loss for such investments in results of operations.

The estimated fair value of investments in privately held securities, other than
those carried under the equity method, is initially equal to the cost of such
investments until the investments are revalued based principally on substantive
events or other factors which could indicate a diminution or appreciation in
value, such as an arm's-length third party transaction justifying an increased
valuation or adverse development of a significant nature requiring a write down.
The Company periodically reviews the valuation of investments in privately held
securities with Marsh & McLennan Risk Capital Corp., its equity investment
advisor.

                                        8



Privately held securities consisted of the following:





                                                                     (IN THOUSANDS)
                                                            JUNE 30,               DECEMBER 31,
                                                              1997                     1996
                                                       --------------------     -------------------
                                                                               
EQUITY SECURITIES:
CARRIED UNDER THE EQUITY METHOD:
The ARC Group, LLC                                             $  9,459
Capital Protection Insurance Services, LLC                          361
First American Financial Corporation                              6,569
Insurance Investment Group, L.P.                                    136                 $   180
Island Heritage Insurance Company, Ltd.                           4,104                   4,269
New Europe Insurance Ventures                                       248
Providers' Assurance Corporation                                  3,921

CARRIED AT FAIR VALUE:
Peregrine Russell Miller Insurance Fund
   of Asia Limited                                                7,554                   7,465
Terra Nova (Bermuda) Holdings, Ltd.                              16,417                  15,870
Venton Holdings, Ltd.                                             4,470                   1,063
                                                           -------------           -------------
         Total privately held equities                          $53,239                 $28,847
                                                           =============           =============




At June 30, 1997, the Company had investment commitments relating to its
privately held securities totaling approximately $31 million, compared to $22
million at December 31, 1996.

Set forth below is certain information relating to each of the Company's
investments in privately held securities which occurred during the second
quarter of 1997:

THE ARC GROUP, LLC

In July 1997, the Company completed its acquisition, effective as of May 7,
1997, of a minority ownership interest in The ARC Group, LLC ("ARC"). ARC,
founded in 1986, is an independent wholesale insurance broker and managing
general agent specializing in the placement of professional liability insurance,
primarily directors and officers liability coverage. ARC will continue to
operate as an independent wholesaler, obtaining its business from a network of
several hundred agents and brokers in the United States.

                                        9





CAPITAL PROTECTION INSURANCE SERVICES, LLC

In May 1997, the Company contributed $510,000, representing 51% (49% voting
interest) of the total capitalization of a newly-formed underwriting management
company, Capital Protection Insurance Services, LLC ("CPI"). CPI, as an
underwriting manager for insurance companies, offers specialty risk and
alternative market solutions. As part of its arrangements with CPI, the Company
expects to provide reinsurance capacity for the business CPI develops.

PROVIDERS' ASSURANCE CORPORATION

In April 1997, the Company acquired an approximately 37% ownership interest in
Providers' Assurance Corporation ("Providers"), for $4 million. Providers
develops and markets workers' compensation insurance programs through joint
operating arrangements with community-based healthcare providers, and offers
other workers' compensation-related consulting services to the healthcare
community. Under the agreements with Providers, the Company has the right to
provide certain reinsurance on insurance programs developed by Providers during
specified time periods.

VENTON HOLDINGS, LTD.

During the 1997 second quarter, the Company recorded an increase of
approximately $3.4 million in the carrying value of its investment in Venton
Holdings, Ltd. ("Venton") to partially reflect the purchase price paid by EXEL
Limited for its 20% ownership in Venton. The new carrying value was established
by taking the mid-point between the per share purchase price paid by the Company
and per share purchase price recently paid by EXEL Limited.

5.  STATUTORY DATA

The statutory capital and surplus of Risk Capital Reinsurance at June 30, 1997
was $365.0 million, compared to $334.3 million at December 31, 1996. The
statutory net loss for the six month period ended June 30, 1997 was $6.1
million, compared to a net loss of $1.4 million in the prior year period. The
growth in surplus during the first half of 1997 is primarily from unrealized
appreciation of the Company's public equity portfolio.

