AMERIN CORP, S-3/A, 1997-01-24

AMERIN CORP
S-3/A, 1997-01-24
SURETY INSURANCE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 1997

REGISTRATION NO. 333-19757
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

AMERIN CORPORATION
(Exact name of Registrant as Specified in its Charter)

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<S> <C> <C>
DELAWARE 6351 11-3085148
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

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200 EAST RANDOLPH DRIVE, 49TH FLOOR
CHICAGO, ILLINOIS 60601-7125
(312) 540-0078
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
RANDOLPH C. SAILER II, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
200 EAST RANDOLPH DRIVE, 49TH FLOOR
CHICAGO, ILLINOIS 60601-7125
(312) 540-0078
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------

COPIES OF ALL COMMUNICATIONS TO:

<TABLE>
<S> <C>
ROBERT A. ZUCCARO, ESQ. RICHARD J. SANDLER, ESQ.
JONES, DAY, REAVIS & POGUE DAVIS POLK & WARDWELL
599 LEXINGTON AVENUE 450 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017
(212) 326-3939 (212) 450-4000
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement has become effective.
--------------------------

If the only Securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than Securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>
EXPLANATORY NOTE

This Registration Statement contains a prospectus relating to a public
offering in the United States and Canada (the "U.S. Offering") of an aggregate
of 3,400,000 shares of common stock, par value $.01 per share ("Common Stock"),
of Amerin Corporation, together with a separate prospectus cover page relating
to a concurrent offering outside the United States and Canada (the
"International Offering") of an aggregate of 850,000 shares of Common Stock. The
complete prospectus for the U.S. Offering follows immediately after this
Explanatory Note. After such prospectus is the alternate front cover page for
the International Offering. All other pages of the prospectus for the U.S.
Offering are to be used for both the U.S. Offering and the International
Offering.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)

ISSUED JANUARY 24, 1997

4,250,000 SHARES

[LOGO]

COMMON STOCK
------------------

OF THE 4,250,000 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "COMMON
STOCK") BEING OFFERED HEREBY, 3,400,000 SHARES ARE BEING OFFERED INITIALLY IN
THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS AND 850,000 SHARES ARE
BEING OFFERED INITIALLY OUTSIDE OF THE UNITED STATES AND CANADA BY THE
INTERNATIONAL UNDERWRITERS. SEE "UNDERWRITERS." ALL OF THE SHARES OF COMMON
STOCK BEING OFFERED HEREBY ARE BEING SOLD BY THE SELLING STOCKHOLDERS.
SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL NOT RECEIVE
ANY PROCEEDS FROM THE SALE OF THE COMMON STOCK BY THE SELLING
STOCKHOLDERS. THE COMMON STOCK IS LISTED ON THE NASDAQ NATIONAL
MARKET UNDER THE SYMBOL "AMRN." ON JANUARY 23, 1997, THE REPORTED
LAST SALE PRICE OF THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET
WAS $22 3/4 PER SHARE.

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

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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PRICE $ A SHARE
---------------------

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<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
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<S> <C> <C> <C>
PER SHARE................................. $ $ $
TOTAL (3)................................. $ $ $
</TABLE>

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(1) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.
(2) EXPENSES ESTIMATED AT $ WILL BE PAID BY THE COMPANY.
(3) THE SELLING STOCKHOLDERS HAVE GRANTED THE U.S. UNDERWRITERS AN OPTION,
EXERCISABLE WITHIN 30 DAYS FROM THE DATE HEREOF, TO PURCHASE UP TO 637,500
ADDITIONAL SHARES OF COMMON STOCK AT THE PRICE TO PUBLIC, LESS THE
UNDERWRITING DISCOUNTS AND COMMISSIONS, FOR THE PURPOSE OF COVERING
OVER-ALLOTMENTS, IF ANY. IF THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN
FULL, THE TOTAL PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND
PROCEEDS TO SELLING STOCKHOLDERS WILL BE $ , $ AND
$ , RESPECTIVELY. SEE "UNDERWRITERS."

THE SHARES OF COMMON STOCK ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND
IF ACCEPTED BY THE UNDERWRITERS AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS
BY DAVIS POLK & WARDWELL, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT
DELIVERY OF THE SHARES OF COMMON STOCK WILL BE MADE ON OR ABOUT , 1997
AT THE OFFICES OF MORGAN STANLEY & CO. INCORPORATED, NEW YORK, NEW YORK AGAINST
PAYMENT THEREFOR IN IMMEDIATELY AVAILABLE FUNDS.

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

MORGAN STANLEY & CO.
INCORPORATED
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN & CO.

, 1997
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, BY ANY SELLING STOCKHOLDER
OR BY ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.

NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE COMPANY, ANY
SELLING STOCKHOLDER OR ANY UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF
THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY
JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED
STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE
COMPANY, THE SELLING STOCKHOLDERS AND THE UNDERWRITERS TO INFORM THEMSELVES
ABOUT, AND TO OBSERVE ANY RESTRICTIONS AS TO, THE OFFERING OF THE COMMON STOCK
AND THE DISTRIBUTION OF THIS PROSPECTUS.
--------------------------

TABLE OF CONTENTS

<TABLE>
<S> <C>
Prospectus Summary............................ 3
Risk Factors.................................. 10
Recent Financial and Operating Results........ 19
Use of Proceeds............................... 22
Price Range of Common Stock and Dividend
Policy...................................... 22
Capitalization................................ 23
Industry Overview............................. 24
Selected Consolidated Financial Information... 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 32
Business...................................... 43
Management.................................... 75
Certain Transactions.......................... 78
Principal and Selling Stockholders............ 80
Shares Eligible for Future Sale............... 83
Description of Capital Stock.................. 85
Certain U.S. Federal Income Tax Consequences.. 88
Underwriters.................................. 92
Validity of Securities........................ 95
Experts....................................... 95
Available Information......................... 95
Incorporation of Certain Documents by
Reference................................... 96
Glossary of Selected Mortgage Insurance
Terms....................................... 97
Index to Consolidated Financial Statements.... F-1
</TABLE>

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IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH
PERSONS PARTICIPATING IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR
OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO
EXEMPTIONS FROM RULE 10B-6 AND 10B-7 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
(IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B6-A UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITERS."

AMERIN CORPORATION DIRECTLY OWNS ALL OF THE OUTSTANDING SHARES OF CAPITAL STOCK
OF AMERIN GUARANTY CORPORATION ("AMERIN GUARANTY"), AN INSURANCE COMPANY LEGALLY
DOMICILED IN ILLINOIS AND CURRENTLY COMMERCIALLY DOMICILED IN CALIFORNIA, AND
AMERIN RE CORPORATION ("AMERIN RE"), AN INSURANCE COMPANY LEGALLY DOMICILED IN
ILLINOIS. ILLINOIS INSURANCE LAWS PROVIDE THAT NO PERSON MAY, DIRECTLY OR
INDIRECTLY, ACQUIRE "CONTROL" OF AMERIN CORPORATION (AND THEREBY INDIRECT
CONTROL OF AMERIN GUARANTY AND AMERIN RE), UNLESS SUCH PERSON FILES A STATEMENT
WITH THE ILLINOIS DIRECTOR OF INSURANCE AND OBTAINS THE DIRECTOR'S PRIOR
APPROVAL (THE DIRECTOR MAY HOLD A PUBLIC HEARING ON THE MATTER). BECAUSE AMERIN
GUARANTY IS CURRENTLY COMMERCIALLY DOMICILED IN CALIFORNIA AND IS THEREFORE
SUBJECT TO CERTAIN CALIFORNIA INSURANCE LAWS, NO PERSON MAY ACQUIRE CONTROL OF
AMERIN CORPORATION (AND THEREBY INDIRECT CONTROL OF AMERIN GUARANTY) WITHOUT
ALSO FILING A STATEMENT WITH THE CALIFORNIA COMMISSIONER OF INSURANCE AND
OBTAINING THE COMMISSIONER'S PRIOR APPROVAL (OR WAITING UNTIL 60 DAYS AFTER THE
STATEMENT IS FILED, IF THE COMMISSIONER HAS NOT DISAPPROVED OF THE ACQUISITION
DURING THE 60-DAY PERIOD). UNDER THE CALIFORNIA AND ILLINOIS INSURANCE LAWS,
"CONTROL" IS PRESUMED TO EXIST IF A PERSON OWNS OR CONTROLS 10% OR MORE OF THE
VOTING SECURITIES OF AMERIN CORPORATION, ALTHOUGH THE ILLINOIS DIRECTOR OF
INSURANCE AND THE CALIFORNIA COMMISSIONER OF INSURANCE EACH HAVE THE STATUTORY
AUTHORITY TO FIND THAT "CONTROL" IN FACT DOES OR DOES NOT EXIST WHERE A PERSON
OWNS OR CONTROLS EITHER A LESSER OR GREATER AMOUNT OF SECURITIES.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS (INCLUDING NOTES THERETO)
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS INDICATED OTHERWISE, THE
INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES THAT THE U.S. UNDERWRITERS'
OVER-ALLOTMENT OPTION IS NOT EXERCISED. TERMS PRINTED IN BOLDFACE TYPE THE FIRST
TIME THEY APPEAR IN THIS PROSPECTUS ARE DEFINED UNDER THE CAPTION "GLOSSARY OF
SELECTED MORTGAGE INSURANCE TERMS." UNLESS OTHERWISE INDICATED, THE COMPANY'S
FINANCIAL INFORMATION SET FORTH IN THIS PROSPECTUS IS BASED ON GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") AND NOT STATUTORY ACCOUNTING PRACTICES
("SAP"), AND ALL SHARE AND PER SHARE NUMBERS HAVE BEEN ADJUSTED TO REFLECT A
RECAPITALIZATION OF THE COMPANY'S CAPITAL STRUCTURE EFFECTED ON NOVEMBER 2,
1995. INDUSTRY DATA INCLUDED HEREIN RELATES TO THE UNITED STATES AND UNLESS
OTHERWISE INDICATED (I) HAVE BEEN DERIVED FROM INSIDE MORTGAGE FINANCE, FACT
BOOK AND MEMBERSHIP DIRECTORY OF MORTGAGE INSURANCE COMPANIES OF AMERICA ("MICA
FACT BOOK") AND OTHER SOURCES WHICH THE COMPANY BELIEVES TO BE RELIABLE BUT
WHICH HAVE NOT BEEN INDEPENDENTLY VERIFIED AND (II) DOES NOT INCLUDE DATA WITH
RESPECT TO POOL INSURANCE. AMERIN CORPORATION IS A HOLDING COMPANY WHICH
CONDUCTS ITS BUSINESS PRIMARILY THROUGH TWO DIRECT WHOLLY-OWNED SUBSIDIARIES:
AMERIN GUARANTY CORPORATION ("AMERIN GUARANTY"), AN ILLINOIS INSURANCE COMPANY,
AND AMERIN RE CORPORATION ("AMERIN RE"), AN ILLINOIS INSURANCE COMPANY. UNLESS
THE CONTEXT OTHERWISE REQUIRES, WHEN USED HEREIN THE TERM "COMPANY" OR "AMERIN"
REFERS TO AMERIN CORPORATION AND ITS SUBSIDIARIES. CERTAIN AMOUNTS WHICH APPEAR
IN THIS PROSPECTUS MAY NOT SUM BECAUSE OF ROUNDING.

THE COMPANY

The Company provides mortgage insurance based on innovative approaches to
sales, products, UNDERWRITING and claims processing. The Company believes these
innovations result in lower costs to borrowers and enhanced profitability,
greater efficiency and ease of interaction for mortgage lenders, and are
therefore particularly attractive to larger mortgage lenders. Since initiating
mortgage insurance underwriting in 1993, the Company has increased its market
share, based on new PRIMARY INSURANCE written, from .2% in 1993 to 5.4% for 1995
and 6.1% for the first nine months of 1996. The Company has also experienced
significant growth in INSURANCE IN FORCE, from $272.4 million at year-end 1993
to $13.4 billion at September 30, 1996. The Company's customers include eight of
the 10 largest mortgage lenders based on originations in the first nine months
of 1996: Bank of America, Chase Manhattan Mortgage Corporation, Countrywide Home
Loans, Fleet Mortgage Group, FT Mortgage Companies, HomeSide Lending, Norwest
Mortgage, Inc. and Resource Bancshares Mortgage Group, Inc.

Private mortgage insurance typically is used by mortgage lenders to enable
them to sell mortgages into the secondary mortgage market, principally to the
Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan
Mortgage Corporation ("Freddie Mac"), and to reduce a mortgage lender's credit
risk in LOW DOWN PAYMENT, HIGH LOAN TO VALUE ("LTV") mortgage loans. Home
purchasers who make down payments of less than 20% of the value of the home are
usually required by the mortgage lender to qualify and pay for primary mortgage
insurance on their mortgage loans. If the homeowner defaults on the mortgage
loan, mortgage insurance pays the owner of the insured loan its losses up to a
specified coverage amount or based on a coverage formula. Mortgage insurance
does not cover losses that result from damage to the property.

Privately insured mortgage originations in the U.S. were $109.6 billion in
1995, as compared to $39.0 billion in 1990. Management believes that the
substantial growth in privately insured mortgage originations in recent years is
due to (i) a recent increase in the percentage of mortgage loans carrying
mortgage insurance due to increased volumes of high LTV loans (due in part to
"affordable housing" and urban housing initiatives) coupled with higher
regulatory capital requirements for depositary institutions holding uninsured,
high LTV mortgages and (ii) increased mortgage originations and outstanding
mortgage amounts resulting from, among other factors, historically low interest
rates, increased housing affordability and increased consumer confidence. In
addition, in the first quarter of 1995, Fannie Mae and Freddie Mac began to
require higher mortgage insurance coverage on certain high LTV loans as a
condition of purchase of such loans. For the mortgage insurer, this higher
coverage requirement increases both the amount of RISK IN FORCE and the amount
of PREMIUMS WRITTEN with respect to the same size loan.

3
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Management believes that there has been and will continue to be a trend of
consolidation in the mortgage origination industry, resulting in concentration
of mortgage origination market share among a relatively small number of high
volume national financial institutions. In 1995, the top 10 and 25 mortgage
lenders accounted for 25.5% and 38.4%, respectively, of all mortgage
originations, an increase from 17.5% and 28.4%, respectively, in 1990. The
Company also believes that such industry consolidation will result in more
centralized decision making by leading mortgage lenders with respect to mortgage
insurance for their loans.

The Company has developed an innovative and efficient operating structure to
take advantage of the consolidation in the mortgage origination industry and to
provide lower cost insurance and alternative products to mortgage lenders and
borrowers. The Company's operating structure includes (i) a small
noncommissioned sales force of approximately 19 salespeople with a selling
effort focused on lender senior management and emphasis on a centralized
mortgage insurance decision, (ii) extensive use of DELEGATED UNDERWRITING and
efficient issuance of insurance certificates with experienced mortgage lenders
capable of meeting the Company's financial, operating and quality requirements,
(iii) a streamlined claims procedure reducing the time and costs to settle
claims and (iv) leverage of existing technology and databases and the
flexibility to adapt new technologies such as ELECTRONIC DATA INTERCHANGE
("EDI") to improve efficiency and interaction with lenders. Management believes
that its low cost structure will allow it to maintain operating costs lower than
those of the mortgage insurance industry in general, thereby allowing the
Company to offer lower cost products. However, because of the Company's limited
operating history, there can be no assurance that the Company's approach will
ultimately enable it to achieve or maintain a lower cost structure to support
lower price products. The Company's lower pricing approach is the result of the
Company's low cost structure and operating efficiencies, not the product of a
more aggressive approach to underwriting and risk management. Management further
believes that the Company's delegated underwriting and streamlined claims paying
procedures provide it with a competitive advantage through speed of delivery and
ease of interaction with the mortgage lender.

The Company's products are designed to take advantage of this innovative low
cost structure. The Company offers BORROWER-PAID MORTGAGE INSURANCE ("BPMI"),
which is similar to traditional mortgage insurance in which the borrower pays
the mortgage insurance premium to the mortgage lender or LOAN SERVICER, who in
turn remits the premiums to the mortgage insurer. The lower cost of the
Company's BPMI gives the lender the opportunity to offer choice and value to
borrowers, thereby offering the lender an advantage in attracting new customers.
The Company began offering BPMI products nationwide in February 1994. In 1994,
1995 and the first nine months of 1996, BPMI accounted for approximately 65%,
73% and 75%, respectively, of the Company's NET premiums written.

In April 1993, the Company introduced a new type of mortgage insurance,
LENDER PAID MORTGAGE INSURANCE ("LPMI") and was the first mortgage insurer to be
approved for the use of LPMI by Fannie Mae and Freddie Mac. Unlike BPMI, where
the borrower pays the mortgage insurance premium, in LPMI, the mortgage lender
or loan servicer pays the mortgage insurance premiums to the mortgage insurer.
The mortgage lender's obligation to pay these premiums is generally reflected in
an increased interest rate on the borrower's loan; however, the mortgage
premiums on Amerin's LPMI are lower than those generally available from other
mortgage insurers for BPMI and the full amount of interest on LPMI-insured
mortgages is generally deductible by borrowers. Therefore, Amerin's LPMI allows
mortgage lenders to offer borrowers lower-cost "all-in" mortgages. LPMI also
reduces closing costs for home buyers as compared to BPMI. The Company also
offers an innovative, experienced-based LPMI product which gives mortgage
lenders an opportunity to benefit from the long-term performance of their
insured portfolio, while also sharing in the risks. In 1994, 1995 and the first
nine months of 1996, LPMI accounted for approximately 35%, 27% and 25%,
respectively, of the Company's net premiums written.

4
<PAGE>
of its mortgage lending customers. See "Risk Factors--Certain Legal Matters
Relating to Captive Mortgage Reinsurance Arrangements" and
"Business--Reinsurance."

Virtually all of the Company's mortgage insurance is written through a
delegated underwriting program under which participating mortgage lenders are
permitted to commit the Company to insure mortgage loans that meet mutually
agreed criteria. The Company performs extensive financial, operating and quality
analyses on a mortgage lender before allowing it to participate in the delegated
underwriting program. Following acceptance of a mortgage lender, the Company
uses numerous procedures, including daily monitoring of all loans committed for
insurance and periodic on-site lender reviews, to assess compliance with agreed
criteria. To further manage the risk profile of its insured mortgage portfolio,
the Company does not insure loans with scheduled NEGATIVE AMORTIZATION, and
generally does not allow delegated underwriting for 97% LTV loans ("97s") or
loans on non-owner occupied properties. In conjunction with its program of
delegated underwriting, the Company provides a simplified post-closing procedure
for the processing of insurance certificates and related documentation.

