SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

/x/ Quarterly report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934

For the Quarterly period ended June 30, 1995

/ / Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934

For the transition period from _________ to __________

Commission file number 0-15404

FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.
(Exact Name of Registrant as Specified in its Charter)

DELAWARE 36-3468795
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)

300 DELAWARE AVENUE, SUITE 1704
WILMINGTON, DE
(Address of Principal Executive Offices) 19801
Registrant's telephone number, including Zip Code
area code (302) 427-5800

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 ___

Number of shares of common stock outstanding:

NUMBER OUTSTANDING
CLASS AS OF JUNE 30, 1995
----- ------------------

$1.00 par value common 2,206,504

2
FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF AS OF
JUNE 30, DECEMBER 31,
1995 1994
----------- ------------
ASSETS (UNAUDITED)

INVESTMENTS

Fixed maturities held for sale at market (Amortized cost: 1995 - $56,468,557;
1994 - $53,909,188) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $57,250,125 $52,283,318
Non-redeemable preferred equities at market (Amortized cost: 1995 - $6,795,965;
1994 - $6,189,589) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,695,648 5,785,356
Common Stock at market (Cost: 1995 - $3,757,863; 1994 - $2,578,971) . . . . . . . . . . . . . 3,995,384 2,493,450
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,677,075 4,673,778
----------- -----------
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,618,233 65,235,902
OTHER ASSETS

Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507,501 3,251,227
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,711,849 2,831,922
Premiums receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,355,958 2,934,056
Reinsurance recoverable on paid losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 156,874 160,587
Reinsurance recoverable on unpaid losses . . . . . . . . . . . . . . . . . . . . . . . . . . 6,712,578 6,424,110
Accrued investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 736,320 594,748
Deferred federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,746,043 2,330,000
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,167,540 1,185,357
----------- -----------
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,094,663 19,712,007
----------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $88,712,897 $84,947,909
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Reserves for unpaid losses and loss adjustment expenses . . . . . . . . . . . . . . . . . . . $33,794,332 $32,967,809
Unearned premium reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,058,511 4,233,747
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,786,947 4,516,220
Funds withheld from reinsurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,711,849 2,831,922
Excess of acquired net assets over cost . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,386,624 1,614,555
----------- -----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,738,262 46,164,253

STOCKHOLDERS' EQUITY
Preferred stock, $1,000 par value. 75,000 shares authorized; no shares issued
and oustanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ -- $ --
Common stock, $1 par value. 6,000,000 shares authorized; 2,923,404 shares issued . . . . . . 2,923,404 2,923,404
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,538,250 29,534,302
Treasury stock, at cost (1995 - 716,900; shares; 1994 - 746,700 shares) . . . . . . . . . . . (6,698,002) (7,016,554)
Unrealized investment losses net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 606,390 (1,562,822)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,604,595 14,905,326
----------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,974,638 38,783,656
----------- -----------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . . . $88,712,899 $84,947,909
=========== ===========

See the accompanying notes to the condensed consolidated financial statements.

2
3

FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

SIX MONTHS SIX MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1995 1994 1995 1994
----------- ---------- ---------- ----------

REVENUE
Premiums earned . . . . . . . . . . . . . . . . . . $5,211,981 $3,585,149 $2,906,205 $1,733,461
Net investment income . . . . . . . . . . . . . . . 2,135,751 1,695,120 965,186 862,105
Net realized gains on investments . . . . . . . . . 359,854 336,109 275,892 4,763
Other income . . . . . . . . . . . . . . . . . . . 332,555 341,882 157,413 167,603
----------- ---------- ---------- ----------
Total revenue . . . . . . . . . . . . . . . . . . 8,040,141 5,958,260 4,304,696 2,767,932
LOSSES AND EXPENSES
Losses and loss adjustment expenses . . . . . . . . 2,296,207 1,459,327 1,474,021 395,329
Commissions expenses . . . . . . . . . . . . . . . 1,308,746 735,189 720,518 378,051
Other operating and management expenses . . . . . . 1,874,937 1,804,402 1,023,982 1,004,524
----------- ---------- ---------- ----------
Total losses and expenses . . . . . . . . . . . . 5,479,890 3,998,918 3,218,521 1,777,904
----------- ---------- ---------- ----------
Income before income taxes . . . . . . . . . . . . . 2,560,251 1,959,342 1,086,175 990,028
Provision for income taxes . . . . . . . . . . . . . 531,190 216,795 226,534 57,257
----------- ---------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . $2,029,061 $1,742,547 $ 859,641 $ 932,771
=========== ========== ========== ==========