                                       10





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

GENERAL

THE COMPANY

Risk Capital Holdings, Inc. ("RCHI") is the holding company for Risk Capital
Reinsurance Company ("Risk Capital Reinsurance"), RCHI's wholly owned subsidiary
which is domiciled in Nebraska. (RCHI and Risk Capital Reinsurance are
collectively referred to herein as the "Company".) RCHI was incorporated in
March 1995 and commenced operations during September 1995 upon completion of its
initial public offering and related exercise of the underwriters' over-allotment
option and direct sales of an aggregate of 16,750,625 shares of RCHI's common
stock, par value $.01 per share, at $20 per share, and the issuance of warrants
(collectively, the "Offerings"). RCHI received aggregate net proceeds from the
Offerings of approximately $335.0 million, of which $328.0 million was
contributed to the capital of Risk Capital Reinsurance. On November 6, 1995,
Risk Capital Reinsurance was licensed under the insurance laws of the State of
Nebraska.

RECENT INDUSTRY PERFORMANCE

The property and casualty reinsurance industry has been highly cyclical. This
cyclicality has produced periods characterized by intense price competition due
to excessive underwriting capacity as well as periods when shortage of capacity
permitted favorable premium levels. Demand for reinsurance is influenced
significantly by underwriting results of primary property and casualty insurers
and prevailing general economic and market conditions, all of which affect
liability retention decisions of primary insurers and reinsurance premium rates.
The supply of reinsurance is related directly to prevailing prices and levels of
surplus capacity, which, in turn, may fluctuate in response to changes in rates
of return on investments being realized in the reinsurance industry. The
cyclical trends in the industry and the industry's profitability can also be
affected significantly by volatile and unpredictable developments, including
changes in the propensity of courts to grant larger awards, natural disasters
(such as catastrophic hurricanes, windstorms, earthquakes, floods and fires),
fluctuations in interest rates and other changes in the investment environment
that affect market prices of investments and the income and returns on
investments, and inflationary pressures that may tend to affect the size of
losses experienced by ceding primary insurers.

Reinsurance treaties that are placed by intermediaries are typically for one
year terms with a substantial number that are written or renewed on January 1
each year. Other significant renewal dates include April 1, July 1 and October
1. Thus far, the 1997 renewal periods have been marked by continuing intensified
competitive conditions in terms of premium rates and treaty terms and conditions
in both the property and casualty segments of the marketplace. These conditions
have worsened due to large domestic primary companies retaining more of their
business and ceding less premiums to reinsurers. While the Company is initially
somewhat disadvantaged compared with many of its competitors, which are larger,
have greater resources and longer operating histories than the Company, it
believes it has been able to generate attractive opportunities in the
marketplace due to its substantial unencumbered capital base, experienced
management team and relationship with its equity investment advisor as well as
its strategic focus on generating a small number of large reinsurance treaty
transactions that may also be integrated with an equity investment in client
companies.

                                       11




As of July 30, 1997, the Company had 64 in-force treaties, with approximately
$150 million of annualized in-force premiums. Such in-force premiums represent
estimated annualized premiums from treaties entered into during 1996 and the
1997 renewal periods that are expected to generate net premiums written during
calendar year 1997. All except one of such treaties are subject to renewal.
Without taking into account the possibility that (x) several of the treaties
entered into during 1996 that are scheduled to expire during the remainder of
1997 may be renewed and (y) additional new treaties may be bound during 1997, it
is estimated that the Company could record approximately $130 million of net
premiums written over the twelve month period ending December 31, 1997 from such
treaties. Such estimates of in-force premiums and net premiums written do not
include certain unearned premium portfolios and other non-recurring transactions
and are based on information provided by ceding company clients. Actual premium
writings for 1997 may differ materially from such estimates.

RESULTS OF OPERATIONS

For the six month periods ended June 30, 1997 and 1996, the Company had
consolidated net income of approximately $542,000, or $0.03 per share, and $1.8
million, or $0.11 per share, respectively. After-tax realized investment losses
of $289,000, or $0.02 per share, for the first half of 1997, compare with a net
investment gain of $165,000, or $0.01 per share, for the same prior year period.
Net income for the first half of 1997 included an after-tax loss of $0.3
million, or $0.02 per share, representing the Company's equity in the net loss
of investee companies, which are accounted for under the equity method of
accounting.

The Company believes that the results of operations for the six months ended
June 30, 1997 are not necessarily indicative of its future financial results due
to a number of factors, including (i) the increase in net premiums written
indicated by the Company's January 1 and subsequent 1997 renewal season
activity, (ii) the Company's emphasis on targeting casualty business that is
longer-tail than its current mix of business and (iii) the Company's investment
strategy. Increased premium writings, particularly longer-tail casualty
business, can generally be expected to generate higher underwriting losses
because of the related requirement to establish claims liabilities that are
adequate to cover the costs of anticipated future claim payments without taking
into account the time value of money.