The majority of claims under private mortgage insurance policies have
historically occurred during the third through the sixth years after issuance of
the policies. Amerin Guaranty wrote its first mortgage insurance policy in April
1993, and, as of September 30, 1996, approximately 91% of Amerin Guaranty's risk
in force was written since October 1, 1994. This means that less than 10% of
Amerin Guaranty's insurance in force had reached the beginning of the expected
peak claims period. No assurance can be given that Amerin Guaranty's claims or
loss experience will follow historical industry patterns. Because of the
Company's limited operating history, its loss experience is expected to
significantly increase as its policies continue to age.

At September 30, 1996, the Company's investment portfolio was carried at
fair market value which was $311.7 million. All of the Company's investments are
in fixed income securities, including U.S. government securities, corporate
obligations and municipal bonds, and short-term debt securities. On September
30, 1996, based on carrying value, 91.8% of the Company's investment portfolio
consisted of fixed income securities, 98.6% of which were rated "A" or better by
at least one nationally recognized securities rating organization or which, in
the case of municipal bonds or short-term debt securities, had an equivalent
rating.

Amerin Guaranty's claims-paying ability is currently rated "Aa3" by Moody's
Investors Service ("Moody's") and "AA" by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("S&P"). Each such rating is the
second highest generic rating given by such rating agency. Both ratings were
granted on September 10, 1992, and the issuance and maintenance of each such
rating is subject to compliance by the Company and Amerin Guaranty with certain
conditions imposed by the respective rating agencies. On January 4, 1996, S&P
reaffirmed its "AA" rating of Amerin Guaranty's claims-paying ability.

The Company began operations in 1992 under Gerald L. Friedman, its Chairman
and Chief Executive Officer, and Stuart M. Brafman, who served as President and
Chief Operating Officer until his retirement in December 1996. In the same
month, Mr. Friedman assumed the Presidency of the Company and of Amerin
Guaranty, and established the Office of the Chairman, consisting of Mr.
Friedman, Roy J. Kasmar, Executive Vice President of Operations and Chief
Operating Officer of Amerin Guaranty, and Jerome J. Selitto, Executive Vice
President and National Director of Marketing and Sales of Amerin Guaranty. Mr.
Friedman began his career in 1961 at Mortgage Guaranty Insurance Company
("MGIC"), a major mortgage insurer, and served as President of MGIC Investment
Corporation, the holding company for MGIC, from 1978 to 1981. Thereafter, he
founded and served as Chairman and President of Financial Guaranty Insurance
Company ("FGIC"), a financial guarantor that was purchased by General Electric
Credit Corporation in 1989. Mr. Kasmar, who joined Amerin Guaranty in May 1996,
served as Managing Director of Prudential Home Mortgage's Capital Markets area
from 1988 to 1996 and as Vice President in charge of Secondary Marketing and
Chief Operating Officer at First Boston Capital Group from 1984 to 1988. Mr.
Selitto, who has been with Amerin Guaranty since 1992, was managing director and
manager of the Asset-Backed Securities Group at First Chicago Capital Markets,
Inc. from 1989 to 1992. Following

5
<PAGE>
completion of this Offering, Mr. Friedman will own 3.9% of the Common Stock,
none of the Company's outstanding nonvoting common stock, par value $.01 per
share (the "Nonvoting Common Stock," and, together with the Common Stock, the
"Common Equity"), and 3.7% of the outstanding Common Equity. See "Principal and
Selling Stockholders."

In November 1995, the Company consummated an initial public offering (the
"Initial Public Offering") of 13,340,000 shares of its Common Stock.

SELLING STOCKHOLDERS

Amerin Guaranty (then named U.S. Mortgage Insurance Company) was purchased
in April 1992 by the Company, which in turn was owned by an investor group
comprised of The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF"), J.P.
Morgan Capital Corporation ("JPMCC"), Aetna Life Insurance Company, First Plaza
Group Trust (a trust organized for the benefit of certain employee benefit plans
of General Motors Corporation and its subsidiaries), and Leeway & Co. (a nominee
for the AT&T Master Pension Trust) (collectively, the "Principal Stockholders")
and Mr. Friedman.

Upon consummation of the Offering: (i) Mr. Friedman and the Principal
Stockholders (together with Mr. Brafman, a limited partnership and a trust
formed for the benefit of Mr. Brafman or members of his family, two relatives of
Mr. Friedman, and certain trusts and a foundation formed by or for the benefit
of Mr. Friedman or certain members of his family, the "Selling Stockholders")
will own, in the aggregate, 25.4% of the outstanding Common Stock, (ii) certain
Principal Stockholders will own, in the aggregate, 100.0% of the Nonvoting
Common Stock and (iii) the Original Stockholders (as defined below) will own, in
the aggregate, 30.0% of the Common Equity.

Pursuant to the terms of an Amended and Restated Shareholders Agreement
dated as of November 1, 1995 (the "Stockholders Agreement"), so long as the
Principal Stockholders, together with Messrs. Friedman and Brafman and certain
transferees thereof pursuant to the terms of the Stockholders Agreement (the
"Original Stockholders"), continue to own, in the aggregate, at least 20% of the
Common Equity, and certain other conditions are met, the Original Stockholders
(other than JPMCC) are required to designate Mr. Friedman for nomination to the
Company's board of directors, and have the right to designate four additional
persons for nomination. The stockholders party to the Stockholders Agreement
(other than JPMCC) are required to vote their Common Stock and to take such
other actions as may be necessary to effectuate the composition of the Company's
board of directors as contemplated by the Stockholders Agreement. See "Certain
Transactions" and "Principal and Selling Stockholders."

MSLEF is an affiliate of both Morgan Stanley & Co. Incorporated ("MS&Co"), a
representative of the U.S. Underwriters, and Morgan Stanley & Co. International
Limited ("MS&Co International"), a representative of the International
Underwriters. JPMCC is an affiliate of both J.P. Morgan Securities Inc., a
representative of the U.S. Underwriters, and J.P. Morgan Securities Ltd., a
representative of the International Underwriters.
------------------------

See "Risk Factors" for a discussion of certain considerations relevant to an
investment in the Common Stock.
------------------------

Amerin Corporation is a Delaware corporation. Its principal office is
located at 200 East Randolph Drive, Chicago, Illinois 60601-7125 (telephone
number (312) 540-0078).

6
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the
Selling Stockholders:
U.S. Offering............... 3,400,000 shares
International Offering...... 850,000 shares
-----------
Total................... 4,250,000 shares(1)
Common Equity outstanding
after the Offering.......... 26,080,839 shares(2)(3)
Nasdaq National Market
Symbol...................... AMRN
Use of Proceeds............... The Selling Stockholders will receive all of the net
proceeds of the Offering. See "Use of Proceeds."
</TABLE>

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

(1) Excludes up to 637,500 additional shares of Common Stock subject to the U.S.
Underwriters' over-allotment option.

(2) Excludes: (i) currently outstanding options issued under the Company's 1992
Long-Term Stock Incentive Plan (the "Stock Incentive Plan") to purchase an
aggregate of 943,180 shares of Common Stock at exercise prices ranging from
$4.24 to $26.50 per share and (ii) an additional 1,957,605 shares of Common
Stock available for future issuance under the Stock Incentive Plan.

(3) Includes 24,496,963 shares of Common Stock and 1,583,876 shares of Nonvoting
Common Stock. See "Description of Capital Stock--Common Equity."

7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following Summary Consolidated Financial Information has been derived
principally from the Company's consolidated financial statements prepared in
accordance with generally accepted accounting principles. Certain information at
December 31, 1995 and 1994 and for each of the years in the three year period
ended December 31, 1995 has been derived from the Company's audited financial
statements which appear elsewhere herein. Certain information at December 31,
1993 and 1992 and for the the year ended December 31, 1992 has been derived from
the Company's audited financial statements which are not contained or
incorporated by reference herein. Certain information at September 30, 1996 and
for the respective nine month periods ended September 30, 1996 and 1995 has been
derived from the Company's unaudited condensed consolidated financial
statements, which are also contained in this Prospectus, and which, in the
opinion of the Company, reflect all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation. Results for the nine
month period ended September 30, 1996 are not necessarily indicative of results
for the full year. All such financial information is qualified in its entirety
by reference to, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements (including Notes thereto). Certain
statutory information derived from the statutory financial statements of Amerin
Guaranty is also presented. For a description of certain differences between SAP
and GAAP, see Note 3 of Notes to Consolidated Financial Statements.

See "Recent Financial and Operating Results" for information concerning
preliminary 1996 results.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
---------- --------- --------- --------- ---------

<CAPTION>
(IN THOUSANDS OF DOLLARS EXCEPT RATIOS, PER SHARE DATA
OR AS
OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Net premiums written............................................... $ 49,988 $ 20,729 $ 33,946 $ 10,274 $ 1,611
Increase in unearned premiums...................................... (6,431) (3,775) (6,387) (5,037) (1,285)
Net premiums earned................................................ 43,557 16,954 27,559 5,237 326
Net investment income.............................................. 12,401 4,984 7,612 4,818 4,251
Realized investment gains (losses)................................. (133) 493 491 435 707
Total revenues................................................. 55,825 22,431 35,662 10,490 5,284
Expenses:
Losses incurred.................................................... 13,958 3,819 7,757 262 --
Policy acquisition costs........................................... 6,120 4,963 6,641 2,456 2,677
Underwriting and other expenses(1)................................. 7,865 4,863 6,915 5,765 5,403
Compensation charge resulting from initial public offering(2)...... -- -- 35,741 -- --
Total expenses................................................. 27,943 13,645 57,054 8,482 8,080
Income tax expense................................................... 7,909 50 1,419 -- --
Net income (loss).................................................... 19,973 8,736 (22,811) 2,008 (2,795)
Pay-in-kind dividends on preferred stock(3).......................... -- 4,255 5,287 5,067 4,437
Net income (loss) applicable to common stockholders.................. 19,973 4,481 (28,098) (3,059) (7,232)
OTHER OPERATING DATA:
Mortgage insurance operating ratios (GAAP)(4)
Loss ratio....................................................... 32.0% 22.5% 28.2% 5.0% --
Expense ratio.................................................... 32.1 58.0 49.2 157.0 (5)
Combined ratio................................................... 64.1% 80.5% 77.3% 162.0% (5)
Mortgage insurance operating ratios (SAP)(4)
Loss ratio....................................................... 32.0% 22.5% 28.2% 5.0% --
Expense ratio.................................................... 27.7 51.0 42.8 97.4 (5)
Combined ratio................................................... 59.7% 73.5% 70.9% 102.4% (5)
PER SHARE DATA:(6)
Net income (loss).................................................. $ .76 $ .42 $ (2.32) $ (.36) $ (.99)
Weighted average shares outstanding (in thousands)................. 26,349 10,623 12,106 8,466 7,328
Book value (at period end)......................................... $ 11.09 $ 6.61 $ 10.55 $ 5.59 $ 5.66

<S> <C>
1992
---------

<S> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Net premiums written............................................... $ --
Increase in unearned premiums...................................... --
Net premiums earned................................................ --
Net investment income.............................................. 1,380
Realized investment gains (losses)................................. 15
Total revenues................................................. 1,395
Expenses:
Losses incurred.................................................... --
Policy acquisition costs........................................... --
Underwriting and other expenses(1)................................. 5,721
Compensation charge resulting from initial public offering(2)...... --
Total expenses................................................. 5,721
Income tax expense................................................... --
Net income (loss).................................................... (4,326)
Pay-in-kind dividends on preferred stock(3).......................... 1,250
Net income (loss) applicable to common stockholders.................. (5,576)
OTHER OPERATING DATA:
Mortgage insurance operating ratios (GAAP)(4)
Loss ratio....................................................... --
Expense ratio.................................................... N/A
Combined ratio................................................... N/A
Mortgage insurance operating ratios (SAP)(4)
Loss ratio....................................................... --
Expense ratio.................................................... N/A
Combined ratio................................................... N/A
PER SHARE DATA:(6)
Net income (loss).................................................. $ (1.98)
Weighted average shares outstanding (in thousands)................. 2,810
Book value (at period end)......................................... $ 6.67
</TABLE>

8
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- -------------------------------
1996 1995 1995 1994 1993
---------- --------- --------- --------- ---------
(IN THOUSANDS OF DOLLARS EXCEPT RATIOS, PER SHARE DATA
OR AS
OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C>
OPERATING AND STATUTORY DATA:(7)
Number of policies in force........................................ 109,383 54,546 68,112 22,937 2,473
Default rate....................................................... 1.07% .68% .89% .18% .16%
Persistency........................................................ 86.8% 96.1% 93.0% 96.2% --
Direct primary insurance in force (in millions).................... $ 13,380 $ 6,581 $ 8,262 $ 2,750 $ 272
Direct primary risk in force (in millions)......................... $ 3,306 $ 1,556 $ 1,989 $ 580 $ 57
Statutory capital.................................................. $ 250.8 $ 95.8 $ 227.0 $ 90.5 $ 70.8
Risk to capital ratio.............................................. 12.3 15.2 8.2 6.4 .8
Net premiums written:
New.............................................................. $ 10,776 $ 7,479 $ 11,060 $ 7,459 $ 1,611
Renewal.......................................................... $ 39,212 $ 13,250 $ 22,886 $ 2,815 --
Market share(8).................................................... 6.1% 5.1% 5.4% 1.9% .2%

<CAPTION>
1992
---------
<S> <C>
OPERATING AND STATUTORY DATA:(7)
Number of policies in force........................................ --
Default rate....................................................... --
Persistency........................................................ --
Direct primary insurance in force (in millions).................... --
Direct primary risk in force (in millions)......................... --
Statutory capital.................................................. $ 73.8
Risk to capital ratio.............................................. N/A
Net premiums written:
New..............................................................
Renewal..........................................................
Market share(8)....................................................
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
<S> <C>
(IN THOUSANDS OF DOLLARS)
CONSOLIDATED BALANCE SHEET DATA:
Total investments........................................................ $311,701
Total assets............................................................. 336,829
Unearned premiums........................................................ 19,141
Loss reserves............................................................ 15,375
Total common stockholders' equity........................................ 289,026
</TABLE>

- ------------------------------
(1) Includes fees paid to the Principal Stockholders of $.7 million, $.9
million, $.8 million, $.8 million and $.2 million, in the nine months ended
September 30, 1995 and in 1995, 1994, 1993 and 1992, respectively, in
respect of their standby commitments during such periods to provide
additional equity capital to the Company under specified conditions, which
standby commitments terminated upon consummation of the Initial Public
Offering.

(2) This nonrecurring non-cash charge was incurred in the fourth quarter of 1995
as a result of Messrs. Friedman and Brafman being entitled to 2,250,068
shares of Common Stock upon consummation of the Initial Public Offering
pursuant to a Management and Stock Voting Agreement (the "MSV Agreement").

(3) The preferred stock was redeemed in connection with the Initial Public
Offering.

(4) GAAP and SAP ratios reflect the Company's status as a new company and
include start-up and other expenses incurred prior to the commencement of
significant operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview--Expenses." SAP
ratios reflect the combined results of the Company's insurance subsidiaries
and do not include holding company costs. The GAAP expense and combined
ratios for the year ended December 31, 1995 exclude the compensation charge
resulting from the Initial Public Offering.

(5) Not meaningful.

(6) See Notes 2, 9, 10 and 15 of Notes to the Consolidated Financial Statements.

(7) Operating and Statutory Data includes data only for Amerin Guaranty except
for net premiums written which is consolidated.

(8) Based on new primary insurance written during the period as reported by
INSIDE MORTGAGE FINANCE.

9
<PAGE>
RISK FACTORS

IN ADDITION TO THE INFORMATION CONTAINED AND INCORPORATED BY REFERENCE IN
THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING
FACTORS IN EVALUATING THE COMPANY, ITS BUSINESS AND AN INVESTMENT IN THE COMMON
STOCK OFFERED HEREBY.

POTENTIAL INCREASE IN CLAIMS

A number of factors affecting the Company and the private mortgage insurance
industry in general could cause claims on policies issued to increase and thus
materially adversely affect the Company's financial condition and results of
operations, as discussed below. Because mortgage insurance coverage generally
cannot be canceled by the insurer and RENEWAL PREMIUMS generally are fixed for
the life of the policy at the time the policy is issued, if a particular product
offered by Amerin Guaranty turns out to have poor risk characteristics or if the
economy in general or of a particular region undergoes unanticipated stress,
such adverse developments cannot be offset by renewal premium increases or
mitigated by nonrenewal of coverage.

COMPOSITION OF RISK IN FORCE. At September 30, 1996, Amerin Guaranty's risk
in force included a substantial percentage of mortgages with LTVs in excess of
90% and less than or equal to 95% ("95s") and adjustable rate mortgages
("ARMs"), which have risk characteristics that exceed the risk characteristics
associated with other mortgage loans. At September 30, 1996, 49.0% of Amerin
Guaranty's risk in force consisted of 95s, which the Company believes have a
claim incidence substantially higher than mortgages with LTVs equal to or less
than 90% and over 85% ("90s"). At September 30, 1996, 13.0% of Amerin Guaranty's
risk in force consisted of ARMs and 7.5% consisted of ARM 95s. The proportion of
Amerin Guaranty's new INSURANCE WRITTEN in 1995 and the first nine months of
1996 with these risk factors is slightly less than the comparable proportion for
new insurance written in the same period for the overall mortgage insurance
industry. However, the proportion of such loans in Amerin Guaranty's risk in
force is higher than the comparable proportion for the overall mortgage
insurance industry due to Amerin Guaranty's recent entry into the mortgage
insurance business and an overall industry trend in recent years toward a
greater percentage of 95s.

The Company believes that the introduction of monthly premium products
throughout the mortgage insurance industry in 1993 and 1994, including by Amerin
Guaranty in the first quarter of 1994, have increased the popularity of 95s by
making these loans affordable to certain borrowers previously unable to obtain
sufficient funds for closing costs. As a result of Fannie Mae and Freddie Mac's
DEEP COVERAGE requirements on certain 95s, which became effective during the
first quarter of 1995, the average size of claims on loans having such deep
coverage will increase.