Net income per common share . . . . . . . . . . . . . $ 0.88 $ 0.76 $ 0.38 $ 0.41
=========== ========== ========== ==========
Weighted average number of shares outstanding
for the entire period . . . . . . . . . . . . . . $2,309,377 $2,292,699 $2,313,168 $2,291,543
=========== ========== ========== ==========

3
4
FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1995 1994
------------ ------------

CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . $ 1,123,834 $ 3,419,227

INVESTING ACTIVITIES
Net (purchases) sales of short term investments . . . . 996,703 (2,915,252)
Purchases of fixed maturities . . . . . . . . . . . . . (13,922,871) (13,464,808)
Dispositions of fixed maturities. . . . . . . . . . . . 11,101,663 14,659,101
Net purchases of preferred equities . . . . . . . . . . (606,376) (2,019,239)
Net purchases of common stock . . . . . . . . . . . . . (1,177,388) (1,878,050)
------------ ------------
NET CASH USED BY INVESTING ACTIVITIES . . . . . . . . . (3,608,269) (5,618,248)

FINANCING ACTIVITIES
Stock options exercised . . . . . . . . . . . . . . . . 70,500 --
Payments of cash dividends. . . . . . . . . . . . . . . (329,791) (282,413)
------------ ------------
NET CASH USED BY FINANCING ACTIVITIES . . . . . . . . . . (259,291) (282,413)
------------ ------------
DECREASE IN CASH . . . . . . . . . . . . . . . . . . . . $ (2,743,726) $ (2,481,434)
============ ============

See the accompanying notes to the condensed consolidated financial statements.

4
5

FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30,1995
(unaudited)

A. BASIS OF PRESENTATION

The condensed consolidated financial statements included herein have
been prepared by the Registrant without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission and reflect
all adjustments, consisting of normal recurring accruals, which are, in
the opinion of management, necessary for a fair presentation of the
results of operations for the periods shown. These statements are
condensed and do not include all information required by generally
accepted accounting principles to be included in a full set of
financial statements. It is suggested that these financial statements
be read in conjunction with the consolidated financial statements at,
and for the year ended, December 31, 1994 and notes thereto, included
in the Registrant's annual report as of that date. Certain prior year
amounts have been reclassified to conform with the 1995 presentation.

B. DIVIDENDS PAID

The Registrant has paid the following common share dividends in 1995
to outstanding stockholders of record:

Payment Stockholder Dividend Paid
Date Record Date Per Common Share
---- ----------- ----------------

February 23, 1995 January 26, 1995 $0.075
May 25, 1995 April 20, 1995 $0.075

In addition, the Registrant has declared the following common share
dividends in 1995 to outstanding stockholders of record:

Payment Stockholder Dividend Paid
Date Record Date Per Common Share
---- ----------- ----------------

August 24, 1995 July 27, 1995 $0.075

Distribution Stockholder Stock Dividend
Date Record Date Per Common Share
---- ----------- ----------------

August 24, 1995 July 27, 1995 20%

5
6

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION

LIQUIDITY AND CAPITAL RESOURCES

GENERAL BUSINESS

Financial Institutions Insurance Group, Ltd. (the "Registrant") is an insurance
holding company which, through its subsidiaries, underwrites insurance and
reinsurance. The principal lines of business include professional liability,
directors' and officers' liability, fidelity, property catastrophe reinsurance
and other lines of property and casualty reinsurance.

The Registrant conducts its business by operating an insurance company and
managing insurance and reinsurance assumptions through two underwriting
agencies.