The amount of investment income earned that may offset underwriting losses from
quarter to quarter could vary and diminish as the Company continues to employ
its strategy of investing a substantial portion of its investment portfolio in
publicly traded and privately held equity securities of insurance companies and
insurance-related entities. Investments in equity securities yield less current
investment income than fixed maturity investments. Variability and declines in
the Company's results of operations could be further exacerbated by private
equity investments in start-up companies which are accounted for under the
equity method. Such start-up companies may be expected to initially generate
operating losses. The Company's results may also be impacted by currency gains
and losses for business transacted in currencies other than

                                       12



U.S. dollars. Accordingly, the Company's results of operations for the year
ending December 31, 1997 may vary from quarter to quarter and from the financial
results reported by the Company in 1996, and could also produce operating
losses.

At June 30, 1997, primary and fully-diluted book value per share were $22.26 and
$21.91, respectively, which compare with primary and fully-diluted book value
per share of $20.68 at December 31, 1996. For the first half of 1997, unrealized
appreciation increased by $25.6 million, net of tax, or $1.50 per share.
Included in the change in unrealized appreciation for the 1997 six-month period
is an unrealized gain, net of tax, of $2.2 million, or $0.13 per share, relating
to the Company's privately held equity investment in Venton Holdings, Ltd.

Unrealized appreciation or depreciation of investments to the extent that it
occurs for investments carried at fair value is recorded in a separate
components of stockholders' equity, net of related deferred income taxes. Such
gains or losses are recorded in net income to the extent investments are sold.
The timing and recognition of such gains and losses are unpredictable and not
indicative of future operating results.

NET PREMIUMS WRITTEN

Net premiums written for the six month periods ended June 30, 1997 and 1996 were
as follows:

                                               (IN MILLIONS)
                                              SIX MONTHS ENDED
                                                  JUNE 30,
                                  -----------------------------------------
                                            1997              1996
                                       ------------     -------------
       Property                             $8.0              $6.5
       Casualty                             31.8               5.5
       Multi-line                           18.1               1.5
       Specialty                             6.1              10.1
                                       ------------     ------------
       Total                               $64.0             $23.6
                                       ============     =============


Approximately 30% of net premiums written in the first half of 1997 was from
non-U.S. clients, compared with 56% in the first half of 1996.


Set forth below is the Company's statutory composite ratios for the six month
periods ended June 30, 1997 and 1996:

                                                       SIX MONTHS ENDED
                                                            JUNE 30,
                                                --------------------------------
                                                    1997                1996
                                                ------------      --------------
Claims and claims expense ratio                       68.2%            72.1%
Commissions and brokerage ratio                       27.2%            15.7%
Operating expense ratio                               10.6%            21.3%
                                                ------------     ---------------
Statutory composite ratio                            106.0%           109.1%
                                                ============     ===============


                                       13




Given the low level of premium volume the Company may initially generate and the
long-term nature of the casualty business which the Company seeks to write, it
is likely that earned premiums will be insufficient to cover claims costs,
acquisition costs and operating expenses, thereby resulting in continued
underwriting losses in 1997.

In pricing its reinsurance treaties, the Company focuses on many factors,
including exposure to claims and commissions and brokerage expenses. Commissions
and brokerage expenses are acquisition costs that generally vary by the type of
treaty and line of business, and are considered by the Company's underwriting
and actuarial staff in evaluating the adequacy of premium writings.

Other operating expenses increased to $7.4 million for the first half of 1997,
compared to $5.1 million for the 1996 prior year period. Assuming the successful
execution of the Company's business strategy, the Company expects other
operating expenses to grow commensurate with growing operations, but expects
other operating expenses to decline moderately as a percentage of net premiums
written because increases in premium writings are generally expected to exceed
the growth in such expenses.

Included in 1997 other operating expenses is a pre-tax foreign exchange loss of
$538,000. Such loss is principally related to assets and premiums receivable of
approximately $5.8 million denominated in European Currency Units ("ECU's"),
which is recorded separately from statutory underwriting results and therefore
excluded from the statutory composite ratio. Unhedged monetary assets and
liabilities are translated at the exchange rate in effect at the balance sheet
date, with the resulting foreign exchange gains or losses recognized in income.
Such future gains or losses are unpredictable, and could be material.