Amerin Guaranty's premium rates are based upon the expected risk of claim on
the insured loan and take into account the LTV, loan type, mortgage term,
occupancy status and COVERAGE PERCENTAGE. Unless otherwise noted, references to
coverage percentages are to standard mortgage insurance industry coverage
percentages, which are different from, but which correspond to, the coverage
percentages used by the Company. See "Business--Coverage." In addition, the
premium rates take into account PERSISTENCY, operating expenses and REINSURANCE
costs, as well as profit and capital needs and the prices offered by
competitors. However, PREMIUMS EARNED, and the associated investment income, may
ultimately prove to be inadequate to compensate for future losses. See
"Business--Products" and "--Overview of Direct Risk in Force."

GEOGRAPHIC CONCENTRATIONS. In addition to nationwide economic conditions
that affect all mortgage insurers, a mortgage insurer can be particularly
affected by economic downturns in specific regions where a large portion of its
business is concentrated. Amerin Guaranty has a relatively high percentage of
its risk in force concentrated in California (26.4% at September 30, 1996,
reduced from 31.1% at December 31, 1995 and 43.2% at December 31, 1994). The
Company's concentration arose as a result of greater early market penetration by
the Company of lenders doing business in California, particularly Southern
California,

10
<PAGE>
relative to other regions. While this level of concentration exceeded Amerin
Guaranty's long-term goals for geographic concentration, management determined
that this concentration would be reduced by increased market penetration of
lenders active in other regions, and has not sought to limit or reduce the
amount of Amerin Guaranty's business in the state. California, and Southern
California in particular, has experienced poor economic conditions in recent
years and industry claims rates on insured mortgages in California have been
substantially higher than national averages in recent periods. While Amerin
Guaranty's business has become more geographically diverse, continued and
prolonged adverse economic conditions in California could result in high levels
of claims and losses for the Company. In addition, refinancing activity can have
the effect of concentrating an insurer's insurance in force in economically
weaker areas, since loans in areas experiencing property value appreciation are
less likely to require mortgage insurance at the time of refinancing than are
loans in areas experiencing limited or no property value appreciation. See
"Business--Geographic Dispersion" and "--Defaults and Claims--Defaults."

GENERAL ECONOMIC FACTORS. The Company believes that the loss experience of
private mortgage insurers, including Amerin Guaranty, would be materially and
adversely affected by extended national or regional economic recessions, falling
housing values, rising unemployment rates, interest rate volatility or
combinations of such factors. Such economic events could also materially
adversely impact the demand for housing and, consequently, mortgage insurance.
See "Industry Overview" and "Business--Defaults and Claims--Claims."

LOSS EXPERIENCE; LOSS RESERVES. The majority of claims under private
mortgage insurance policies have historically occurred during the third through
the sixth years after issuance of the policies. See "Business--Defaults and
Claims--Claims." Amerin Guaranty wrote its first mortgage insurance policy in
April 1993, and, as of September 30, 1996, approximately 91% of Amerin
Guaranty's risk in force was written since October 1, 1994. This means that less
than 10% of Amerin Guaranty's insurance in force has reached the beginning of
the expected peak claims period. No assurance can be given that Amerin
Guaranty's claims or loss experience will follow historical industry patterns.
Because of the Company's limited operating history, its loss experience is
expected to significantly increase as its policies continue to age. If the claim
frequency on such risk in force significantly exceeds the claim frequency that
was assumed in setting premium rates, the Company's financial condition and
results of operations would be materially and adversely affected.

To recognize the liability for unpaid losses related to its insurance in
force with respect to mortgage loans which are in default, Amerin Guaranty
establishes LOSS RESERVES in respect of such defaults, based upon the estimated
CLAIM RATE and related CLAIM AMOUNT. These estimates are regularly reviewed and
updated using the most current information available. Such reserves are
necessarily based on estimates and the ultimate claim rate and the resulting
aggregate amount of claims may vary from such estimates. Any resulting
adjustments, which may be material, are reflected in the Company's then current
consolidated results of operations. There can be no assurance that Amerin
Guaranty's reserves will be adequate to cover ultimate loss development on
incurred defaults. The Company's results of operations would be adversely
affected to the extent that Amerin Guaranty's reserves are insufficient to cover
the actual related claims paid and expenses incurred. GAAP does not permit
Amerin Guaranty to establish loss reserves in respect of estimated potential
defaults that may occur in the future. See "Business--Loss Reserves."

DELEGATED UNDERWRITING

While other mortgage insurers offer a program of delegated underwriting to
some of the lenders with which they do business, Amerin Guaranty is the only
mortgage insurer which writes substantially all of its insurance on a delegated
underwriting basis. The performance of loans insured through programs of
delegated underwriting, including Amerin's program of delegated underwriting,
has not been tested over an extended period of time or over portfolios almost
exclusively written based on delegated underwriting, nor has the performance of
such loans been tested in a period of adverse economic conditions. See
"Business--Overview of Direct Risk in Force" and "--Underwriting Practices."

11
<PAGE>
Once a lender is accepted for delegated underwriting, Amerin Guaranty does
not have the option to refuse to insure, or rescind coverage on, a particular
loan originated by such lender based on Amerin Guaranty's subsequent evaluation
of the loan's risk profile or the lender's failure to comply with the agreed
upon delegated underwriting criteria. Amerin Guaranty may, however, curtail or
terminate a lender's delegated underwriting authority if the risk profile of
such lender's insured loans is unacceptable to Amerin Guaranty or based on
failure to comply with applicable criteria. Amerin Guaranty's ability to take
action against a lender is therefore limited by its access to data with which to
assess the risk of a lender's insured loans and to assess compliance with
applicable criteria. Moreover, Amerin Guaranty would remain at risk for any
loans insured by a lender prior to Amerin Guaranty's taking action against such
lender. It is therefore possible that a lender could cause Amerin Guaranty to
insure a material volume of loans with unacceptable risk profiles before such
lender's delegated underwriting authority was terminated.

Amerin Guaranty collects data in connection with each application for
insurance which it believes covers the most important risk factors relating to a
loan, reviews this data daily and takes action if a significant risk issue
becomes apparent. In addition, Amerin Guaranty underwriters conduct periodic
reviews of full loan documentation of all or a sample of a lender's insured
loans. Actions may also be taken against lenders based on the findings of these
reviews, which are conducted at intervals of six to 12 weeks for lenders with a
significant volume of insured loans. Management believes that these procedures,
in connection with Amerin Guaranty's lender approval process, provide acceptable
protection against abuse of the delegated underwriting process.

CONCENTRATION OF BUSINESS WITH LENDERS

Amerin Guaranty is dependent on a small number of lenders for a substantial
portion of its business. Ten lenders were responsible for 98.7%, 89.9%, 86.8%
and 87.0% of Amerin Guaranty's DIRECT RISK IN FORCE at December 31, 1993, 1994
and 1995 and September 30, 1996, respectively. At September 30, 1996, the three
largest single customers of Amerin Guaranty (including branches and affiliates
of such customers), measured by direct risk in force, were Norwest Mortgage,
Inc., Countrywide Home Loans and Bank of America, which accounted for 40.0%,
22.4% and 8.3%, respectively, of Amerin Guaranty's direct risk in force. From
time to time, concentration of business with lenders may increase as a result
of, among other factors, mergers or other combinations of lenders. For example,
during 1996, Norwest Mortgage, Inc. acquired Prudential Home Mortgage and Chase
Manhattan Mortgage Corporation merged with Chemical Residential Mortgage
Corporation. While management believes its relations with the major lenders
doing business with Amerin Guaranty to be good, there can be no assurance that
these lenders will not reduce the amount of business currently given to Amerin
Guaranty or cease doing business with Amerin Guaranty altogether. Amerin
Guaranty's master policies and related lender agreements do not, and by law can
not, require lenders to do business with Amerin Guaranty. The loss of business
from any of Amerin Guaranty's major lenders would have a material adverse effect
on Amerin Guaranty's business and financial results. See "Business--Customers"
and "--Overview of Direct Risk in Force."

CLAIMS-PAYING ABILITY RATINGS

Moody's and S&P have rated the claims-paying ability of Amerin Guaranty as
"Aa3" and "AA," respectively. Certain national mortgage lenders, and a large
segment of the mortgage securitization market, including Fannie Mae and Freddie
Mac, generally will not purchase mortgages or mortgage-backed securities unless
the private mortgage insurance on the mortgages has been issued by an insurer
with a claims-paying ability rating of at least "Aa3" from Moody's or "AA-" from
S&P, Duff & Phelps Credit Ratings Co. ("D&P") or Fitch Investors Service, Inc.
("Fitch"). Any downgrading of Amerin Guaranty's ratings below such levels would
have a material adverse effect on the Company's results of operations and
prospects. Adverse developments in Amerin Guaranty's financial condition or
results of operations, by virtue of underwriting or investment losses or
otherwise, or changes in the views of the rating agencies, could cause the
rating agencies to lower Amerin Guaranty's ratings. There can be no

12
<PAGE>
assurance that Amerin Guaranty's claims-paying ability ratings will not be
downgraded by one or more rating agencies in the future.

The Company and Amerin Guaranty are parties to agreements (the "Rating
Agency Agreements") required by Moody's and S&P as a condition of the issuance
to Amerin Guaranty and maintenance of their respective claims-paying ability
ratings of "Aa3" and "AA." See "Business--Claims-Paying Ability Ratings." Among
the requirements imposed by the Rating Agency Agreements is a limitation on the
amount of insurance risk that may be written by Amerin Guaranty to a multiple of
20 times its STATUTORY CAPITAL (which includes the CONTINGENCY RESERVE) less the
carrying value of non-investment grade debt and tax and loss bonds and
investment in affiliates, or such higher or lower multiple as is reasonably
determined by the rating agency in its sole discretion. At September 30, 1996,
Amerin Guaranty's risk to capital ratio was 12.3 to 1.

Amerin Guaranty has several alternatives available to control its RISK TO
CAPITAL RATIO, including obtaining capital contributions from the Company,
purchasing additional QUOTA SHARE or EXCESS LOSS REINSURANCE and reducing the
amount of new business written. However, the Company currently does not have any
substantial available funds and there can be no assurance that the Company could
raise additional funds, or do so on a timely basis, in order to make a capital
contribution to Amerin Guaranty. In addition, there can be no assurance that
needed reinsurance would be available to Amerin Guaranty or, if available, would
be on satisfactory terms to Amerin Guaranty. A material reduction in statutory
capital, whether resulting from underwriting or investment losses or otherwise,
or a disproportionate increase in risk in force, could increase the risk to
capital ratio. An increase in the risk to capital ratio could limit Amerin
Guaranty's ability to write new business (which in turn could materially
adversely affect the Company's results of operations and prospects).

The higher coverage requirements effective in the first quarter of 1995 for
90s and 95s announced by Fannie Mae and Freddie Mac (see "Industry
Overview--Fannie Mae and Freddie Mac") have increased the average coverage
percentages of new insurance written by Amerin Guaranty, as well as increased
premiums earned on policies subject to such requirements. These requirements
have increased Amerin Guaranty's risk in force and risk to capital ratio, and
the Company expects that they will continue to have some incremental effect in
the future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

COMPETITION; MARKET SHARE

The principal sources of Amerin's direct competition are (i) other private
mortgage insurers (some of which are well capitalized, diversified public
companies or their affiliates, have higher claims-paying ability ratings and
have greater access to capital than Amerin) and (ii) federal and state
governmental and quasi-governmental agencies (principally the Federal Housing
Administration ("FHA")). Indirectly, Amerin Guaranty also competes with mortgage
lenders which forego third-party coverage and retain the full risk of loss on
their high LTV loans.

The environment for the nine active insurers which comprise the U.S. private
mortgage insurance industry is both highly dynamic and intensely competitive.
Numerous factors bear on the relative position of the private mortgage insurance
industry versus the "direct" government and quasi-governmental competition as
well as the "indirect" competition of lending institutions which choose to
remain uninsured. These factors include legislative and/or regulatory
initiatives which affect the FHA's competitive position as well as the capital
adequacy of, and alternative business opportunities for, lending institutions.
See "-- Fannie Mae and Freddie Mac; Federal Legislation."

In the first nine months of 1996, MGIC possessed the largest share of the
private mortgage insurance market based on new primary insurance written with
25.4%, and GE Capital Mortgage Insurance Corporation ("GEMICO"), an affiliate of
GE Capital Corporation, PMI Mortgage Insurance Co.

13
<PAGE>
("PMI"), United Guaranty Residential Insurance Company ("UGC"), an affiliate of
American International Group, Inc., Republic Mortgage Insurance Company
("RMIC"), an affiliate of Old Republic International Corporation, and
Commonwealth Mortgage Assurance Company ("CMAC") had market shares of 18.8%,
14.7%, 12.7%, 11.2% and 9.5%, respectively.

Amerin Guaranty's market shares for new primary insurance written for 1993,
1994, 1995 and the first nine months of 1996 were .2%, 1.9%, 5.4% and 6.1%,
respectively. There can be no assurance that the Company's market share of new
insurance written will grow. See "Business--Mortgage Insurance Industry Market
Share."

HISTORY OF LOSSES; LIMITED OPERATING HISTORY

The Company was incorporated in November 1991 and commenced its insurance
operations (through Amerin Guaranty) in April 1993. Accordingly, the Company has
only a limited operating history. In addition, during the time the Company has
owned Amerin Guaranty (since April 1992), Amerin Guaranty's principal insurance
regulators have not conducted a statutory financial examination of Amerin
Guaranty and none are currently scheduled. The Company had net income applicable
to common stockholders of $20.0 million for the nine months ended September 30,
1996, and net losses applicable to common stockholders of $28.1 million, $3.1
million, and $7.2 million for the years ended December 31, 1995, 1994 and 1993,
respectively. The Company had net losses before pay-in-kind dividends on the
Company's 13.5% Convertible Preferred Stock, which was redeemed in connection
with the Initial Public Offering, of $2.8 million in 1993, net income before
such pay-in-kind dividends of $2.0 million for 1994, and a net loss before such
pay-in-kind dividends of $22.8 million for 1995. The 1995 net loss included a
nonrecurring charge of $35.7 million of compensation expenses. See Note 15 of
Notes to the Consolidated Financial Statements.

DEPENDENCE ON KEY OFFICERS

The Company's founding and its operations to date have depended to a
significant degree on the efforts of Gerald L. Friedman, Chairman and Chief
Executive Officer of the Company, and Stuart M. Brafman, who served as President
and Chief Operating Officer until his retirement in December 1996. In the same
month, Mr. Friedman assumed the Presidency of the Company and of Amerin
Guaranty, and established the Office of the Chairman, consisting of Mr.
Friedman, Roy J. Kasmar, Executive Vice President of Operations and Chief
Operating Officer of Amerin Guaranty, and Jerome J. Selitto, Executive Vice
President and National Director of Marketing and Sales of Amerin Guaranty. The
Company's operations may be adversely affected if Mr. Friedman ceases to be
active in the Company's management. Mr. Friedman has entered into an employment
agreement with Amerin Guaranty for a period ending May 1, 1997. Since the
inception of the Company, Mr. Friedman has been obligated to devote the
equivalent of at least two business days a week to Amerin Guaranty's affairs or
such lesser or greater amount of time as he shall reasonably and in good faith
determine and is not permitted to accept any other responsibilities, with or
without compensation, that would be inconsistent with the services to be
rendered by him under his employment agreement. Since the inception of the
Company, Mr. Friedman has devoted the equivalent of three to four business days
a week to Amerin Guaranty's affairs. See "Management."

CERTAIN MATTERS RELATING TO LENDER PAID MORTGAGE INSURANCE

Because the cost of LPMI is paid by the lender, to recover such additional
cost, the mortgage loans insured pursuant to LPMI policies generally bear
interest at a rate in excess of comparable loans insured by BPMI policies. Based
on the advice of Davis Polk & Wardwell, which in turn is based in part on
certain representations by Amerin regarding the structure of LPMI, Amerin
believes that the use of LPMI on a mortgage loan does not affect the
deductibility from gross income for U.S. federal income tax purposes of
otherwise deductible mortgage interest paid by the borrower on such loan. There
can be no assurance,

14
<PAGE>
however, that the United States Internal Revenue Service ("IRS") may not
challenge the conclusions reached by Amerin Guaranty's counsel, and a ruling by
the IRS that did so could have a material adverse effect on Amerin's business
and financial results. The Company does not intend to seek a ruling from the
IRS.

Political and monetary pressures to reduce the nation's budget deficit
could, among other things, result in the partial or entire loss of the U.S.
federal income tax deduction for mortgage interest, which could result in
downward pressure on housing prices. Any reduction or loss of such deduction
could reduce the volume of low down payment mortgages originated and private
mortgage insurance written and adversely impact mortgage default patterns, and
would materially adversely affect the Company's LPMI business.

CERTAIN LEGAL MATTERS RELATING TO CAPTIVE MORTGAGE REINSURANCE ARRANGEMENTS

Amerin Guaranty has developed a program that permits mortgage lenders to
participate on a limited basis in the risks and rewards of insuring loans
originated by such lenders. To date, under this program, Amerin Guaranty has
entered into reinsurance arrangements ("Captive Arrangements") with mortgage
reinsurance affiliates of two of its mortgage lending customers. Such customers
are not affiliated with a national bank or a federal savings and loan
association and therefore are not subject to regulation by federal banking
authorities.

In October 1996, the Office of the Controller of the Currency (the "OCC"),
which regulates banks, announced that Captive Arrangements were permissible for
subsidiaries of banks, and that the OCC would consider applications from banks
for approval of Captive Arrangements. On January 22, 1997, the OCC granted
approval to Chase Manhattan Bank USA, NA, an affiliate of Chase Manhattan
Mortgage Corporation, to enter into a Captive Arrangement. In December 1996, the
Office of Thrift Supervision (the "OTS"), which regulates thrifts, announced
that it would consider applications from thrifts for approval of Captive
Arrangements. To date, the OTS has not approved any Captive Arrangements. No
assurance can be given as to when or whether any approvals from the OTS or
additional approvals from the OCC will be forthcoming or whether such approvals
will contain any conditions on any Captive Arrangements.