The First Reinsurance Company of Hartford ("First Re") is the largest
subsidiary. Through affiliated subsidiaries, First Re provides insurance
coverage and has entered into reinsurance treaties whereby companies cede a
portion of their premiums, commissions and related incurred losses to First Re.

The principal underwriting activity of the group is managed by a wholly-owned
subsidiary, Oakley Underwriting Agency, Inc. ("Oakley"). Formed in 1993,
Oakley underwrites directors' and officers' liability insurance and
professional liability insurance principally on behalf of First Re and Virginia
Surety Company, Inc. ("VSC"). VSC is an unaffiliated insurance company that
maintains an underwriting contract with Oakley.

The profitability of the property-casualty business is dependent on competitive
influences, the efficiency and costs of operations, investment results between
the time premiums are collected and losses are paid, the level of ultimate
losses paid, and the ability to estimate each of those factors in setting
premium rates. Investment results are dependent on the selection of investment
vehicles, the ability to project ultimate loss payments, and the timing of
those loss payments. Ultimate loss payments are dependent on the types of
coverages provided, results of litigation and the geographic areas of the
country covered.

LIQUIDITY

General convention in the insurance industry has established an informal
guideline ratio of premiums written to capital that is deemed appropriate.
Typically, this ratio provides that premiums be no greater than three times the
capital and surplus of the company. The Registrant has maintained a ratio of
less than $.40 of premium written for each $1.00 of its capital and surplus
since its inception. Additionally, the Registrant must file certain reports
with various regulatory agencies. These reports measure the liquidity, capital
resources and profitability of the Registrant to insurance industry standards.
Based on these reports, for the 1994 year and first two quarters of 1995, the
liquidity and capital resources of the Registrant exceed the operating
standards.

6
7

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (CONT.)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

The Registrant's fixed investment portfolio has been structured such that the
average maturity of the portfolio does not exceed three years. The length of
time needed to settle claims from reinsured policies is influenced by the type
of coverage involved and the complexity of the individual loss occurrence.
Management believes that it has positioned its investment portfolio to ensure
that it can meet its obligations without adverse deviation from its current
investment objectives. It is also believed that the Registrant's current
investment policies permit it to continue to take advantage of favorable
changes that might occur in the investment marketplace.

On December 30, 1993, the Registrant adopted SFAS 115 and classified all of its
fixed maturity investments as held for sale and carries them at market value,
because the Registrant will likely sell such investments prior to maturity.
Non-redeemable preferred equity securities and common stocks are also carried
at market value. Short-term investments are carried at the lower of amortized
cost or market value.

The net tax effected unrealized loss of $1,562,822 at December 31, 1994
improved to a net tax effected unrealized gain of $606,390 as of June 30,
1995, due to a favorable stock and bond market.

Management does not plan to liquidate investments to fund operations or pursue
financing activities, but will continue to manage the portfolio seeking the
maximum total return while keeping the duration and credit profile at
approximately the same historical levels. Following this policy, the Registrant
realized $354,854 of capital gains from the held for sale portfolio in the
first six months of 1995 by selling securities and reinvesting the proceeds.

The Registrant and its investment advisors believe that, given the current
uncertainties in the fixed income market, it was appropriate to realize these
gains. This activity did not affect the liquidity or quality of the portfolio.

7
8

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (CONT.)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

The following table outlines the respective reserve components and their
balances as of June 30, 1994 and at quarterly intervals through the period to
June 30, 1995.

DIRECT AND ASSUMED
RESERVES ON
REPORTED IBNR
DATE RESERVES % CLAIMS % RESERVES %

6/30/94 $33,029,457 100% $13,099,987 40% $19,929,470 60%
9/30/94 $33,250,399 100% $13,117,104 40% $20,133,295 60%
12/31/94 $32,967,809 100% $12,814,155 38% $20,153,654 62%
3/31/95 $33,048,655 100% $13,551,763 41% $19,496,892 59%
6/30/95 $33,794,332 100% $13,106,992 39% $20,687,340 61%