INVESTMENT RESULTS

At June 30, 1997, approximately 49% of the Company's invested assets, short term
investments and cash consisted of fixed maturity and short-term investments
compared to 63% at the end of 1996. Net investment income for the first six
months of 1997 was approximately $7.0 million, compared to $6.5 million for the
prior year period. The amount of investment income from quarter to quarter could
vary and diminish as the Company continues to employ its strategy of investing a
substantial portion of its investment portfolio in publicly traded and privately
held equity securities of insurance companies which generally yield less current
investment income than fixed maturity investments. Unrealized appreciation or
depreciation of such investments to the extent that it occurs is recorded in a
separate component of stockholders' equity, net of related deferred income
taxes. Gains or losses are recorded in net income to the extent investments are
sold, but the recognition of such gains and losses is unpredictable and not
indicative of future operating results.

                                       14




INCOME TAXES

The Company's effective tax rates for the first half of 1997 and 1996 are less
than the 35% statutory rate on pre-tax operating income due to tax exempt income
and the dividends received deductions. The gross deferred income tax benefits
for the first half of 1997 and 1996 of approximately $1.1 million and $919,000,
respectively, which are assets considered recoverable from future taxable
income, resulted principally from temporary differences between financial and
taxable income. Temporary differences include, among other things, charges for
restricted stock grants which are not deductible for income tax purposes until
vested (vesting of existing restricted stock grants will occur over a five-year
period), as well as charges for a portion of unearned premiums and claims
reserves.

INVESTMENTS

A principal component of the Company's investment strategy is investing a
significant portion of invested assets in publicly traded and privately held
equity securities, primarily issued by insurance and reinsurance companies and
companies providing services to the insurance industry. Cash and fixed maturity
investments and, if necessary, the sale of publicly traded equity securities
will be used to support shorter-term liquidity requirements.

As a significant portion of the Company's investment portfolio will generally be
equity securities issued by insurance and reinsurance companies and companies
providing services to the insurance industry, the equity portfolio lacks
industry diversification and will be particularly subject to the cyclically of
the insurance industry. Unlike fixed income securities, equity securities such
as common stocks, including the equity securities in which the Company may
invest, generally are not and will not be rated by any nationally recognized
rating service. The values of equity securities generally are more dependent on
the financial condition of the issuer and less dependent on fluctuations in
interest rates than are the values of fixed income securities. The market value
of equity securities generally is regarded as more volatile than the market
value of fixed income securities. The effects of such volatility on the
Company's equity portfolio could be exacerbated to the extent that such
portfolio is concentrated in the insurance industry and in relatively few
issuers.

As the Company's investment strategy is to invest a significant portion of its
investment portfolio in equity securities, its investment income in any fiscal
period may be smaller, as a percentage of investments, and less predictable than
that of other insurance companies, and net realized and unrealized gains
(losses) on investments may have a greater effect on the Company's results of
operations or stockholders' equity at the end of any fiscal period than other
insurance and/or reinsurance companies. Because the realization of gains and
losses on equity investments is not generally predictable, such gains and losses
may differ significantly from period to period.

Investments included in the Company's private portfolio include securities
issued by privately held companies and securities issued by public companies
that are generally restricted as to resale or are otherwise illiquid and do not
have readily ascertainable market values. The risk of investing in such
securities is generally greater than the risk of investing in securities of
widely held, publicly traded companies. Lack of a secondary market and resale
restrictions may result in the Company's inability to sell a security at a price
that would otherwise be obtainable if such

                                       15



restrictions did not exist and may substantially delay the sale of a security
the Company seeks to sell. At June 30, 1997, cash and invested assets totaled
approximately $446.2 million, consisting of $98.9 million of cash and short-term
investments, $120.6 million of publicly traded fixed maturity investments,
$173.5 million of publicly traded equity securities and $53.2 million of
privately held securities.

During the first six months of 1997, the Company allocated approximately $20.5
million from its short term portfolio to publicly traded equity securities, and
an additional $20.6 million to fund investments in privately held securities.
See Note 4 under the caption "Investment Information" of the accompanying Notes
to Consolidated Financial Statements for certain information regarding the
Company's privately held securities and their carrying values. During the
remainder of 1997 and over the long-term, the Company intends to continue to
allocate a substantial portion of its cash and short-term investments into
publicly traded and privately held equity securities, subject to market
conditions and opportunities in the marketplace.