In April 1996, Amerin Guaranty met with the Department of Housing and Urban
Development ("HUD") and presented its position that Amerin Guaranty's Captive
Arrangements are in compliance with the Real Estate Settlement Procedures Act of
1974, and the regulations promulgated thereunder (collectively, "RESPA"). To
date, HUD has not made any pronouncement with respect to Captive Arrangements.
Based on the advice of Patton Boggs, L.L.P., Amerin believes that its Captive
Arrangements comply with RESPA. There can be no assurance, however, that HUD
will not challenge the compliance of Captive Arrangements under RESPA. A ruling
by HUD that limits or prohibits the use of Captive Arrangements could have a
material adverse effect on Amerin's business and financial results.

FANNIE MAE AND FREDDIE MAC; FEDERAL LEGISLATION

As the most significant beneficiaries of private mortgage insurance, Fannie
Mae and Freddie Mac impose requirements for private mortgage insurers to be
eligible to insure loans sold to such agencies. The Company believes that Fannie
Mae and Freddie Mac purchased a majority of the loans insured by Amerin Guaranty
in 1995 and the first nine months of 1996. While loans insured by Amerin
Guaranty have been continuously eligible for purchase by Fannie Mae and Freddie
Mac since Amerin Guaranty commenced operations, there can be no assurance that
Amerin Guaranty will remain a Fannie Mae or Freddie Mac eligible insurer. The
Company is not aware of any changes to Fannie Mae or Freddie Mac requirements
under consideration, or any other factors, that would materially impact the
purchaseability or saleability of loans insured by Amerin Guaranty. Any change
in Amerin Guaranty's eligibility status would have a

15
<PAGE>
material adverse effect on the Company's financial condition, results of
operations and prospects. See "Industry Overview--Fannie Mae and Freddie Mac"
and "Business--Regulation."

Private mortgage insurers, including Amerin Guaranty, are highly dependent
upon federal housing legislation and other laws and regulations which affect the
demand for private mortgage insurance and the housing market generally.
Proposals have been advanced which would allow Fannie Mae and Freddie Mac
additional flexibility in determining the amount and nature of alternative
recourse arrangements or other credit enhancements which they could utilize as
substitutes for private mortgage insurance. In addition, Fannie Mae and Freddie
Mac have entered into, and may in the future seek to enter into, alternative
recourse arrangements or other credit enhancements based on their existing
legislative authority. Fannie Mae recently announced a proposed change to its
policy with respect to cancellation of mortgage insurance on loans owned or
securitized by Fannie Mae. This proposal, if adopted in its current form, would
result in automatic cancellation of mortgage insurance on some loans based on
scheduled maturity and minimum aging requirements, simplified conditions for
cancellation of mortgage insurance on certain other loans, and the delivery of
annual disclosure statements to all borrowers explaining the conditions under
which their mortgage insurance could be cancelled. The Company cannot predict
whether this proposal will be adopted or the overall effect of such adoption on
the Company or the mortgage insurance industry generally.

General public discussions have taken place from time to time concerning the
desirability of limiting or eliminating the deductibility of qualifying
residential mortgage interest for U.S. federal income tax purposes. The Company
cannot predict whether any such proposals will be adopted, but, if adopted and
depending upon the nature and extent of revisions made, demand for private
mortgage insurance may be adversely affected. Future changes in laws or
regulations or their interpretations which adversely impact the demand for
private mortgage insurance, restrict premium rates or otherwise restrict or
impair the ability of Amerin Guaranty to compete for business could have a
material adverse effect on the Company's financial condition and results of
operations. See "Industry Overview" and "Business--Regulation."

NO INTENTION TO PAY DIVIDENDS

The Company has never paid any cash dividends on its capital stock. The
Company currently intends to retain its future earnings to finance the growth
and development of its business and therefore does not anticipate paying cash
dividends on the Common Stock for the foreseeable future. Amerin Corporation is
a holding company whose principal source of cash flow is dividends and other
permitted payments from its subsidiaries, Amerin Guaranty and Amerin Re. See
"Price Range of Common Stock and Dividend Policy" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Statutory Capital
and Dividend Capacity of Amerin Guaranty." For a description of restrictions on
the payment of dividends applicable to Amerin Corporation and Amerin Guaranty,
see Note 12 of Notes to Consolidated Financial Statements.

CONCENTRATION OF OWNERSHIP

Immediately following the Offering, the Original Stockholders will
collectively own 30.0% of the Common Equity and 25.4% of the Common Stock (27.6%
and 23.7%, respectively, if the U.S. Underwriters' over-allotment option is
exercised in full), and certain Principal Stockholders will own beneficially
100.0% of the Nonvoting Common Stock. The Stockholders Agreement provides that
so long as the Original Stockholders, together with certain transferees thereof
pursuant to the terms of the Stockholders Agreement and grantees under the Stock
Incentive Plan ("Plan Grantees"), continue to own, in the aggregate, at least
20% of the Common Equity, and certain other conditions are met, the Principal
Stockholders (other than JPMCC) are required to designate Mr. Friedman for
nomination to the Company's board of directors and may also designate up to four
additional persons for nomination. The stockholders party to the Stockholders
Agreement and the Plan Grantees are required to vote their Common Stock and the
stockholders party to the Stockholders Agreement are required to take such other

16
<PAGE>
actions as may be necessary to effectuate the composition of the Company's board
of directors as contemplated by the Stockholders Agreement. JPMCC owns less than
5% of the Common Stock and is not a party to the voting provisions of the
Stockholders Agreement, although an officer of JPMCC is a director of the
Company. See "Management," "Certain Transactions" and "Principal and Selling
Stockholders."

Although immediately following the Offering the Original Stockholders in the
aggregate will not hold a majority of the voting securities of the Company,
their respective significant beneficial holdings, rights to nominate directors
and obligations to vote in favor of specified nominees under the Stockholders
Agreement will enable them to exercise substantial influence over the management
of the Company and its future direction and operations, including decisions
regarding business opportunities and the issuance of additional shares of Common
Stock and other securities. The concentration of beneficial ownership of the
Company may have the effect of delaying, deferring or preventing a change of
control of the Company, may discourage bids for the Common Stock at a premium
over market price and may adversely affect the market price of the Common Stock.

Upon consummation of the Offering, MSLEF will own 12.3% of the Common Stock
and 11.6% of the Common Equity (11.2% and 10.6%, respectively, if the U.S.
Underwriters' over-allotment option is exercised in full) and, so long as MSLEF
owns at least 5% of the outstanding Common Stock, it will be entitled to
designate two directors for nomination. MSLEF is an affiliate of both MS&Co, a
representative of the U.S. Underwriters, and MS&Co International, a
representative of the International Underwriters. Upon consummation of the
Offering, JPMCC will own 1.3% of the Common Stock and 3.7% of the Common Equity
(1.3% and 3.5%, respectively, if the U.S. Underwriters' over-allotment option is
exercised in full). JPMCC is an affiliate of both J.P. Morgan Securities Inc., a
representative of the U.S. Underwriters, and J.P. Morgan Securities Ltd., a
representative of the International Underwriters.

EFFECT ON PUBLIC MARKET OF SHARES ELIGIBLE FOR FUTURE SALE

The total number of shares of Common Equity outstanding after the Offering
will remain unchanged at 26,080,839, consisting of 24,496,963 shares of Common
Stock after the Offering (22,471,214 shares before the Offering) and 1,583,876
shares of Nonvoting Common Stock after the Offering (3,609,625 shares before the
Offering) which is convertible into Common Stock in accordance with the
Company's Amended and Restated Certificate of Incorporation (the "Certificate").
Of these shares, the shares sold pursuant to the Offering and an additional
13,527,414 shares of Common Stock that were outstanding prior to the Offering
will be tradeable without restrictions or further registration under the
Securities Act except for any such shares held by "affiliates" (as defined in
the Securities Act of 1933, as amended (the "Securities Act")) of the Company.
The 7,817,602 shares of Common Equity held by the Original Stockholders after
the Offering are "restricted" securities within the meaning of the Securities
Act and may not be sold in the absence of registration under the Securities Act
or an exemption therefrom, including the exemptions contained in Rule 144 under
the Securities Act. No prediction can be made as to the effect, if any, that
future sales of shares of Common Stock, or the availability of such shares for
future sale, will have on the market price of the Common Stock prevailing from
time to time. Sales of substantial amounts of Common Stock in the public market,
or the perception that such sales could occur, could adversely affect the
prevailing market price of the Common Stock or the ability of the Company to
raise capital through a public offering of its equity securities.

The Company, the Original Stockholders (who, following the Offering will own
in the aggregate 6,233,726 shares of Common Stock and 1,583,876 shares of
Nonvoting Common Stock, assuming no exercise of the U.S. Underwriters'
over-allotment option), and the directors and other executive officers of the
Company, have agreed, subject to certain limited exceptions, not to (i) offer,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (whether such shares or any such securities are now owned by such
party or are hereafter acquired) or (ii) enter into any

17
<PAGE>
swap or other arrangement that transfers to another, in whole or in part, the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or other securities, in cash or otherwise for a period of 90
days after the date of this Prospectus without the prior written consent of the
representatives of the U.S. Underwriters in the case of MSLEF, or of MS&Co in
the case of the Company and the other Selling Stockholders. See "Shares Eligible
for Future Sale" and "Underwriters."

Pursuant to the Stockholders Agreement and subject to certain conditions,
the Original Stockholders have certain demand registration rights with respect
to the shares of Common Stock that they currently own, and this Offering is
being effected pursuant to such demand registration rights. Additional demand
registration rights may not be exercised within six months of the effective date
of any registration statement relating to the Common Stock (including the
registration statement related to the Offering). See "Certain
Transactions--Stockholders Agreement." Subject to the 90 day lock-up period
described above and (with respect to additional demand registrations) the six
month limitation described immediately above, one or more of the Original
Stockholders may choose to dispose of the Common Stock owned by them (or shares
of Common Stock issuable upon conversion of Nonvoting Common Stock). The timing
of such sales or other dispositions will depend on market and other conditions,
but could occur relatively soon after the 90 day lock-up period described above,
including pursuant to the exercise of their registration rights (which are in
turn subject to the six month limitation). Such dispositions could be privately
negotiated transactions or public sales or, in the case of MSLEF, distributions
to its limited partners, in whose hands such shares of Common Stock would
generally be freely tradeable and not subject to the provisions of the
Stockholders Agreement.

SAFE HARBOR FOR FORWARD LOOKING STATEMENTS

The statements contained in this Prospectus and in the documents
incorporated by reference herein that are not historical facts are forward
looking statements. Actual results may differ materially from those projected in
the forward looking statements. These forward looking statements involve risks
and uncertainties, including but not limited to, the following risks: that
interest rates may increase rather than remain stable or decrease; that housing
demand may decrease for any number of reasons including changes in interest
rates, adverse economic conditions, or other reasons; that Amerin's market share
may decrease as a result of changes in underwriting criteria by Amerin or its
competitors, or other reasons; and changes in the performance of the financial
markets, in the demand for and market acceptance of Amerin products, and in
general economic conditions. Investors are also directed to other risks
discussed herein under "Risk Factors" and in documents filed by the Company with
the Securities and Exchange Commission (the "Commission") and incorporated by
reference herein.

18
<PAGE>

RECENT FINANCIAL AND OPERATING RESULTS

THE INFORMATION SET FORTH BELOW WITH RESPECT TO 1996 FINANCIAL RESULTS IS
BASED ON UNAUDITED FINANCIAL INFORMATION AND MAY BE SUBJECT TO CHANGE UPON
COMPLETION OF THE COMPANY'S ANNUAL AUDIT. THE COMPANY HAS NO REASON TO BELIEVE
THAT FINAL AUDITED FINANCIAL RESULTS AT OR FOR THE YEAR ENDED DECEMBER 31, 1996
WILL DIFFER MATERIALLY FROM THE INFORMATION SET FORTH BELOW.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
<S> <C> <C>
1996 1995
----------- -----------
(IN THOUSANDS OF DOLLARS
EXCEPT RATIOS, PER SHARE
DATA, OR AS OTHERWISE
INDICATED)

<CAPTION>
<S> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Net premiums written............................................................................ $ 70,000 $ 33,946
Increase in unearned premiums................................................................... (7,651) (6,387)
Net premiums earned............................................................................. 62,349 27,559
Net investment income........................................................................... 16,871 7,612
Realized investment gains (losses).............................................................. 161 491
Total revenues.............................................................................. 79,381 35,662
Expenses:
Losses incurred................................................................................. 20,681 7,757
Policy acquisition costs........................................................................ 8,485 6,641
Underwriting and other expenses................................................................. 10,623 6,915
Compensation charge resulting from initial public offering(1)................................... -- 35,741
Total expenses.............................................................................. 39,789 57,054
Income tax expense................................................................................ 11,363 1,419
Net income (loss)................................................................................. 28,229 (22,811)
Pay-in-kind dividends on preferred stock(2)....................................................... -- 5,287
Net income (loss) applicable to common stockholders............................................... 28,229 (28,098)
OTHER OPERATING DATA:
Mortgage insurance operating ratios (GAAP)(3)
Loss ratio.................................................................................... 33.2% 28.2%
Expense ratio................................................................................. 30.6% 49.2
Combined ratio................................................................................ 63.8% 77.3%
Mortgage insurance operating ratios (SAP)(3)
Loss ratio.................................................................................... 33.2% 28.2%
Expense ratio................................................................................. 27.4 42.8
Combined ratio................................................................................ 60.6% 70.9%
PER SHARE DATA:(4)
Net income (loss)............................................................................... $ 1.07 $ (2.32)
Weighted average shares outstanding (in thousands).............................................. 26,351 12,106
Book value (at period end)...................................................................... $ 11.53 $ 10.55
OPERATING AND STATUTORY DATA:(5)
Number of policies in force..................................................................... 120,385 68,112
Default rate.................................................................................... 1.20% .89%
Persistency..................................................................................... 87.6% 93.0%
Direct primary insurance in force (in millions)................................................. $ 14,777 $ 8,262
Direct primary risk in force (in millions)...................................................... $ 3,671 $ 1,989
Statutory capital............................................................................... $ 260.7 $ 227.0
Risk to capital ratio........................................................................... 13.3 8.2
Net premiums written:
New........................................................................................... $ 13,115 $ 11,060
Renewal....................................................................................... $ 56,885 $ 22,886
</TABLE>

19
<PAGE>

<TABLE>
<CAPTION>
DECEMBER 31,
1996
-------------
<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total investments................................................................................................ $ 328,793
Total assets..................................................................................................... 354,824
Unearned premiums................................................................................................ 20,525
Loss reserves.................................................................................................... 18,730
Total common stockholders' equity................................................................................ 300,609
</TABLE>

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

(1) The nonrecurring non-cash charge was incurred in the fourth quarter of 1995
as a result of Messrs. Friedman and Brafman being entitled to 2,250,068
shares of Common Stock upon consummation of the Initial Public Offering
pursuant to the MSV Agreement.

(2) The preferred stock was redeemed in connection with the Initial Public
Offering.

(3) GAAP and SAP ratios reflect the Company's status as a new company and
include start-up and other expenses incurred prior to the commencement of
significant operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview--Expenses." SAP
ratios reflect the combined results of the Company's insurance subsidiaries
and do not include holding company costs. The GAAP expense and combined
ratios for the year ended December 31, 1995 exclude the compensation charge
resulting from the Initial Public Offering.

(4) See Notes 2, 9, 10, 15 of Notes to the Consolidated Financial Statements.

(5) Operating and Statutory Data includes data only for Amerin Guaranty except
for net premiums written which is consolidated.

Total revenues for 1996 were $79.4 million, an increase of 122.6% over 1995
total revenues of $35.7 million. The growth in revenues was due primarily to the
increases in net premiums earned and investment income in 1996 as compared to
1995, as discussed below.

New insurance written in 1996 was $7.7 billion, compared to $5.9 billion in
1995. New insurance written was $1.7 billion in the fourth quarter of 1996 as
compared with $1.9 billion in the fourth quarter of 1995. As of December 31,
1996, Amerin's primary insurance in force was $14.8 billion as compared with
$8.3 billion as of December 31, 1995, an increase of 78.9%.

Net premiums written for 1996 were $70.0 million compared to $33.9 million
for 1995, an increase of 106.2%. The increase was primarily attributable to a
30.1% increase in Amerin Guaranty's new insurance written to $7.7 billion and
growth in insurance in force and related renewal premiums. Management believes
that Amerin Guaranty was able to increase revenues due primarily to increased
use by existing lenders of the Company's BPMI, the addition of new, large
lenders which began doing business with the Company during the second half of
1995 and in 1996, and increased sales of LPMI. The increase in new insurance
written was also due to a lesser extent to higher average premiums during 1996
compared to 1995, principally due to the increased coverage requirements imposed
by Fannie Mae and Freddie Mac during the first quarter of 1995, which
requirements took effect over the course of 1995. Amerin Guaranty's monthly
premium plan represented 86.6% and 81.5% of new insurance written for 1996 and
1995, respectively.

Renewal premiums for 1996 increased 148.6% from 1995 to $56.9 million, due
primarily to the growth of insurance in force throughout 1995, as well as
increased popularity of the monthly premium plan in 1996. With respect to the
monthly premium product, the first month's premium is recorded as new business
and all subsequent premiums are recorded as renewals. Net premiums written for
new business in 1996 increased 18.6% from 1995 to $13.1 million due to a greater
volume of new business written in 1996. However, net premiums written for new
business declined in the fourth quarter of 1996 as compared to the fourth
quarter of 1995 due to the increased percentage of the Company's business
written under the monthly premium plan in the fourth quarter of 1996.

Net premiums earned increased by $34.8 million to $62.3 million for 1996
from $27.6 million for 1995. This increase was primarily due to the increase in
insurance written and in force in 1996 as compared to 1995.