CEDED

RESERVES ON
REPORTED IBNR
DATE RESERVES % CLAIMS % RESERVES %

6/30/94 $6,124,728 100% $4,378,321 71% $1,749,407 29%
9/30/94 $5,983,568 100% $4,367,754 73% $1,615,814 27%
12/31/94 $6,424,110 100% $4,006,925 62% $2,417,185 38%
3/31/95 $6,228,220 100% $4,282,499 69% $1,945,721 31%
6/30/95 $6,712,578 100% $5,503,357 82% $1,209,221 18%

NET RESERVES

RESERVES ON
REPORTED IBNR
DATE RESERVES % CLAIMS % RESERVES %

6/30/94 $26,904,729 100% $8,724,666 32% $18,180,063 68%
9/30/94 $27,266,831 100% $8,749,350 32% $18,517,481 68%
12/31/94 $26,543,699 100% $8,807,230 33% $17,736,469 67%
3/31/95 $26,820,435 100% $9,269,264 35% $17,551,171 65%
6/30/95 $27,081,754 100% $7,603,635 28% $19,478,119 72%

The Registrant regularly monitors the relative proportions of its gross
reserves to ensure that they are adequate. In the event such reserves are
deemed to be either excessive or insufficient, adjustments are made at the time
of such determination.

8
9

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (CONT.)

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

For income tax purposes, the liability for unpaid losses and loss adjustment
expenses is discounted to values less than those reported for accounting
purposes. The effect of the discounting is to increase the amount of taxable
income and current income tax liability. The tax based adjustments are more
fully explained in Notes A and D to the consolidated financial statements of
the Registrant in the Registrant's Form 10-K for the year ended December 31,
1994.

Management considers the Registrant's current capitalization, investments and
net reserves to be adequate to meet the Registrant's operating needs and to
support the level of reinsurance premiums currently being assumed.

Payments of future cash dividends are reviewed and voted on at regularly
scheduled Board of Directors' meetings of the Registrant and its subsidiaries.
In declaring the most recent dividend, the Registrant considered its current
financial condition, with special attention to current income, retained
earnings and its Stockholder Dividend Policy. These decisions, further, are
based upon the subsidiaries' performances, taking into account regulatory
restrictions on payment of dividends by such subsidiaries.

The Registrant's cash flow in the first six months of 1995 reflects a decrease
in net cash of $2,743,726. The net cash outflow is comprised of $3,608,269
related to cash used for purchasing of investments, and cash inflow of
$1,123,834 related to operations. The prior year 1994 reflects a net cash
decrease of $2,482,434 comprised of the purchases of investments of $5,618,248
and cash provided by operations of $3,419,227. The reduction in cash provided
by operations is primarily due to the funding of loss payments and federal tax
payments in 1995 at higher levels than 1994.

As of April 1, 1995, First Re increased its net participation in the lower
layer of the Oakley treaties and eliminated its participations in the two upper
layers. The net exposure per risk will increase by less than 1% from $495,000
to $500,000 but will be concentrated in the first layer of coverage rather than
spread among the policy limits of up to $5,000,000. The net premium writings
will increase from approximately 44% of the gross premiums to approximately
70%. This change in participation will create a proportional increase in the
commissions expenses and estimated incurred losses on the program.

During the first quarter of 1995, the Registrant made a formal offer to
acquire, in a cash transaction, AmerInst Insurance Group, Inc. ("AIIG"), a
publicly held reinsurer of accountants professional liability insurance, at a
discount to its book value. The proposed acquisition price is approximately
$10.9 million. On June 29, 1995, the AIIG board of directors notified the
Registrant that it considered the offer not in the best interests of AIIG
shareholders. The Registrant is currently evaluating its options with respect
to this matter.

The Registrant is unaware of any other trends or uncertainties that have had,
or that the Registrant reasonably expects will have, a material effect on its
liquidity, capital resources or operations. Management feels that the
Registrant's liquidity and capital resources are adequate to meet future needs.

9
10

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (CONT.)

RESULTS OF OPERATIONS

Earnings per share in the six and three months ended June 30, 1995, amounted to
$0.88 and $0.38 respectively. This represents an increase of 15.8% and a
decrease of 7.3% from the comparable periods of 1994. Earnings per share are
calculated on a diluted basis.