At June 30, 1997, the publicly traded equity portfolio consisted of investments
in 12 publicly traded domestic insurers, reinsurers, or companies providing
services to the insurance industry. The estimated fair values of such
investments ranged individually from $1.5 million to $22.6 million. The fixed
maturity and short-term investments were all rated investment grade by Moody's
Investors Service, Inc. or Standard & Poor's Corporation and have an average
quality rating of AA and an average duration of approximately 2.4 years.

The Company's pre-tax and net of tax investment yields in the first six months
of 1997 were 3.7% and 2.7%, respectively, compared to 3.9% and 2.9%,
respectively, for the same prior year period. Assuming a stable interest rate
environment, the Company anticipates such yields to moderately decline as funds
invested in short-term securities are allocated into equity securities.

The Company has not invested in derivative financial instruments such as
futures, forward contracts, swaps, or options or other financial instruments
with similar characteristics such as interest rate caps or floors and fixed-rate
loan commitments.

LIQUIDITY AND CAPITAL RESOURCES

RCHI is a holding company and has no significant operations or assets other than
its ownership of all of the capital stock of Risk Capital Reinsurance, whose
primary and predominant business activity is providing reinsurance and other
forms of capital to insurance and reinsurance companies and making investments
in insurance-related companies. RCHI will rely on cash dividends and
distributions from Risk Capital Reinsurance to pay any cash dividends to
stockholders of RCHI and to pay any operating expense that RCHI may incur. The
payment of dividends by RCHI will be dependent upon the ability of Risk Capital
Reinsurance to provide funds to RCHI. The ability of Risk Capital Reinsurance to
pay dividends or make distributions to RCHI is dependent upon its ability to
achieve satisfactory underwriting and investment results and to meet certain
regulatory standards of the State of Nebraska. There are presently no
contractual restrictions on the payment of dividends or the making of
distributions by Risk Capital Reinsurance to RCHI.

                                       16




Nebraska insurance laws provide that, without prior approval of the Nebraska
Director of Insurance (the "Nebraska Director"), Risk Capital Reinsurance cannot
pay a dividend or make a distribution (together with other dividends or
distributions paid during the preceding 12 months) that exceeds the greater of
(i) 10% of statutory surplus as of the preceding December 31 or (ii) statutory
net income from operations from the preceding calendar year not including
realized capital gains. Net income (exclusive of realized capital gains) not
previously distributed or paid as dividends from the preceding two calendar
years may be carried forward for dividends and distribution purposes. Any
proposed dividend or distribution in excess of such amount is called an
"extraordinary" dividend or distribution and may not be paid until either it has
been approved, or a 30-day waiting period has passed during which it has not
been disapproved, by the Nebraska Director. Notwithstanding the foregoing,
Nebraska insurance laws provide that any distribution that is a dividend may be
paid by Risk Capital Reinsurance only out of earned surplus arising from its
business, which is defined as unassigned funds (surplus) as reported in the
statutory financial statement filed by Risk Capital Reinsurance with the
Nebraska Insurance Department for the most recent year. In addition, Nebraska
insurance laws also provide that any distribution that is a dividend and that is
in excess of Risk Capital Reinsurance's unassigned funds, exclusive of any
surplus arising from unrealized capital gains or revaluation of assets, will be
deemed an "extraordinary" dividend subject to the foregoing requirements.

RCHI and Risk Capital Reinsurance file consolidated federal income tax returns
and have entered into a tax sharing agreement (the "Tax Sharing Agreement"),
allocating the consolidated income tax liability on a separate return basis.
Pursuant to the Tax Sharing Agreement, Risk Capital Reinsurance makes tax
sharing payments to RCHI based on such allocation.

Net cash flow from  operating  activities  for the six months ended June 30, 
1997 was $17.3  million,  compared  with $7.1 million in the prior year 
period.

The primary sources of liquidity for Risk Capital Reinsurance are net cash flow
from operating activities, principally premiums received, the receipt of
dividends and interest on investments and proceeds from the sale or maturity of
investments. The Company's cash flow is also affected by claims payments, some
of which could be large. Therefore, the Company's cash flow could fluctuate
significantly from period to period.

The Company does not currently have any material commitments for any capital
expenditures over the next 12 months other than in connection with the further
development of the Company's infrastructure. The Company expects that its
financing and operational needs for the foreseeable future will be met by the
Company's balance of cash and short-term investments, as well as by funds
generated from operations. However, no assurance can be given that the Company
will be successful in the implementation of its business strategy.