20
<PAGE>

The carrying value of Amerin's investment portfolio at December 31, 1996 was
$328.8 million, as compared to $296.9 million at December 31, 1995. This
increase resulted primarily from investment of Amerin's net operating cash flows
over the course of 1996. Net investment income of $16.9 million for 1996
increased by $9.3 million (or 121.6%) over 1995, due primarily to investment of
the proceeds from the Initial Public Offering, as well as Amerin's net operating
cash flows over the course of 1996, which together resulted in an increase of
138.4% in the monthly average amount of invested assets. Realized investment
gains for 1996 were $.2 million compared to realized investment gains of $.5
million for 1995. This decrease reflected lower sales activity within the
portfolio in order to maintain the desired composition of the investment
portfolio. Sales of investments in 1996 were made primarily in connection with
the continuation of the Company's current investment strategy to increase
investment in tax-exempt securities. As of December 31, 1996 and 1995, the
yields to maturity on the investment portfolio were 5.8% and 6.2%, respectively,
and the average durations of the investment portfolio were 6.4 years and 3.3
years, respectively. The average duration at December 31, 1995 reflected the
investment of the net proceeds of the Initial Public offering in short-term
investments pending their investment in longer maturity tax-exempt securities.

Losses incurred in 1996 were $20.7 million, compared to $7.8 million of
losses incurred in 1995, as a result of aging of the Company's policies. Because
of the Company's limited operating history, its loss experience is expected to
increase significantly as its policies continue to age. Policy acquisition costs
during 1996 of $8.5 million increased by $1.8 million (or 27.8%) compared to
1995 principally due to the growth in the level of marketing and underwriting
activity in connection with the increased production of new insurance written in
1996 compared to 1995. Underwriting and other expenses during 1996 increased by
$3.7 million or 53.6% compared to 1995 due to the institution of an excess loss
treaty, the increase in insurance in force and increases in various
administrative and occupancy costs relating to growth in the Company's
personnel, offset in part by the elimination in 1996 of standby commitment fees
previously paid to certain of the Principal Stockholders.

Computed on a SAP basis, Amerin's loss ratio increased from 28.2% for 1995
to 33.2% for 1996. Amerin's expense ratio declined from 42.8% for 1995 to 27.4%
for 1996. This resulted in a combined ratio of 60.6% for 1996 as compared to
70.9% for 1995.

Persistency was 87.6% at December 31, 1996, compared with 93.0% at December
31, 1995.

The Company's effective tax rate was 28.7% in 1996. The Company incurred tax
expense in 1995 notwithstanding the fact that the Company reported a loss before
taxes, which loss resulted from the Company's recording of the non-recurring
non-deductible charge of $35.7 million discussed in the following paragraph. The
Company fully utilized its net operating losses in 1995, with the result that no
additional net operating losses were available for utilization in 1996. The
effective tax rate for 1996 was below the statutory rate of 35%, principally
reflecting the benefits of tax-exempt investment income.

As a result of the foregoing factors, the Company had net income of $28.2
million for 1996, or $1.07 per share, compared to a net loss before pay-in-kind
dividends on its previously outstanding 13.5% Convertible Preferred Stock of
$22.8 million for 1995. The 1995 net loss was due to a non-recurring non-
deductible charge of $35.7 million in the fourth quarter of 1995 as a result of
its Chairman and President being entitled to shares of Common Stock pursuant to
the MSV Agreement upon consummation of the Initial Public Offering. The net loss
applicable to common shareholders (after pay-in-kind dividends) was $28.1
million, or $2.32 per share, for 1995. The 13.5% Convertible Preferred Stock was
redeemed in connection with the Initial Public Offering.

21
<PAGE>
USE OF PROCEEDS

All of the shares of Common Stock offered hereby are being offered by the
Selling Stockholders. The Company will not receive any of the proceeds from the
sale of the shares being offered.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Common Stock is listed on the Nasdaq National Market ("Nasdaq") under
the symbol "AMRN." The following table sets forth, for the periods indicated,
the high and low sale prices of the Common Stock as reported by Nasdaq since
November 22, 1995, the date of the Initial Public Offering.

<TABLE>
<CAPTION>
HIGH
-----------
<S> <C>
1995:
Fourth Quarter (from November 22)............................................................................ $ 28 1/2

1996:
First Quarter................................................................................................ $ 28 1/2
Second Quarter............................................................................................... $ 27 1/4
Third Quarter................................................................................................ $ 26
Fourth Quarter............................................................................................... $ 25 3/4

1997:
First Quarter (through January 24, 1997)..................................................................... $ 26 1/4

<CAPTION>
LOW

-----------

<S> <C>
1995:
Fourth Quarter (from November 22)............................................................................ $ 18

1996:
First Quarter................................................................................................ $ 22 3/4

Second Quarter............................................................................................... $ 19 3/4

Third Quarter................................................................................................ $ 20

Fourth Quarter............................................................................................... $ 19

1997:
First Quarter (through January 24, 1997)..................................................................... $ 19 3/4

</TABLE>

On January 23, 1997, the reported last sale price of the Common Stock, on
the Nasdaq was $22 3/4 per share. As of January 1, 1997, there were 102 holders
of record of the Common Stock and five holders of record of the Nonvoting Common
Stock.

The Company has never paid any cash dividends on its capital stock. The
Company currently intends to retain its future earnings to finance the growth
and development of its business and therefore does not anticipate paying cash
dividends on the Common Stock for the foreseeable future. Amerin Corporation is
a holding company whose principal source of cash flow is dividends and other
permitted payments from its subsidiaries, Amerin Guaranty and Amerin Re. See
"Risk Factors--No Intention to Pay Dividends" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Statutory Capital and
Dividend Capacity of Amerin Guaranty." For a description of restrictions on the
payment of dividends applicable to Amerin Corporation and Amerin Guaranty, see
Note 12 of Notes to Consolidated Financial Statements.

22
<PAGE>
CAPITALIZATION

The following table sets forth the unaudited capitalization of the Company
as of September 30, 1996. The following table should be read in conjunction with
the Condensed Consolidated Financial Statements (including Notes thereto)
included and incorporated by reference in this Prospectus.

See "Recent Financial and Operating Results" for information concerning
preliminary 1996 results.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
(IN THOUSANDS OF
DOLLARS)
<S> <C>
Common Stockholders' Equity:
Common Stock, $.01 par value, 50,000,000 shares authorized, 22,453,100 shares issued and
outstanding at September 30, 1996(1)(2)............................................... $ 224
Nonvoting Common Stock, $.01 par value, 50,000,000 shares authorized, 3,609,625 issued
and outstanding at September 30, 1996(1).............................................. 36
Additional paid-in capital.............................................................. 315,302
Net unrealized investment losses........................................................ (2,543)
Retained-earnings deficit............................................................... (23,993)
--------
Total common stockholders' equity................................................... 289,026
--------
Total capitalization.................................................................... $ 289,026
--------
--------
</TABLE>

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

(1) In connection with the Offering, 2,025,749 shares of Nonvoting Common Stock
will be converted into an equal number of shares of Common Stock.

(2) Excludes (i) 943,180 shares of Common Stock subject to options outstanding
under the Stock Incentive Plan at exercise prices ranging from $4.24 to
$24.00 per share, of which 171,258 of such shares relate to options granted
after September 30, 1996, and (ii) 18,080 shares of Common Stock issued
after September 30, 1996.

23
<PAGE>
INDUSTRY OVERVIEW

FANNIE MAE AND FREDDIE MAC

The modern private mortgage insurance industry in the United States began in
1957. The development of the industry was significantly influenced by the
enactment of the Emergency Home Finance Act of 1970, which authorized Fannie Mae
and Freddie Mac to create secondary markets for "conventional" mortgage loans
(mortgages that are not insured by the FHA or the Department of Veterans'
Affairs (the "VA")) on single family residences having a principal balance less
than a specified amount ($214,700 since January 1, 1997). Fannie Mae and Freddie
Mac are the predominant purchasers and sellers of conventional mortgage loans in
the United States, providing a direct link between the primary mortgage
origination markets and the capital markets. See "Risk Factors--Fannie Mae and
Freddie Mac; Federal Legislation."

The role of Fannie Mae and Freddie Mac has increased in part because
risk-based capital regulations, adopted in recent years by the various federal
bank and savings institution regulatory agencies, assign lower asset risk
weights to mortgage-related securities issued or guaranteed by Fannie Mae or
Freddie Mac than to the underlying mortgage loans themselves. Consequently,
banks and savings institutions have a financial incentive to sell mortgage loans
to Fannie Mae and Freddie Mac and to acquire such mortgage-related securities as
portfolio investments. Fannie Mae's and Freddie Mac's importance has also
increased due to the increase in the level of mortgage loans being originated by
mortgage bankers, which sell substantially all of their mortgage loan production
into the secondary market.

Since 1970, Fannie Mae and Freddie Mac have been permitted to purchase
conventional high LTV mortgages only if the lender (i) secures private mortgage
insurance from an eligible insurer on those loans; (ii) retains a participation
of not less than 10% in the mortgage; or (iii) agrees to repurchase or replace
the mortgage in the event of a default under specified conditions. If the lender
retains a participation in the mortgage or agrees to repurchase or replace the
mortgage, applicable federal bank and savings institution regulations require
the lender to maintain capital with respect to the mortgage. Because loan
originators prefer to make loans that may be marketed in the secondary market to
Fannie Mae and Freddie Mac without having to hold such capital, they are
motivated to purchase mortgage insurance from insurers deemed eligible by Fannie
Mae and Freddie Mac. Loans insured by Amerin Guaranty are eligible for purchase
by Fannie Mae and Freddie Mac. See "Business--Regulation--Direct Regulation."

Both Fannie Mae and Freddie Mac have established higher coverage
requirements for higher LTV 30-year loans eligible for purchase by them starting
in the first quarter of 1995. 95s must have 30% coverage in contrast to the 25%
coverage previously required, while 90s must have 25% coverage in contrast to
the 17% coverage previously required. 30% coverage is now required for 97s.
Management estimates that, on average, such increased coverage has increased
Amerin Guaranty's monthly premium rates (on a 30-year fixed rate loan) by
approximately 38% for 90s and approximately 26% for 95s, while at the same time
increasing the borrowers' monthly mortgage payments, including mortgage
insurance, by less than 2%. These higher coverage requirements have increased
risk in force and the risk to capital ratio compared to insuring an equal amount
of new mortgages under the prior coverage requirements, and the Company expects
that they will continue to have some incremental effect in the future. In
addition, coverage requirements on shorter term amortizing loans (15- and
20-year terms) were lowered for 90s and for loans having LTVs below 85%.

Both Fannie Mae and Freddie Mac have been subject to 1992 oversight
legislation for "government sponsored enterprises" (the "GSEs") which tightened
capital requirements for them and, at the same time, mandated that 30% of all
loans purchased by the GSEs (determined on the basis of the number of dwelling
units securing the loan) be LOW-TO-MODERATE loans and that 30% of all loans
purchased by the GSEs (determined on the basis of the number of dwelling units
securing the loan) be for housing located in central cities. The Company
believes that the GSE requirement to expand purchases of low-to-moderate loans
and central city loans has increased and may continue to increase the overall
size of the total

24
<PAGE>
mortgage insurance market because such loans are traditionally in excess of 80%
LTV, with a majority being in excess of 90% LTV.

The Company believes that Fannie Mae and Freddie Mac purchased a majority of
the loans insured by Amerin Guaranty in 1993, 1994, 1995 and the first nine
months of 1996.

In February 1994, Fannie Mae announced a six month pilot program of
purchasing 97s to help meet its 30% low-to-mod loan and central city loan
purchase requirements. Based on the success of this pilot program, in November
1994 Fannie Mae expanded its Community Home Buyers Program to include 97s.
Freddie Mac began purchasing 97s in October 1996. Amerin Guaranty began offering
a 97% product in the third quarter of 1994. At September 30, 1996, less than .3%
of the Company's risk in force was in 97s.

Fannie Mae and Freddie Mac have each announced alternatives to their
traditional method of approving loan purchases after the closing of a mortgage
loan. Such alternatives are new automated underwriting services called Loan
Prospector (Freddie Mac) and Desktop Underwriter (Fannie Mae), which can be used
by a mortgage originator to determine, prior to the closing of a mortgage loan,
whether the respective agency will purchase such loan. Lenders must purchase
these services and pay related fees. Through these systems, lenders will also be
able to obtain approval for mortgage guaranty insurance issued by any mortgage
insurer participating in these services. Eight mortgage insurers including
Amerin Guaranty have agreed to participate in this service, and Amerin Guaranty
is working with Fannie Mae and Freddie Mac to ensure that lenders will be able
to select Amerin Guaranty under either of these systems. The Company cannot
predict what impact, if any, the use of these systems will have on such
originators' choices in purchasing mortgage guaranty insurance.

SELECTED FACTORS INFLUENCING PERFORMANCE

The results of operations of a primary mortgage insurer are affected, among
other things, by: (i) the overall demand for and persistency of mortgage
insurance, which directly affects insurance in force and is related to the level
of home sales and refinancing activity, which in turn is influenced by a number
of economic and demographic factors and trends, including housing affordability,
interest rates, consumer confidence, GNP growth, rates of employment and
inflation, and the aging of the U.S. population; (ii) the amount of new
insurance written and any given mortgage insurer's percentage thereof, which are
affected by such mortgage insurer's ability to compete against other private
mortgage insurance companies as well as mortgage insurance provided by the FHA
and, to a lesser extent, the VA and state housing insurance funds, and by the
extent to which lenders forego third-party coverage and retain the full risk of
loss on high LTV mortgage loans; (iii) the degree to which an insurer is able to
charge premiums commensurate with the ultimate cost of the risks insured; (iv)
CLAIM FREQUENCY, which is influenced by national and regional economic
conditions (including recessions), the geographic dispersion of risk in force,
the borrower's equity in the home at the time of default, the underlying
mortgage amount, the type and term of the insured mortgage and the type of
property securing the mortgage; (v) CLAIM SEVERITY, which is influenced in part
by the amount of accrued interest on the mortgage loan, the foreclosure expenses
and appreciation or depreciation in housing prices; (vi) an insurer's expenses;
and (vii) the performance of an insurer's investment portfolio. The results of
operations for a mortgage insurer may be significantly affected in any period by
any of the foregoing factors. See "Business--Coverage" and "--Defaults and
Claims--Claims."

INDUSTRY PERFORMANCE

The mortgage insurance industry, as a whole, has shown positive UNDERWRITING
INCOME throughout the 1990s. Between 1990 and 1995, the industry recorded
cumulative underwriting income of $1.55 billion.

The following table shows certain financial performance ratios for the
private mortgage insurance industry since 1991. The COMBINED RATIO is a
principal indicator of a private mortgage insurer's profitability on its
insurance written. In respect of any year, the lower the combined ratio, the
higher an insurer's earnings from its insurance underwriting activities, with a
combined ratio below 100% indicating an

25
<PAGE>
underwriting profit for such year. The Company began writing mortgage insurance
in 1993. Prior period information is for background information only. No
assurance can be given that Amerin would have performed or will perform
similarly to the industry under historical or future conditions.

PRIVATE MORTGAGE INSURANCE INDUSTRY PERFORMANCE RATIOS(1)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
TOTAL INDUSTRY:
Loss ratio.............................................. 51.3% 59.3% 53.3% 50.1% 58.1%
Expense ratio........................................... 23.6 25.2 24.4 23.9 25.1
Combined ratio.......................................... 74.9% 84.5% 77.6% 74.0% 83.2%
</TABLE>

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

(1) Based on SAP. Includes companies writing new mortgage insurance and
companies in runoff.

Source: MICA FACT BOOK.

Between 1985 and 1989, the mortgage insurance industry experienced a
cumulative net underwriting loss of $2.6 billion partially offset by investment
income of approximately $1.2 billion. These losses resulted primarily from
liberal credit standards and low premium rates offered by the industry in the
early 1980s and extremely adverse conditions in the property markets of the
nation's major energy producing states in the mid-1980s. The industry's response
to these losses included premium rate increases, wider differentiation of
premium rates based on risk characteristics, more conservative underwriting
standards and improved risk management methods.

COMPETITION

The U.S. private mortgage insurance industry consists of nine active
mortgage insurers, including MGIC, GEMICO (an affiliate of GE Capital
Corporation), PMI, UGC (an affiliate of American International Group, Inc.),
CMAC, and RMIC (an affiliate of Old Republic International Corporation). Amerin
Guaranty is the seventh largest private mortgage insurer in the United States,
based on new primary insurance written in the first nine months of 1996. In the
first nine months of 1996, MGIC possessed the largest share of the private
mortgage insurance market, with 25.4% of new primary insurance written, and
GEMICO, PMI, UGC, RMIC, CMAC and Amerin Guaranty had market shares of 18.8%,
14.7%, 12.7%, 11.2%, 9.5% and 6.1%, respectively.

Amerin Guaranty and other private mortgage insurers also compete directly
with federal and state governmental and quasi-governmental agencies, principally
the FHA and, to a lesser degree, the VA. These agencies sponsor
government-backed mortgage insurance programs which, according to data from HUD,
VA and INSIDE MORTGAGE FINANCE, accounted for 46.9%, 51.8% and 36.1% of all
loans insured by the FHA, VA or by private mortgage insurers in 1993, 1994 and
1995, respectively. Currently, the maximum individual loan amount that the FHA
can insure is $155,250, and the maximum individual loan amount that the VA can
insure is $207,000. Private mortgage insurers have higher maximum individual
loan amounts that they can insure. Generally, Amerin Guaranty and other private
mortgage insurers have lower premium rates than the FHA and VA and a greater
variety of insured loan products. However, the FHA and VA have more flexible
loan underwriting guidelines than Amerin Guaranty and the other private mortgage
insurers, the servicers of FHA-or VA-insured loans receive a higher servicing
fee than they receive from loans insured with private mortgage insurance, and
the FHA and VA provide higher insurance coverage percentages than private
mortgage insurers. In addition, FHA and VA regulations allow the financing of
almost all closing costs, including the initial mortgage insurance premium, thus
resulting in little or no cash being required of the borrower at closing, while
mortgage lenders originating conventional loans and using private mortgage
insurance generally are unable to finance the same level of

26
<PAGE>
closing costs, thus requiring the borrower to provide a greater amount of cash
at closing. Management believes that the introduction of the monthly premium
product and lender paid mortgage insurance has increased the competitiveness of
the private mortgage insurers versus the FHA and VA by spreading the initial
premium over a 12-month period and thereby lowering the borrower's closing
costs.

In addition to competition from federal agencies, Amerin Guaranty and other
private mortgage insurers face competition from state-supported mortgage
insurance funds. As of December 31, 1996, several states (among them,
California, Connecticut, Maryland, Massachusetts, New York and Vermont) have
state housing insurance funds which are either independent agencies or
affiliated with state housing agencies.