Net income for the six months ended June 30, 1995 is approximately 16.4%
higher than for the same period in 1994 ($2,029,000 vs. $1,743,000). Incurred
losses and commission expenses increased proportionally to the premium
increase, but favorable development in losses in the company's financial
institution reinsurance programs continued to contribute significantly to the
Registrants' net income.

The 1995 second quarter net income is 7.8% lower than for the same period
in 1994 approximately ($860,000 vs. $933,000). The favorable loss development
recorded in each six month period was approximately the same, but underlying
claims actions influencing the favorable development occurred principally in
the second quarter of 1994. The 1995 development was earned uniformly in each
quarter of 1995. Similarly, the realized capital gains, while being
approximately equal for the comparable six month periods, were earned
principally in the first quarter of 1994 and the second quarter of 1995.

PREMIUMS EARNED

The six month premiums earned as of June 30, 1995 increased 45.4% ($5,212,000
vs. $3,585,000) over 1994. This increase is primarily due to earned premiums
from business produced by the registrants Oakley subsidiary, of approximately
$4,203,000 vs $1,862,000 for 1994 on 125.7% increase. The premium growth
reflects a 30% increase in the gross premium production and an increase in
retention from approximately 44.0% to 70.0% of the gross premium, which
occurred in the second quarter of 1995.

Earnings from other reinsurance programs increased approximately 8.7%
($978,000 vs. $900,000) in the six month period ended June 30,1995. The
increase was approximately the same for each quarter of 1995 with no major
changes in the amount or type of risk taken.

The six months of 1994 benefited from $811,000 of premium revenue from the
financial institutions insurance program. The expiring premiums related to
this run-off program were fully earned by the end of 1994, with most of the
earnings being reflected in the first six months.

10
11

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (CONT.)

NET INVESTMENT INCOME AND REALIZED INVESTMENT GAINS

Net investment income in the six months ended June 30, 1995 increased
approximately 26.0% ($2,136,000 vs. $1,695,000). This was due to higher
available interest rates during the six months of 1995 and a change from tax
advantaged into higher yielding taxable securities during the third and fourth
quarters of 1994.

Net realized gains on investments in the six months ended June 30 increased
approximately 7.1%, from ($360,000 vs. $336,000) for 1995 and 1994
respectively. The gains earned in 1995 represented repositioning of securities
from tax advantaged to fully taxable to take advantage of market opportunities.
In 1994, the Registrant realized capital gains as part of a strategy to capture
a tax benefit that was scheduled to expire at December 31, 1994. This goal was
achieved principally in the first quarter of 1994.

Future realized gains will be dependent on portfolio positions and market
conditions. Consistent with its investment guidelines, the Registrant will
continue to invest for the highest total return possible while maintaining its
portfolio's current liquidity and credit characteristics.

LOSSES AND LOSS ADJUSTMENT EXPENSES

The six months ended June 30, 1995 reflected a loss ratio of 44.1% as compared
to 40.7% in 1995. Favorable liability re-estimations of loss reserves on
First Re's reinsurance assumed contracts issued prior to 1993 provided
approximately $1,600,000 and $1,500,000 of reduction in incurred losses for
the six month period ended June 30, 1995 and 1994 respectively. Incurred losses
and loss adjustment expenses increased from $1,459,327 to $ 2,296,207, a 57.3%
increase.

The increase in premium earnings from the Oakley and other reinsurance
operations also caused a proportional increase in losses incurred on these
lines. The absence of catastrophe losses from the other reinsurance business
also contributed to the lower loss ratio.

The second quarter incurred losses for 1994 reflected most of the favorable
development for that six month period. The principal reason for the 1995
quarterly increase in losses incurred corresponded to the increased premium
revenue that occurred in the second quarter of 1995.

COMMISSIONS EXPENSES

The six months ended June 30, 1995 had a commission expense increase of
approximately 78% ($1,308,000 vs. $735,000) from the same period in 1994. The
three months ended June 30, 1995 increased 90.6% ($720,000 vs. $378,000) from
the same period in 1994. The 1995 increase in commission expenses is
proportional to the increased premiums earned. The effective commission rate
on premiums earned in 1995 increased from 20.5% to 25.1% from the comparable
period in 1994. The commissions cost increased due the change in retention
levels on Oakley business at the April 1, 1995 treaty renewal date.