At June 30, 1997, the Company's consolidated stockholders' equity totaled $379.2
million, or $22.26 per share. At such date, statutory surplus of Risk Capital
Reinsurance was approximately $365.0 million. Based on data available as of
March 31, 1997 from the Reinsurance Association of America, Risk Capital
Reinsurance is the thirteenth largest domestic broker market oriented reinsurer
as measured by statutory surplus.

                                       17



SAFEHARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Except for the historical information contained herein, the matters discussed in
this Form 10-Q include forward looking statements that involve risks and
uncertainties, including, but not limited to, quarterly fluctuations in results
and other risks detailed from time to time in the Company's Securities and
Exchange Commission filings. Among the factors that could cause such forward
looking statements not to be realized include, without limitation, acceptance in
the market of the Company's reinsurance products; the availability of
investments on terms that are attractive to the Company; pricing competition;
the amount of underwriting capacity from time to time in the market; general
economic conditions and conditions specific to the reinsurance and investment
markets in which the Company operates; regulatory changes and conditions; rating
agency policies and practices; claims development and loss of key executives.
Actual results may differ materially from management expectations. The Company
assumes no obligation to update any forward looking statement or other
information contained in this report.

                                       18






PART II.  OTHER INFORMATION

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

(a)      The 1996 Annual Meeting of Shareholders ("Annual Meeting") of Risk 
         Capital Holdings, Inc. ("RCHI") was held on May 13, 1997.

(b)      Proxies for the Annual Meeting were solicited pursuant to Regulation 14
         under the Securities Exchange Act of 1934, as amended. There was no
         solicitation in opposition to management's nominees as listed in RCHI's
         Proxy Statement, dated April 14, 1997.

(c)      The shareholders of RCHI re-elected the Class II Directors of RCHI to
         hold office until the 2000 annual meeting of shareholders and until
         their successors are elected and qualified. Set forth below are the
         number of votes cast for and withheld for each such Director:

         ELECTION OF DIRECTORS

                                          FOR                     WITHHELD
                                          ---                     --------

         Allan W. Fulkerson            15,323,089                   5,225
         Lewis L. Glucksman            15,291,989                  36,325
         Ian R. Heap                   15,291,989                  36,325

         At the Annual Meeting, the shareholders also approved (i) an Amendment
         to RCHI's 1995 Long Term Incentive and Share Award Plan and (ii)
         ratified the selection of Price Waterhouse LLP as independent
         accountants for the fiscal year ending December 31, 1997. Set forth
         below are the voting results for such proposals:

         APPROVAL OF AMENDMENT TO RCHI'S 1995 LONG TERM INCENTIVE AND SHARE 
         AWARD PLAN

              FOR                 AGAINST                    ABSTAIN
              ---                 -------                    -------
          15,045,854              236,935                     28,475

         RATIFICATION OF SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT 
         ACCOUNTANTS

              FOR                 AGAINST                    ABSTAIN
              ---                 -------                    -------
          15,321,314                1,300                      5,700








                                       19






ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits.

         EXHIBIT NO.                        DESCRIPTION

         10.1               Stock Option Agreements - Executive Officers

         10.2               Stock Option Agreement - Chairman

         10.3               Restricted Share Agreements - Executive Officers

         15                 Accountants' Awareness Letter and Limitation of 
                            Liability (regarding unaudited interim financial 
                            information)

         27                 Financial Data Schedule

(b)      Reports on Form 8-K.

         There were no reports filed on Form 8-K for the three month period
         ended June 30, 1997.

         Omitted from this Part II are items which are inapplicable or to which
         the answer is negative for the period covered.


                                       20







                                   SIGNATURES



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

                                           RISK CAPITAL HOLDINGS, INC.

                                           ----------------------------------
                                            (REGISTRANT)

                                            /s/  MARK D. MOSCA
                                           ----------------------------------
DATE: AUGUST 13, 1997                       MARK D. MOSCA
                                            PRESIDENT

                                            /s/  PAUL J. MALVASIO
                                           ----------------------------------
DATE: AUGUST 13, 1997                       PAUL J. MALVASIO
                                            CHIEF FINANCIAL OFFICER


                                       21



                                  EXHIBIT INDEX

Exhibit
NO.                          DESCRIPTION

10.1               Stock Option Agreements - Executive Officers

10.2               Stock Option Agreement - Chairman

10.3               Restricted Share Agreements - Executive Officers

15                 Accountants' Awareness Letter and Limitation of Liability 
                   (regarding unaudited interim financial information)

27                 Financial Data Schedule


                                       22