The following table sets forth (i) the dollar amount of total mortgage loan
origination, (ii) mortgage loan origination insured by FHA/VA or private
mortgage insurance and (iii) the percentage of such insured loan origination to
total mortgage loan origination during the periods shown. Management believes
that the principal factors influencing the percentage of total loan originations
which are insured are interest rates and general economic conditions. Interest
rates have a strong effect on the relationship between purchase money mortgages
and refinanced loans, which are more prevalent in lower interest rate
environments and are less likely to require mortgage insurance. General economic
conditions have a significant effect on demand for one to four family homes.
Weaker economic conditions create uncertainties which can reduce demand for
purchase money mortgages and thus the demand for insured loans.

TOTAL MORTGAGE LOAN ORIGINATIONS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE
30, 1996 1995 1994 1993 1992 1991
------------- ---------- ---------- ---------- ---------- ----------
(IN BILLIONS OF DOLLARS EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C>
Total origination............................... $ 418.1 $ 650.1 $ 773.1 $ 1,009.3 $ 893.7 $ 562.1
FHA/VA and private mortgage insured
origination.................................... 112.5 257.5 272.5 257.5 174.5 116.9
Percentage of total origination................. 26.9% 39.6% 35.2% 25.5% 19.5% 20.8%
</TABLE>

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

Sources: MICA, MICA FACT BOOK and INSIDE MORTGAGE FINANCE.

Management believes the share of newly-originated mortgages carrying
mortgage insurance is influenced by several factors. The share of high-LTV loans
carrying mortgage insurance has been increased by higher regulatory capital
requirements for depository institutions holding uninsured high-LTV loans. The
high-LTV share of mortgage originations is influenced by the level of
refinancing activity (the share of high-LTV loans among refinancings is lower
than among purchase money mortgages), and may be increased by affordable housing
and central-city housing initiatives.

The following table indicates the relative share of the mortgage insurance
market based on new insurance written by FHA/VA and private mortgage insurers
for the periods shown.

27
<PAGE>
FEDERAL GOVERNMENT AND PRIVATE MORTGAGE INSURANCE MARKET SHARE

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1996 1995 1994 1993 1992 1991
------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
FHA/VA................................................. 43.1% 36.1% 51.8% 46.9% 42.1% 53.8%
Private mortgage insurance............................. 56.9 63.9 48.2 53.1 57.9 46.2
----- ----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
</TABLE>

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

Sources: MICA FACT BOOK and INSIDE MORTGAGE FINANCE.

Management believes that the market share of private mortgage insurers
relative to the FHA and VA has been influenced by factors including: (i) the
percentage of loans exceeding the FHA and VA limits, which has generally
increased over time but may be reduced by increases in the FHA and VA limits;
(ii) the percentage of high-LTV borrowers making down payments of 5% or more, at
which levels private mortgage insurance has generally been more cost-effective
than FHA borrowing; (iii) the number of borrowers eligible for VA insurance,
which has recently been increased to include members of the National Guard and
Reserves with at least six years' service; (iv) the level of refinancing
activity (beginning in 1992, the FHA ceased charging renewal premiums on FHA
refinancings of FHA loans, which made such refinancings relatively attractive)
and (v) the relative attractiveness of FHA and privately insured mortgage
products in various market conditions.

Various proposals are being discussed by Congress and certain federal
agencies to reform or modify the FHA. The Company is unable at this time to
predict the scope and content of such proposals, or whether any such proposals
will be enacted into law, and, if enacted, the effect on the Company.

Amerin Guaranty and other private mortgage insurers also compete indirectly
with mortgage lenders that elect to retain the risk of loss from defaults on all
or a portion of their high LTV mortgage loans rather than obtain insurance for
such risk. Any change in legislation which affects the risk-based capital rules
imposed on savings institutions, like the Financial Institutions Reform,
Recovery and Enforcement Act of 1989 ("FIRREA"), may affect the desirability of
forgoing insurance for savings institutions and, therefore, Amerin Guaranty's
opportunity to insure more high LTV mortgage loans from such institutions. See
"--Legislative and Regulatory Changes."

LEGISLATIVE AND REGULATORY CHANGES

Legislative and regulatory changes affecting the FHA and certain savings
institutions and commercial banks that forgo insurance have affected demand for
private mortgage insurance.

Housing legislation enacted in 1992 permits up to 100% of borrower closing
costs to be financed by loans insured by the FHA, a significant increase from
the previous 57% limit. Also, in April 1992, the FHA stopped charging renewal
premiums if a loan insured by the FHA was refinanced, which made FHA insurance
for refinancings relatively more attractive. In April 1994, HUD reduced the
initial premium (payable at loan origination) for FHA insurance from 3.0% to
2.25%. The Company believes that this reduction has not had a significant effect
to date on the relative market shares of FHA insurance and private mortgage
insurance. In addition, the maximum individual loan amount that the FHA could
insure was increased from $151,725 to $152,363 in the third quarter of 1994 and
to $155,250 in the first quarter of 1996, and the maximum individual loan amount
that the VA could insure was increased from $184,000 to $203,150 in the fourth
quarter of 1994 and to $207,000 in the first quarter of 1996. Legislation that
increases the number of persons eligible for FHA or VA mortgages could have an
adverse effect on the Company's ability to compete with the FHA or VA. See
"Business--Regulation--Indirect Regulation."

28
<PAGE>
In August 1989, Congress adopted FIRREA, which required insured savings and
loan associations, federal savings banks and other similar savings institutions
to maintain certain levels of capital relative to their lending and investment
risk. If such an institution forgoes insurance for conventional high LTV
mortgage loans and retains such loans in its portfolio, the institution must
maintain a relatively high level of risk-based capital (generally 8% of the
principal amount of a mortgage). If, however, such loans are insured by a
private mortgage insurer, the institution can reduce its capital held for such
loans by 50% (generally to 4% of the principal amount of a mortgage), which has
helped increase the demand for private mortgage insurance from lenders that,
prior to FIRREA, did not purchase insurance for high LTV mortgages. See
"Business--Regulation--Indirect Regulation."

Pursuant to the FDIC Improvement Act of 1991, the federal banking agencies
(the Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, OCC, and OTS) on December 31, 1992, issued uniform regulations
prescribing standards for real estate lending. Under the regulations, mortgage
insurance is recommended for mortgage loans at or above 85% LTV, while
previously mortgage insurance was recommended only for loans at or above 90%
LTV. The Company believes these regulations have increased, although not to a
significant extent, the demand for mortgage insurance from lenders who may have
remained uninsured for mortgage loans having LTVs between 85% and 90%.

29
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following Selected Consolidated Financial Information has been derived
principally from the Company's consolidated financial statements prepared in
accordance with generally accepted accounting principles. Certain information at
December 31, 1995 and 1994 and for each of the years in the three year period
ended December 31, 1995 has been derived from the Company's audited financial
statements which appear elsewhere herein. Certain information at December 31,
1993 and 1992 and for the the year ended December 31, 1992 has been derived from
the Company's audited financial statements which are not contained or
incorporated by reference herein. Certain information at September 30, 1996 and
for the respective nine month periods ended September 30, 1996 and 1995 has been
derived from the Company's unaudited condensed consolidated financial
statements, which are also contained in this Prospectus, and which, in the
opinion of the Company, reflect all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation. Results for the nine
month period ended September 30, 1996 are not necessarily indicative of results
for the full year. All such financial information is qualified in its entirety
by reference to, and should be read in conjunction with, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements (including Notes thereto). Certain
statutory information derived from the statutory financial statements of Amerin
Guaranty is also presented. For a description of certain differences between SAP
and GAAP, see Note 3 of Notes to Consolidated Financial Statements.

See "Recent Financial and Operating Results" for information concerning
preliminary 1996 results.

<CAPTION>
(IN THOUSANDS OF DOLLARS EXCEPT RATIOS, PER SHARE DATA
OR AS
OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Net premiums written.............................................. $ 49,988 $ 20,729 $ 33,946 $ 10,274 $ 1,611
Increase in unearned premiums..................................... (6,431) (3,775) (6,387) (5,037) (1,285)
Net premiums earned............................................... 43,557 16,954 27,559 5,237 326
Net investment income............................................. 12,401 4,984 7,612 4,818 4,251
Realized investment gains (losses)................................ (133) 493 491 435 707
Total revenues................................................ 55,825 22,431 35,662 10,490 5,284
Expenses:
Losses incurred................................................... 13,958 3,819 7,757 262 --
Policy acquisition costs.......................................... 6,120 4,963 6,641 2,456 2,677
Underwriting and other expenses(1)................................ 7,865 4,863 6,915 5,765 5,403
Compensation charge resulting from initial public offering(2)..... -- -- 35,741 -- --
Total expenses................................................ 27,943 13,645 57,054 8,482 8,080
Income tax expense.................................................. 7,909 50 1,419 -- --
Net income (loss)................................................... 19,973 8,736 (22,811) 2,008 (2,795)
Pay-in-kind dividends on preferred stock(3)......................... -- 4,255 5,287 5,067 4,437
Net income (loss) applicable to common stockholders................. 19,973 4,481 (28,098) (3,059) (7,232)
OTHER OPERATING DATA:
Mortgage insurance operating ratios (GAAP)(4)
Loss ratio...................................................... 32.0% 22.5% 28.2% 5.0% --
Expense ratio................................................... 32.1 58.0 49.2 157.0 (5)
Combined ratio.................................................. 64.1% 80.5% 77.3% 162.0% (5)
Mortgage insurance operating ratios (SAP)(4)
Loss ratio...................................................... 32.0% 22.5% 28.2% 5.0% --
Expense ratio................................................... 27.7 51.0 42.8 97.4 (5)
Combined ratio.................................................. 59.7% 73.5% 70.9% 102.4% (5)
PER SHARE DATA:(6)
Net income (loss)................................................. $ .76 $ .42 $ (2.32) $ (.36) $ (.99)
Weighted average shares outstanding (in thousands)................ 26,349 10,623 12,106 8,466 7,328
Book value (at period end)........................................ $ 11.09 $ 6.61 $ 10.55 $ 5.59 $ 5.66

<S> <C>
1992
---------

<S> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Net premiums written.............................................. $ --
Increase in unearned premiums..................................... --
Net premiums earned............................................... --
Net investment income............................................. 1,380
Realized investment gains (losses)................................ 15
Total revenues................................................ 1,395
Expenses:
Losses incurred................................................... --
Policy acquisition costs.......................................... --
Underwriting and other expenses(1)................................ 5,721
Compensation charge resulting from initial public offering(2)..... --
Total expenses................................................ 5,721
Income tax expense.................................................. --
Net income (loss)................................................... (4,326)
Pay-in-kind dividends on preferred stock(3)......................... 1,250
Net income (loss) applicable to common stockholders................. (5,576)
OTHER OPERATING DATA:
Mortgage insurance operating ratios (GAAP)(4)
Loss ratio...................................................... --
Expense ratio................................................... N/A
Combined ratio.................................................. N/A
Mortgage insurance operating ratios (SAP)(4)
Loss ratio...................................................... --
Expense ratio................................................... N/A
Combined ratio.................................................. N/A
PER SHARE DATA:(6)
Net income (loss)................................................. $ (1.98)
Weighted average shares outstanding (in thousands)................ 2,810
Book value (at period end)........................................ $ 6.67
</TABLE>

30
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- -------------------------------
1996 1995 1995 1994 1993
---------- --------- --------- --------- ---------
(IN THOUSANDS OF DOLLARS EXCEPT RATIOS, PER SHARE DATA
OR AS
OTHERWISE INDICATED)
<S> <C> <C> <C> <C> <C>
OPERATING AND STATUTORY DATA:(7)
Number of policies in force....................................... 109,383 54,546 68,112 22,937 2,473
Default rate...................................................... 1.07% .68% .89% .18% .16%
Persistency....................................................... 86.8% 96.1% 93.0% 96.2% --
Direct primary insurance in force (in millions)................... $ 13,380 $ 6,581 $ 8,262 $ 2,750 $ 272
Direct primary risk in force (in millions)........................ $ 3,306 $ 1,556 $ 1,989 $ 580 $ 57
Statutory capital................................................. $ 250.8 $ 95.8 $ 227.0 $ 90.5 $ 70.8
Risk to capital ratio............................................. 12.3 15.2 8.2 6.4 .8
Net premiums written:
New............................................................. $ 10,776 $ 7,479 $ 11,060 $ 7,459 $ 1,611
Renewal......................................................... $ 39,212 $ 13,250 $ 22,886 $ 2,815 --
Market share(8)................................................... 6.1% 5.1% 5.4% 1.9% .2%

<CAPTION>
1992
---------
<S> <C>
OPERATING AND STATUTORY DATA:(7)
Number of policies in force....................................... --
Default rate...................................................... --
Persistency....................................................... --
Direct primary insurance in force (in millions)................... --
Direct primary risk in force (in millions)........................ --
Statutory capital................................................. $ 73.8
Risk to capital ratio............................................. N/A
Net premiums written:
New.............................................................
Renewal.........................................................
Market share(8)...................................................
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ---------------------------------
1996 1995 1994 1993
-------------- ---------- ---------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total investments...................................................... $ 311,701 $ 296,982 $ 96,246 $ 72,094
Total assets........................................................... 336,829 316,328 107,261 79,421
Unearned premiums...................................................... 19,141 12,710 6,323 1,286
Loss reserves.......................................................... 15,375 7,092 262 --
13.5% Convertible Preferred Stock(3)................................... -- -- 40,755 35,687
Total common stockholders' equity...................................... 289,026 274,137 58,081 40,840

1992
---------

<S> <C>
CONSOLIDATED BALANCE SHEET DATA:
Total investments...................................................... $ 73,580
Total assets........................................................... 80,126
Unearned premiums...................................................... --
Loss reserves.......................................................... --
13.5% Convertible Preferred Stock(3)................................... 31,250
Total common stockholders' equity...................................... 47,978
</TABLE>

(3) The preferred stock was redeemed in connection with the Initial Public
Offering.

(5) Not meaningful.

(6) See Notes 2, 9, 10 and 15 of Notes to the Consolidated Financial Statements.

(7) Operating and Statutory Data includes data only for Amerin Guaranty except
for net premiums written which is consolidated.

(8) Based on new primary insurance written during the period as reported by
INSIDE MORTGAGE FINANCE.

31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company's consolidated
financial condition and results of operations should be read in conjunction with
the Selected Consolidated Financial Information, the Consolidated Financial
Statements (including Notes thereto), the Condensed Consolidated Financial
Statements (including Notes thereto) and the other information included or
incorporated by reference in this Prospectus.

OVERVIEW

Amerin Corporation is a holding company whose principal assets are its
investments in Amerin Guaranty, which conducts the Company's mortgage insurance
operations, and Amerin Re, through which the Company's deep coverage reinsurance
is conducted. The Company was capitalized in 1992, and all of its revenues for
that year were as a result of net investment income and realized investment
gains. The Company began underwriting mortgage insurance and generating net
premiums in April 1993 when Amerin Guaranty began writing mortgage insurance in
the form of LPMI. In June 1993, Amerin Guaranty began offering BPMI on a limited
basis in California. Beginning in February 1994, Amerin Guaranty commenced
offering BPMI on a national basis at rates which the Company believes were
generally lower than those available from other mortgage insurers, which
resulted in a significant increase in the level of insurance volume written by
Amerin Guaranty from 1994 to date.

REVENUES. Revenues are derived from net premiums earned from the Company's
mortgage insurance operations, net investment income and realized net investment
gains. Premiums ceded by Amerin Guaranty to Amerin Re for reinsurance coverage,
like all intercompany accounts, are eliminated in consolidation in accordance
with GAAP.

Net premiums earned consist of net premiums written on both new business and
renewal business less the increase in unearned premiums associated with such
business. The level of such premiums is directly affected by the contribution of
new insurance written during a period to insurance in force as well as the
persistency of insurance written in prior periods. Premiums are written on a
monthly, annual and single premium basis. Generally, premiums are earned ratably
over the term of the related policy, regardless of whether the premiums are paid
monthly, annually or in a single lump sum; however, initial premiums, or
portions thereof, which relate to risk periods extending beyond the first policy
year are earned over the period at risk in correspondence with the expiration of
risk. Unearned premiums are a liability consisting of premiums written that are
not yet recognized as revenue.

Amerin Guaranty's MONTHLY PREMIUM PLAN spreads the receipt of premiums over
12 equal monthly payments compared to the annual prepayment method (where the
entire annual premium is recorded as written at the effective date of the
policy). For the monthly premium plan, Amerin Guaranty only recognizes the first
month's premium as new premiums written while subsequent monthly premium
payments are recognized as renewal premiums. The monthly premium products have
been priced to compensate for the different timing of cash flows (as compared to
annual premium products) and the attendant effect on investment income, and
accordingly, are not currently anticipated to have a significant effect on the
Company's results of operations or cash flows.

The Company's investment portfolio is invested in fixed income securities.
Net investment income is generated almost exclusively from interest on fixed
maturity investments, which is credited to income as interest accrues, less
associated investment expenses. A substantial portion of the Company's
investment portfolio is invested in U.S. Treasury bonds and tax-exempt municipal
bonds, the latter of which are generally lower yielding securities, but which
the Company has found generate a greater after-tax return than investments in
taxable fixed income securities of comparable risk, maturity and other
investment characteristics. See "Business--Investment Portfolio."

32
<PAGE>
EXPENSES. The Company's principal expense categories are policy acquisition
costs, underwriting and other expenses and losses incurred on insurance
policies. Policy acquisition costs include only those expenses that relate
directly to, and vary with premium production, such as compensation of employees
involved in underwriting, marketing and policy issuance functions, state premium
taxes, and certain other underwriting expenses. Underwriting and other expenses
include occupancy costs, personnel-related costs of non-production personnel,
and administrative support and compliance costs. Because of the Company's
limited operating history, its loss experience is not yet meaningful and is
expected to increase significantly as its policies age. See "Risk
Factors--Potential Increase in Claims."