11
12

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION (CONT.)

OTHER OPERATING AND MANAGEMENT EXPENSES

Other operating and management expenses increased approximately 3.9% for the
six months ending June 30, 1995 ($1,874,000 vs. $1,804,000) and increased
approximately 1.9% for the three months ending June 30, 1995 ($1,024,000 vs.
$1,005,000) when compared to the same periods of 1994. The Company continues
to identify and initiate expense saving strategies as it becomes more efficient
in operating its Oakley subsidiary and managing its runoff liabilities. The
result of these efforts allowed the six month increase in premium revenue of
45.4% to be earned while only incurring a 3.9% increase in operating expenses.

PROVISION FOR INCOME TAXES

The six months ended June 30, 1995 reflected a 145% increase in the effective
tax rate due to an increased amount of fully taxed investment income.

REGULATORY ENVIRONMENT

The insurance (and reinsurance) industry is being scrutinized by the Executive
and Legislative branches of government as well as regulatory agencies. Items
presently being given attention are individual state regulatory issues (i.e.
solvency) and federal regulation of the reinsurance and insurance industry. It
is not possible to predict at this time the impact that these initiatives will
have on the Registrant's business.

The Registrant has responded to, and will continue to respond to these
regulatory challenges. Without an appropriate response, actions of regulatory
authorities could adversely affect the operations of the Registrant.

The Registrant will continue to monitor these developments and respond as
necessary to the changing environment.

12
13

FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.
PART II
OTHER INFORMATION

ITEMS 1-3 Have been omitted as they are either not applicable or result
in a negative answer.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The annual meeting of stockholders was held on June
7, 1995.

(b) The stockholders elected as directors W. Dean Cannon
with a vote of 1,406,926 shares for and 285,010
shares where authority was withheld, William B.
O'Connell 1,507,446 shares for and 184,490 shares
withheld, John B. Zellars 1,577,346 shares for and
114,590 shares withheld and R. Keith Long 1,677,866
shares for and 14,070 shares withheld. Dale C.
Bottom, Thad Woodard, Joe C. Morris, John A. Dore,
Gerald J. Levy and Herschel Rosenthal will continue
their terms as directors. Effective July 1, 1995
Henry Drewitz and Edmond M. Shanahan resigned as
directors of the Registrant and the board appointed
John P. Diesel and Richard P. Ackerman to fill the
vacancies caused by such resignations.

(c) The appointment of Coopers & Lybrand as auditors for
the Registrant was ratified with a vote of 1,511,396
shares for the appointment and 8,800 shares against
the appointment, with 171,740 shares abstaining.

ITEM 5 OTHER MATTERS
(a) Not applicable.

ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K

(a)(10) The following Exhibits have been included as
part of this report:

i Amendment to the By-Laws of
Registrant adapted 6/6/95.

ii Letter to the Registrant from Mr. R.
Keith Long dated 4/21/95 .

(b) The Registrant has filed no current reports
on Form 8-K for the quarter ended 6/30/95.

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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.

FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.
(Registrant)

August 11, 1995
John A. Dore
------------------------------
John A. Dore
(President and Chief Executive Officer, duly
authorized to sign this report in such capacities
and on behalf of the Registrant.)

August 11, 1995
Lonnie L. Steffen
------------------------------
Lonnie L. Steffen
(Chief Financial Officer, Executive Vice
President, Treasurer, duly authorized to sign
this report in such capacities and on behalf
of the Registrant.)

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AMENDMENT TO
ARTICLE III, SECTION 8
OF THE BYLAWS
OF
FINANCIAL INSTITUTIONS INSURANCE GROUP, LTD.

Section 8.

(a) Nominations of persons for election to the board of directors of the
corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (1) by or at the direction of
the board of directors as set forth above, or (2) by any stockholder of record
of the corporation who is entitled to vote at the meeting and who complies with
the notice procedures set forth in this Section 8.