The Company follows a low cost strategy which includes the use of a small,
noncommissioned sales force and a single centralized location (without a network
of field offices), predetermined coverage amounts, streamlined claims procedures
and the use of technology to enhance efficiency. As is typical with a new
company, the Company's start-up costs and costs of maintaining its organization
were incurred in advance of significant operations. Because the Company's
premiums written were not significant until the second half of 1994, the
Company's EXPENSE RATIOS for the early periods of its operations are distorted
and appear extremely high. The Company's expense ratio has declined as
additional premiums have been written. The Company believes that its expense
ratio will decline further as the Company writes new business and ultimately
allow the Company to attain expense ratios below industry averages.

LOSS RESERVES. Consistent with industry practice and GAAP, the Company
establishes loss reserves only as to insured mortgage loans which are actually
in default but not in respect of estimated potential defaults that may occur in
the future. The Company establishes loss reserves based on notices of default
received with respect to insured mortgage loans. Reserves are also established
for estimated losses incurred on notices of default which may have occurred but
which are not yet reported by lenders. Revised estimates of such loss reserves
are normal and expected in the insurance industry, including the mortgage
insurance industry, and are generally based on more complete claim experience
data than that which was available at the time of earlier estimates. Under GAAP,
the effects of such revised estimates are recorded in the financial statements
in the period the revised estimates occurred. Revised estimates which relate to
prior years can have a significant impact on the reported results of operations
in the year such revised estimates are made and can make the underlying current
operating trends less apparent. Because of the Company's limited operating
history, its loss experience is expected to increase significantly as its
policies age further. See "Risk Factors--Potential Increase in Claims--Loss
Experience; Loss Reserves."

U.S. FEDERAL INCOME TAXES. At December 31, 1994, the Company had
consolidated net operating loss carryforwards of $10.7 million. During 1992,
1993 and 1994, the Company did not generate net taxable income for U.S. federal
income tax purposes. With respect to 1995, the Company was able to offset its
taxable income by fully utilizing such net operating loss carryforwards. As a
result of the Company's recent profitability, management believes the deferred
tax asset at December 31, 1995 and September 30, 1996 is more likely than not to
be fully realizable and, consequently, all valuation allowances previously
recorded were reversed by December 31, 1995.

33
<PAGE>
MORTGAGE INSURANCE UNDERWRITING SUMMARY. The following table summarizes the
Company's mortgage insurance underwriting experience for the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,(1)
-------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------

<CAPTION>
(IN THOUSANDS OF DOLLARS EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
Net premiums written............................ $ 49,988 $ 20,729 $ 33,946 $ 10,274 $ 1,611
Net premiums earned............................. 43,557 16,954 27,559 5,237 326
Losses incurred................................. 13,958 3,819 7,757 262 --
Policy acquisition costs........................ 6,120 4,963 6,641 2,456 2,677
Underwriting and other expenses................. 7,865 4,863 6,913 5,765 5,403
GAAP operating ratios:(2)
Loss ratio.................................... 32.0% 22.5% 28.2% 5.0% --
Expense ratio(3).............................. 32.1 58.0 49.2 157.0 *
Combined ratio................................ 64.1% 80.5% 77.3% 162.0% *
SAP operating ratios:(2)
Loss ratio.................................... 32.0% 22.5% 28.2% 5.0% --
Expense ratio(3).............................. 27.7 51.0 42.8 97.4 *
Combined ratio................................ 59.7% 73.5% 70.9% 102.4% *
</TABLE>

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

* Not meaningful.

(1) Although the Company was capitalized in 1992, it did not begin underwriting
mortgage insurance policies until 1993.

(2) These ratios reflect the Company's status as a new company and include
start-up and other expenses incurred prior to the commencement of
significant operations. See "--Expenses" above.

(3) Expense ratios under SAP and GAAP differ due to different accounting
treatment of policy acquisition costs. Under SAP, insurance policy
acquisition costs are charged against operations in the year incurred and
expense ratios are calculated based on net premiums written. Under GAAP,
these costs are deferred and amortized as the related premiums are earned;
accordingly, GAAP expenses reflect such deferral and amortization, and GAAP
expense ratios are calculated based on net premiums earned. In addition,
under SAP, holding company expenses are excluded in determining expense
ratios. The GAAP expense ratio for the year ended December 31, 1995 excludes
the compensation charge resulting from the Initial Public Offering.

RESULTS OF CONSOLIDATED OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995.

Net premiums written for the nine months ended September 30, 1996 were $50.0
million compared to $20.7 million for the nine months ended September 30, 1995
which represents a 141% increase. The increase was primarily attributable to a
48.7% increase in Amerin Guaranty's new insurance written and growth in
insurance in force and related renewal premiums. Management believes that Amerin
Guaranty was able to increase revenues due primarily to increased use by
existing lenders of the Company's BPMI, the addition of new, large lenders which
began doing business with the Company during the second half of 1995 and
increased sales of LPMI. The increase in net premiums written was also due to
higher average premiums during the nine months ended September 30, 1996 compared
to the first nine months of 1995, principally due to the increased coverage
requirements introduced by Fannie Mae and Freddie Mac during the first quarter
of 1995, which requirements took effect over the course of 1995. Amerin
Guaranty's monthly premium plan represented 85.5% of new insurance written for
the nine months ended September 30, 1996 compared to 81.2% for the same period
in 1995.

34
<PAGE>
Renewal premiums for the nine months ended September 30, 1996 increased 196%
from the comparable prior year period due primarily to the growth of insurance
in force throughout 1995, as well as increased popularity of the monthly premium
plan.

Net premiums earned increased by $26.6 million to $43.6 million for the nine
months ended September 30, 1996 from $17.0 million for the nine months ended
September 30, 1995. This increase was primarily due to the increase in insurance
written and in force in the 1996 period over the corresponding portion of the
1995 period.

Net investment income of $12.4 million for the first nine months of 1996
increased by $7.4 million (or 149%) over the first nine months of 1995 primarily
due to investment of the proceeds from the Initial Public Offering, which
resulted in an increase of 174.6% in the monthly average amount of invested
assets. Realized investment losses for the first nine months of 1996 were
$133,000 compared to realized investment gains of $493,000 for the first nine
months of 1995. This change was due primarily to a smaller number of profitable
sales in 1996, resulting from reduced activity within the existing portfolio due
to the Company's desire to maintain the current composition of the investment
portfolio. As of September 30, 1996 and 1995, the yields to maturity in the
investment portfolio were 5.8% and 6.4%, respectively, and the average durations
of the investment portfolio were 6.5 years and 5.1 years, respectively.

Losses incurred in the first nine months of 1996 were $14.0 million,
compared to $3.8 million of losses incurred in the first nine months of 1995 as
a result of the aging of the Company's policies. Because of the Company's
limited operating history, its loss experience is expected to significantly
increase as its policies continue to age. Policy acquisition costs during the
first nine months of 1996 of $6.1 million increased by $1.2 million (or 23.3%)
compared to the first nine months of 1995 principally due to the growth in the
level of marketing and underwriting activity in connection with the increased
production of new insurance written in the 1996 period compared to the prior
year period. Underwriting and other expenses increased by $3.0 million (or
61.7%) for the first nine months of 1996 over the first nine months of 1995 due
to the institution of an excess loss treaty, the increase in insurance in force
and increases in various administrative and occupancy costs relating to growth
in the Company's personnel, offset in part by the elimination in the 1996 period
of standby commitment fees previously paid to certain of the Principal
Stockholders.

The Company's effective tax rate was 28.4% in the nine months ended
September 30, 1996, compared to 1% in the first nine months of 1995. The
increase in the effective tax rate resulted from the fact that the Company fully
utilized its net operating losses in 1995 and no additional net operating losses
were available for utilization in the first nine months of 1996. The effective
tax rate for the first nine months of 1996 was below the statutory rate of 35%,
principally reflecting the benefits of tax-exempt investment income.

As a result of the foregoing factors, the Company had net income of $20.0
million for the first nine months of 1996, compared to net income before
pay-in-kind dividends on its previously outstanding 13.5% Convertible Preferred
Stock of $8.7 million for the first nine months of 1995. Net income applicable
to common stockholders (after pay-in-kind dividends) was $4.5 million for the
first nine months of 1995. The 13.5% Convertible Preferred Stock was redeemed in
connection with the Initial Public Offering.

1995 COMPARED TO 1994

Net premiums written for 1995 were $33.9 million compared to $10.3 million
for 1994, which represents a 230.4% increase. The increase was primarily
attributable to a 137.1% increase in Amerin Guaranty's new insurance written and
growth in insurance in force and related renewal premiums. Management believes
that Amerin Guaranty was able to increase revenues due primarily to increased
use by existing lenders of the Company's BPMI, which was introduced nationwide
in February 1994 at rates which the Company believes are lower than those
generally offered by other mortgage insurance companies, the addition of new,
large lenders which began doing business with the Company during the second half
of 1994 and 1995 and increased sales of LPMI. The increase in new insurance
written was further

35
<PAGE>
enhanced to a lesser extent by higher average premiums during 1995 compared to
1994, principally due to the increased coverage requirements imposed by Fannie
Mae and Freddie Mac. Amerin Guaranty's monthly premium plan represented 81.5% of
new insurance written for 1995. Renewal premiums for 1995 increased from the
comparable prior year period due primarily to the increased popularity of the
monthly premium plan.

Net premiums earned increased by $22.4 million to $27.6 million for 1995
from $5.2 million for 1994. This increase was primarily due to the increase in
insurance written and in force in 1995 as compared to 1994.

Net investment income of $7.6 million for 1995 increased by $2.8 million (or
58.3%) over 1994. Substantially all of such increase was due to 55.0% growth in
the monthly average amount of invested assets. Realized investment gains for
1995 of $.5 million increased by 12.7% compared to 1994 due to a greater number
of sales with higher profits in the latter period. Sales of investments in the
latter period were made primarily in connection with the Company's current
investment strategy to increase investment in tax-exempt securities. See
"Liquidity and Capital Resources" below. As of December 31, 1995 and 1994, the
yields to maturity on the investment portfolio were 6.2% and 6.3%, respectively,
and the average durations of the investment portfolio were 3.3 years and 4.6
years, respectively. The average duration at December 31, 1995 reflected the
investment of the net proceeds of the Initial Public Offering in short-term
investments pending their investment in longer maturity tax-exempt securities.

Losses incurred in 1995 were $7.8 million, compared to $.3 million of losses
incurred in 1994. The low level of 1994 losses reflected the fact that the
Company's book of business was at an early stage of development. Policy
acquisition costs during 1995 of $6.6 million increased by $4.2 million (or
170.4%) compared to 1994 principally due to the growth in the level of marketing
and underwriting activity in connection with the increased production of new
insurance written in 1995 compared to 1994.

Underwriting and other expenses increased by $1.1 million or 19.9% due to
the increase in insurance in force and increases in various administrative and
occupancy costs relating to growth in the Company's personnel.

The Company incurred a nonrecurring non-cash charge of $35.7 million in the
fourth quarter of 1995 as a result of Messrs. Friedman and Brafman being
entitled to 2,250,068 shares of Common Stock pursuant to the MSV Agreement upon
consummation of the Initial Public Offering. The nonrecurring charge was not
deductible by the Company for U.S. federal income tax purposes because Messrs.
Friedman and Brafman previously made 83(b) elections in 1992 with respect to
such shares. Accordingly, there was no current deduction in 1995 available to
the Company for the nonrecurring charge caused by the removal of restrictions on
such shares. Although the nonrecurring charge taken by the Company increased the
Company's retained earnings deficit, there was a corresponding increase in
additional paid in capital and, accordingly, total common stockholders' equity
was unchanged. The nonrecurring charge did not affect Amerin Guaranty's or
Amerin Re's statutory financial statements.

As a result of the foregoing factors, the Company had a net loss before
pay-in-kind dividends on the 13.5% Convertible Preferred Stock of $22.8 million
for 1995, compared to net income before such pay-in-kind dividends of $2.0
million for 1994. Net loss applicable to common stockholders (after such
pay-in-kind dividends) was $28.1 million for 1995 compared to a net loss
applicable to common stockholders of $3.1 million for 1994.

1994 COMPARED TO 1993

Net premiums written increased $8.7 million to $10.3 million in 1994 from
$1.6 million in 1993. Of such increase, $6.5 million was due to the introduction
of BPMI nationwide in February 1994, which enhanced the Company's penetration of
the mortgage insurance market because it offered lenders Amerin Guaranty's
economies and operational efficiencies in a familiar form, and $2.2 million of
such increase

36
<PAGE>
reflected increased sales of LPMI. The introduction of BPMI resulted in a
significant increase in the levels of premium written by the Company, primarily
in the second half of 1994, despite a rise in interest rates which resulted in a
decrease in the total industry's new primary mortgage insurance written. When
the Company began writing business in April 1993, it wrote mortgage insurance
exclusively in the form of LPMI. The Company believes that record levels of home
purchases and corresponding levels of mortgage lending activity in 1993 caused
by low interest rates demanded the full attention of mortgage lenders and made
it difficult for the Company to introduce LPMI. Accordingly, the Company wrote a
minimal amount of insurance and corresponding premiums in 1993.

Net premiums earned increased by $4.9 million to $5.2 million in 1994 from
$.3 million in 1993 due to the substantial increase in insurance in force
described above.

Net investment income of $4.8 million for 1994 increased by 13.3% over net
investment income of $4.3 million in 1993. Substantially all of such increase
was due to 12.6% growth in the monthly average amount of invested assets in 1994
compared to 1993, while the balance of the increase related to higher investment
yields consistent with a general increase in interest rates in 1994. Realized
investment gains for 1994 of $.4 million decreased compared to the $.7 million
realized in 1993 due to reduced activity within the existing portfolio required
to maintain the overall portfolio's desired composition in accordance with the
Company's investment strategy. As of December 31, 1994 and 1993, the yields to
maturity on the investment portfolio were 6.3% and 5.7%, respectively, and the
average durations of the investment portfolio were 4.6 years and 5.8 years,
respectively.

Losses incurred on mortgage insurance in 1994 of $.3 million were the first
such losses incurred since the Company began operations. There were no such
losses incurred in 1993. Because of the Company's limited operating history, its
loss experience was not yet meaningful. Policy acquisition costs decreased by
8.3% to $2.5 million for 1994 compared to $2.7 million in 1993 even though new
insurance written increased by 812% in 1994 compared to 1993. The decrease in
policy acquisition costs in 1994 resulted from a significant increase in the
deferral of policy acquisition costs in that year related to the 812% increase
in new insurance written from 1993 to 1994. In contrast, the deferral of policy
acquisition costs in 1993 was minimal due to the volume of business written in
1993.

As a result of the foregoing factors, the Company had net income before
pay-in-kind dividends on the 13.5% Convertible Preferred Stock of $2.0 million
in 1994 compared to a net loss before such pay-in-kind dividends of $2.8 million
in 1993. Net loss applicable to common stockholders (after such pay-in-kind
dividends) was $3.1 million for 1994 compared to a net loss applicable to common
stockholders of $7.2 million for 1993.

LIQUIDITY AND CAPITAL RESOURCES

The liquidity and capital resources considerations are different for Amerin
Corporation and its principal insurance operating subsidiary, Amerin Guaranty,
as discussed below.

Amerin Corporation is a holding company whose principal assets are its
investments in Amerin Guaranty and Amerin Re. Amerin Corporation has no
operations of its own and no employees and has only limited needs for liquidity
to meet certain legal, accounting, tax and administrative expenses. Amerin
Corporation relies primarily on dividends and other permitted distributions from
Amerin Guaranty and Amerin Re as sources of funds. Amerin Corporation does not
currently have any committed lines of credit. Amerin Corporation does not plan
to pay cash dividends on its Common Stock for the foreseeable future. See "Risk
Factors--No Intention to Pay Dividends."

The principal sources of funds for Amerin Guaranty are premiums received on
new and renewal business, amounts earned from the investment of its contributed
capital as well as the investment of its cash flow and commissions on ceded
business and reimbursement of losses from reinsurers. The principal uses of
funds by Amerin Guaranty are the payment of claims and related expenses,
reinsurance premiums,

37
<PAGE>
other operating expenses and dividends to Amerin Corporation. Liquidity
requirements are influenced significantly by the level of claims incidence.
Amerin Guaranty does not currently have any committed lines of credit.

In the mortgage insurance industry, liquidity refers to the ability of an
enterprise to generate adequate amounts of cash from its normal operations,
including premiums received and investment income, in order to meet its
financial commitments, which are principally obligations under the insurance
policies it has written.

Amerin Guaranty generates substantial cash flows from operations as a result
of premiums being received in advance of the time when claim payments are
required. Cash flows generated from Amerin Guaranty's mortgage insurance
operations totaled $22.8 million and $4.8 million for 1995 and 1994,
respectively, and $34.3 million and $14.6 million for the first nine months of
1996 and the first nine months of 1995, respectively. These operating cash
flows, along with that portion of the investment portfolio that is held in cash
and highly liquid securities, are available to meet the liquidity requirements
of Amerin Guaranty. Amerin Guaranty's investment portfolio was $275.1 million at
September 30, 1996, $260.8 million at December 31, 1995 and $90.9 million at
December 31, 1994. Significant increases in claims, which are expected as Amerin
Guaranty's policies age and which may be significantly exacerbated by adverse
economic conditions, would create increased liquidity requirements for Amerin
Guaranty. Should Amerin Guaranty experience cash flow shortfalls due to
significantly higher than anticipated claims, or for other reasons, the Company
anticipates funding such shortfalls through sales of investments. Because, on
average, approximately 12 months elapses between defaults on insured loans and
the related claim payments, management intends to utilize available time to
manage any required sales of investments so as to minimize losses to the
investment portfolio.

Because of the Company's limited operating history, its loss experience is
expected to significantly increase as its policies continue to age. See "Risk
Factors--Potential Increase in Claims--Loss Experience; Loss Reserves."

During 1995, the Company entered into a noncancelable 10 year operating
lease for office space. In addition to base rental costs, the lease provides for
rent escalations resulting from increased assessments for real estate taxes,
utilities and maintenance. Aggregate minimum rental commitments under the lease
are $.2 million per year through 2000, and $1.4 million in total thereafter. See
Note 11 of Notes to Consolidated Financial Statements.

The Company's investment strategy is the result of various interrelated
investment considerations including protection of principal, appreciation
potential, tax consequences and yield. The Company typically maintains its
investment portfolio with a longer average duration than its anticipated claims
development in order to achieve higher yields. The Company has found this
strategy to be cost effective and expects that reasonably foreseeable cash
mismatches may be met by cash generated from operations or sales of investments.
The Company's investments are managed by Scudder, Stevens & Clark pursuant to
the terms of an agreement which may be terminated upon 90 days notice by either
party.