(b) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (2) of paragraph (a) of this
Section, the stockholder must have given timely notice thereof in writing to
the President of the corporation. To be timely, a stockholder's notice shall be
delivered to the President at the principal executive offices of the
corporation not less than sixty (60) days nor more than ninety (90) days prior
to the first anniversary of the preceding year's annual meeting; provided,
further, in the event that the date of the annual meeting is advanced by more
than thirty (30) days or delayed by more than sixty (60) days from such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the 90th day prior to such annual meeting and not later than
the close of business on the later of the 60th day prior to such annual meeting
or the 10th day following the day on which public announcement of the date of
such meeting is first made. Such stockholder's notice shall set forth: (1) as
to each person whom the stockholder proposes to nominate for election or
reelection as a director (i) the name, age, business address and residence
address of each such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of the corporation that are
beneficially owned by each such person, (iv) such other information relating to
such person as would be required to be disclosed by the federal securities laws
and the rules and regulations promulgated thereunder in respect of an
individual nominated as a director of the corporation and for whom proxies are
solicited by the board of directors of the corporation (including without
limitation such person's written consent to being named in the proxy statement
as a nominee and serving as a director if elected), (v) to the extent known to
the notifying stockholder, the total number of shares of capital stock of the
corporation that will be voted for each proposed nominee; (2) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting; and (3) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the corporation that are owned
beneficially and of record by such stockholder and such beneficial owner and
(iii) a description of all arrangements or understandings between such
stockholder or beneficial owner and any other person or persons (including
their names) in connection with such nomination or business and any material
interest of such stockholder or beneficial owner in such nomination or
business.

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(c) Notwithstanding anything in the second sentence of paragraph (b) of
this Section to the contrary, in the event that the number of directors to be
elected to the board of directors of the corporation is increased and there is
no public announcement naming all of the nominees for director or specifying
the size of the increased board of directors made by the corporation at least
(70) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the President at the
principal executive offices of the corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the corporation.

(d) Only such persons who are nominated in accordance with the procedures
set forth in this Section shall be eligible to serve as directors and only such
business shall be conducted at an annual meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Section. The President of the corporation shall have the power and duty to
determine whether a nomination or any business proposed to be brought before
the meeting was made in accordance with the procedures set forth in this
Section and, if any proposed nomination or business is not in compliance with
these by-laws, to declare that such defective proposed business or nomination
shall be disregarded.

(e) For the purposes of this Section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or a comparable national news service or in a document
publicly filed by the corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(f) Notwithstanding the foregoing provisions of this Section, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section. Nothing in this Section shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.

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R. KEITH LONG
400 ROYAL PALM WAY, SUITE 204
PALM BEACH, FLORIDA 33480

April 21, 1995

John B. Zellars
Financial Institutions
Insurance Group, Ltd.
10 North Dearborn, 8th Floor
Chicago, IL 60602-4202

Dear Mr. Zellars:

This is to confirm the substance of an agreement we reached this morning by
telephone, as follows:

1. Messrs. Drewitz and Shanahan shall resign from the Boards of
Directors of Financial Institutions Insurance Group, Ltd. ("FIIG") and its
subsidiaries effective July 1, 1995;

2. The FIIG Board of Directors shall fill the vacancies created by
such resignations with my nominees;

3. I am to be nominated to become chairman of the Boards of Directors
of FIIG and its subsidiaries at the June 1995 Annual Stockholders Meeting;

4. You are to be nominated to become chairman of the Executive
Committee of the FIIG Board of Directors at your present compensation at the
June 1995 Annual Stockholders Meeting; and

5. Mr. O'Connell is to be nominated to be re-elected to be
vice-chairman of the FIIG Board of Directors at the June 1995 Annual
Stockholders Meeting.

Once I have reviewed preliminary proxy materials reflecting the foregoing, I
shall withdraw my request for a list of stockholders and further agree to vote
my shares in favor of the slate of nominees recommended by the FIIG Board of
Directors at the June 1995 Annual Stockholders Meeting.

I am convinced these changes will result in FIIG moving forward for the benefit
of all stockholders.

Sincerely,

/s/ R. KEITH LONG
R. Keith Long