At January 1, 1994, the Company implemented SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." At that time, the Company
designated all its securities as available for sale. Investments designated as
available for sale are expected to be held for an indefinite period and may be
sold depending on tax position, interest rates, liquidity needs and other
considerations. The aggregate market value (carrying value) of the fixed income
securities was less than amortized cost at September 30, 1996 by $3.9 million.
At December 31, 1995, the aggregate market value (carrying value) of the
Company's fixed income securities was greater than amortized cost by $5.0
million. The decrease during the nine months ended September 30, 1996 in the
market value of the Company's fixed income securities compared to amortized cost
reflects the increase in interest rates during the nine months ended September
30, 1996 as well as the significant percentage of the Company's fixed income
securities with long-term maturities. Fixed income securities of $203.4 million
or 71.1% of total fixed income securities at September 30, 1996

38
<PAGE>
have maturities of 10 years or greater. As a result of these substantial
long-term holdings, if interest rates should increase, the market value of these
securities will decline and stockholder's equity will decrease.

All of the Company's $286.0 million of fixed income securities at September
30, 1996 are rated "investment grade," which is defined by the Company as a
security having a National Association of Insurance Commissioners ("NAIC")
rating of 1 or 2 or an S&P rating ranging from "AAA" to "BBB-."

The Company expects to incur aggregate capital costs of approximately $4
million in 1997 to expand and enhance its computer hardware and software. The
Company expects to fund such expenditure with cash flow from operations.

The Company's experience to date regarding the persistency of its policies
in force is limited. As of September 30, 1996, 86.8% of Amerin Guaranty's
policies in force as of September 30, 1995 remained in force. Management
believes that the Company's persistency rate will decline as its policies
continue to age. Subject to the effects of aging on persistency, management
expects that, in general, persistency will tend to be stable or improve in a
stable or increasing interest rate environment because loans insured by the
Company would be less likely to be refinanced; conversely, management expects
that, in general, persistency will decrease if interest rates declined
sufficiently to cause mortgage refinancings to increase.

STATUTORY CAPITAL AND DIVIDEND CAPACITY OF AMERIN GUARANTY

Maintenance of appropriate levels of Amerin Guaranty's statutory capital is
a primary objective of the Company. As discussed below, Amerin Guaranty is
subject to regulatory requirements as to statutory capital and the adequacy of
statutory capital is a principal factor considered by the rating agencies in
assigning claims-paying ability ratings. Amerin Guaranty's dividend capacity is
also limited by the level of specified components of statutory capital.

STATUTORY CAPITAL. Statutory capital is the sum of POLICYHOLDERS' SURPLUS
and the contingency reserve. Policyholders' surplus consists principally of
paid-in-capital and UNASSIGNED SURPLUS. The contingency reserve is a special
statutory reserve required of all mortgage insurers, which is designed to
provide a cushion against the effect of adverse economic cycles. Every month an
amount equal to 50% of premiums earned in such month is deducted from unassigned
surplus and added to the contingency reserve and must be maintained in such
reserve for 10 years (after which it is released to unassigned surplus). Prior
to 10 years, upon notice to the Illinois Insurance Director, the contingency
reserve is available to Amerin Guaranty to the extent necessary to make loss
payments with respect to any year in which Amerin Guaranty's INCURRED LOSSES in
such year exceed the greater of (i) 35% of earned premiums for such year or (ii)
70% of the amount contributed to the contingency reserve for such year.
Additions to the contingency reserve have the effect of reducing the growth of
policyholders' surplus. In periods of significant premium growth, policyholders'
surplus may decline if the required additions to the contingency reserve exceed
the statutory net income. The Company anticipates continuing growth in the
contingency reserve. The contingency reserve is not permitted under GAAP.

39
<PAGE>
Amerin Guaranty's policyholders' surplus, the principal components thereof
and the contingency reserve were as follows on the dates indicated below.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
-------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------

<CAPTION>
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Liabilities:
Contingency reserve.................................. $ 38.6 $ 12.5 $ 18.3 $ 4.3 $ .4
Surplus:
Paid-in and other surplus............................ 224.5 97.5 224.5 97.5 77.8
Unassigned surplus................................... (12.3) (14.2) (15.8) (11.3) (7.4)
--------- --------- --------- --------- ---------
Policyholders' surplus............................. 212.2 83.3 208.7 86.2 70.4
--------- --------- --------- --------- ---------
Statutory capital................................ $ 250.8 $ 95.8 $ 227.0 $ 90.5 $ 70.8
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

Amerin Guaranty's statutory capital increased $155.0 million from $95.8
million at September 30, 1995 to $250.8 million at September 30, 1996. This
increase was primarily attributable to the aggregate capital contributions of
$127.0 million made by the Company to Amerin Guaranty in December 1995 from the
proceeds of the Initial Public Offering as well as increases to the contingency
reserve and the statutory basis results of operations for the nine months ended
September 30, 1996.

Amerin Guaranty's statutory capital increased to $227.0 million at December
31, 1995 from $90.5 million at December 31, 1994 due to contributions from
proceeds of the Initial Public Offering as well as the net growth of the
contingency reserve offset in part by an increase in the deficit of unassigned
surplus. Amerin Guaranty's statutory capital increased to $90.5 million at
December 31, 1994 from $70.8 million at December 31, 1993 as the result of
increases to the contingency reserve offset in part by an increase in the
deficit of unassigned surplus, as well as a capital contribution of $25.0
million from the Company in August 1994. See Note 3 of Notes to Consolidated
Financial Statements.

In April 1992, the Company was capitalized by the Principal Stockholders
with contributions of $10.0 million. The Company in turn purchased Amerin
Guaranty, which at the time was an inactive insurance company, for $6.7 million.
In September 1992 and August 1994, respectively, the Principal Stockholders made
additional capital contributions to the Company of $72.9 and $25.0 million,
which the Company in turn contributed to the capital of Amerin Guaranty in order
to increase the statutory capital of Amerin Guaranty by such amounts. The
Initial Public Offering in November 1995 resulted in net proceeds of $200.2
million to the Company. Of these proceeds, $46 million were used to retire all
of the outstanding 13.5% Convertible Preferred Stock on December 1, 1995, and
$127 million and $25 million was contributed to the capital of Amerin Guaranty
and Amerin Re, respectively, in order to increase the statutory capital of the
two companies by such amounts.

RISK TO CAPITAL RATIO. As a condition to maintenance of its claims-paying
ratings, the total amount of insurance risk that may be written by Amerin
Guaranty is limited to a multiple of 20 times its statutory capital (which
includes the contingency reserve) less the carrying value of non-investment
grade debt and tax and loss bonds and investments in affiliates, or such higher
or lower multiple as is reasonably determined by the rating agency in its sole
discretion. Amerin Guaranty has several alternatives available to control its
risk to capital ratio, including obtaining capital contributions from the
Company, purchasing quota share reinsurance and reducing the amount of new
business written. A material reduction in statutory capital, whether resulting
from underwriting or investment losses or otherwise, or a disproportionate
increase in risk in force, could increase the risk to capital ratio. An increase
in the risk to capital ratio could limit Amerin Guaranty's ability to write new
business (which in turn could materially adversely affect the Company's results
of operations and prospects). See "Business--Claims-Paying Ability Ratings." At
September 30, 1996 and 1995 and December 31, 1995 and 1994, Amerin Guaranty's
risk to capital ratio was 12.3 to 1, 15.2 to 1, 8.2 to 1 and 6.4 to 1,
respectively.

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<PAGE>
The higher coverage requirements effective in the first quarter of 1995 for
90s and 95s announced by Fannie Mae and Freddie Mac (see "Industry
Overview--Fannie Mae and Freddie Mac") have increased the average coverage
percentages of new insurance written by Amerin Guaranty as well as increased
premiums earned on policies subject to such requirements. These higher coverage
requirements will have the effect of increasing risk in force and, initially,
increasing the risk to capital ratio. Amerin Guaranty intends to maintain a risk
to capital ratio at levels required to maintain Amerin Guaranty's claims-paying
ability ratings.

DIVIDEND LIMITATIONS. The Company has never paid a cash dividend on its
capital stock and does not anticipate paying cash dividends on the Common Stock
for the foreseeable future. Limitations on Amerin Guaranty's risk to capital
ratio also effectively limit Amerin Guaranty's ability to pay dividends, because
the payment of dividends reduces statutory capital.

Amerin Guaranty is subject to the insurance laws of Illinois, its state of
domicile, and California, because, under California law, it is currently deemed
to be COMMERCIALLY DOMICILED in California. Under the insurance laws of both
Illinois and California, the ability of a mortgage insurance company to pay
dividends is limited by certain tests that are based on the insurer's statutory
policyholders' surplus, net income and, in the case of Illinois, unassigned
surplus. For a further description of restrictions on the payment of dividends
payable by Amerin Corporation and Amerin Guaranty, see Note 12 of Notes to
Consolidated Financial Statements.

The Company and Amerin Guaranty are parties to agreements (the "Rating
Agency Agreements") required by Moody's and S&P as a condition of the issuance
to Amerin Guaranty and maintenance of their respective claims-paying ratings of
"Aa3" and "AA." Failure to comply with the provisions of either of the Rating
Agency Agreements could result in the withdrawal or reduction of Amerin
Guaranty's claims-paying rating by one or both of the rating agencies. Pursuant
to the Moody's Rating Agency Agreement, the Company and Amerin Guaranty have
covenanted that neither company will declare or pay any dividend or other
distribution on any of its capital stock unless (a) Amerin Guaranty's
claims-paying ability rating is not less than "Aa3" and (b) Amerin Guaranty's
risk to capital ratio does not exceed the ratio then required by Moody's to be
maintained by Amerin Guaranty. Pursuant to the S&P Rating Agency Agreement, the
Company has covenanted that it will cause Amerin Guaranty not to declare or pay
any dividend or distribution unless the Company shall have received a
certificate of Amerin Guaranty's Chief Financial Officer that following such
transaction Amerin Guaranty's statutory capital less the carrying value of
non-investment grade debt and tax and tax loss bonds and investments in
affiliates would not be less than $20 million or such higher amount as may be
necessary to ensure that Amerin Guaranty's risk to capital ratio does not exceed
the ratio then required by S&P to be maintained by Amerin Guaranty.

REINSURANCE

Amerin Guaranty cedes reinsurance to Amerin Re to comply with maximum policy
coverage percentage limitations, and utilizes a minimal amount of third-party
reinsurance. In the future, Amerin Guaranty may seek reinsurance to reduce its
NET RISK IN FORCE and its risk to capital ratio or to manage risk. The
availability and cost of reinsurance are subject to prevailing market
conditions, both in terms of price, which can affect the Company's
profitability, and available capacity, which can affect the Company's ability to
increase insurance in force. The Company also is subject to credit risk with
respect to its ability to recover amounts due from its reinsurers, as the ceding
of risk to its reinsurers generally does not relieve the Company of direct
liability to its insureds. At September 30, 1996, there were $0 of reinsurance
recoverables for losses. For discussion of the Company's reinsurance
arrangements and the claims-paying ability ratings of its reinsurers, see
"Business--Reinsurance."

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<PAGE>
1996, and cancelable by the Company for a fee beginning in 2000. The
claims-paying ability of the reinsurer is rated AA by S&P. This agreement
provides additional capital support in the event that the Company's risk to
capital ratio and its combined ratio both exceed specified levels and will be
taken into account by S&P in measuring the Company's risk to capital ratio to
the extent required by rapid growth. Premiums payable with respect to any
quarterly period may vary to the extent that the Company's combined insurance
risk to capital ratio exceeds certain specified levels.

TAX CONSOLIDATION

Beginning in 1993, the Company and Amerin Guaranty entered into an agreement
to file a consolidated federal income tax return. Amerin Re, which was
incorporated in 1994, became a party to this agreement in 1994. Income taxes are
allocated to members of the group generally on a separate return basis. The
Company and Amerin Guaranty filed separate federal income tax returns for 1992.

42
<PAGE>
BUSINESS

GENERAL

The Company is a holding company which, through Amerin Guaranty, is a
provider of private mortgage insurance coverage in the United States to mortgage
bankers, savings institutions, commercial banks and other lenders. Primary
mortgage insurance provides mortgage default protection on individual loans.
Amerin Guaranty issues primary insurance for first mortgage loans on owner
occupied, one-to-four unit residential properties, including condominiums.
Private mortgage insurance is used by mortgage lenders to reduce their credit
risk in high LTV mortgage loans as well as to enhance their ability to sell the
loans into the secondary mortgage market, principally to Fannie Mae and Freddie
Mac. Home purchasers who make down payments of less than 20% of the value of
their home are usually required by the mortgage lender to qualify and pay for
primary mortgage insurance on their mortgage loans. If the homeowner defaults on
the mortgage loan, mortgage insurance reduces and, in some instances, eliminates
any loss to the insured lender. Mortgage insurance does not cover losses that
result from damage to the property.

Amerin Guaranty is a mono-line insurer which is restricted by state law to
providing mortgage guaranty insurance on residential first mortgage loans. See
"--Regulation--Direct Regulation."

PRODUCTS

PRODUCT FEATURES

All of Amerin Guaranty's mortgage insurance products share three important
features which differentiate Amerin Guaranty's mortgage insurance products from
those of other mortgage insurers. Amerin Guaranty's use of fully delegated
underwriting coupled with post-closing issuance of insurance certificates
provides lenders with greater certainty and reduces paperwork and expense.
Amerin Guaranty's streamlined processing of claims substantially eliminates the
administrative work involved in filing and documenting a traditional mortgage
insurance claim. Finally, due to operating and marketing efficiencies, Amerin
Guaranty has been able to offer premium rates which have been consistently lower
than those generally available from other mortgage insurers.

BORROWER-PAID MORTGAGE INSURANCE AND LENDER-PAID MORTGAGE INSURANCE

Traditionally, all mortgage insurance has been sold in the form of BPMI,
whereby mortgage insurance premiums are charged to the borrower by the mortgage
lender or loan servicer, which in turn remits the premiums to the mortgage
insurer. Amerin Guaranty first offered BPMI on a limited basis in California
beginning in June 1993, and began offering BPMI nationwide in February 1994 at
rates which are generally lower than those currently approved for use in most
states by other private mortgage insurers. In December 1996, the Company
introduced an alternative set of premium rates ("Retail Rates"). The Retail
Rates, which are substantially similar to the premium rates charged by other
mortgage insurers, will be used with certain mortgage lenders which have
requested that Amerin provide additional services and support beyond those
provided by the Company under its regular premium plans. Management believes
that the cost of such services and support will be offset by the additional
premium revenue to be received under the Retail Rates.

In addition to BPMI, Amerin Guaranty also offers comparable mortgage
insurance coverage in the form of LPMI, whereby mortgage insurance premiums are
charged to the mortgage lender or loan servicer, which pays the premiums to the
mortgage insurer. The mortgage lender's obligation to pay these premiums is
generally reflected in an increased interest rate on the borrower's loan;
however, the mortgage premiums on Amerin's LPMI are lower than those generally
available from other mortgage insurers for BPMI and the full amount of interest
on LPMI-insured mortgages is generally deductible by borrowers. Therefore,
Amerin's LPMI allows mortgage lenders to offer borrowers lower-cost "all-in"
mortgages.

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<PAGE>
LPMI also reduces closing costs for home buyers and results in lower pretax and
after tax total monthly payments compared to BPMI. In April 1993, Amerin
Guaranty was the first private mortgage insurer to offer LPMI, and was the first
mortgage insurer to be approved for the use of LPMI by Fannie Mae and Freddie
Mac. See "Risk Factors--Certain Matters Relating to Lender Paid Mortgage
Insurance."

THE AWARD PLUS PLAN. Amerin Guaranty offers a program known as the Award
Plus Plan to lenders utilizing LPMI. Under the Award Plus Plan, the lender is
charged lower premium rates for loans insured. Based on performance of such
loans over an extended period of time, the lender may be entitled to receive
cash awards from, or required to pay cash surcharges to, Amerin Guaranty.
Effectively, awards and surcharges result in adjustments to premium on a
prospective basis, because any award or surcharge is paid only if a new premium
is paid on a newly insured loan or a renewal premium is paid on an existing
loan. If the performance of a portfolio insured under the Award Plus Plan falls
within a middle range which includes average historical industry loss
experience, no award or surcharge is applicable. The first such award or
surcharge, if any, pursuant to an Award Plus Plan is determined based on four
full years of participation by the lender in the Award Plus Plan, and applies to
both new and renewal business written in the fifth year of participation.
Thereafter, a determination is made at the end of each subsequent year of
participation by the lender, based on the lesser of (i) seven full years of
participation or (ii) the lender's term of participation in the Award Plus Plan,
and any award and surcharge will be applicable to new and renewal business
written in the immediately succeeding year.

If the lender sells servicing on loans insured under the Award Plus Plan, it
may be required to make a one-time payment to Amerin Guaranty. This one-time
payment is designed to compensate Amerin Guaranty for the fact that such loans,
which were insured at premium rates lower than Amerin Guaranty's standard rates,
will henceforth not be included in any calculation of awards and surcharges.

As of September 30, 1996, 8.0% of Amerin Guaranty's direct risk in force was
comprised of loans insured under the Award Plus Plan. Amerin Guaranty expects to
begin paying awards in April 1997 to the largest participant in the Award Plus
Plan. The Company believes that the cost of such awards will be substantially
offset by savings resulting from lower claims payments on such loans over time.

PREMIUM PAYMENT PLANS

Amerin Guaranty has three basic types of premium payment plans. The most
popular is a monthly premium plan, introduced in March 1994, under which only
one or two months premium is paid at the mortgage loan closing, and thereafter
premiums are remitted on a monthly basis to Amerin Guaranty. In January 1995, in
response to similar products introduced by competitors, Amerin Guaranty
introduced a new monthly premium plan under which no premium is payable at loan
closing. For the nine months ended September 30, 1996, monthly premium plans
represented 85.5% of Amerin Guaranty's new insurance written. Based on the rapid
market acceptance of monthly premium plans, the Company expects that such
percentage will remain at this level or continue to increase slightly. The
second type of premium payment plan is an ANNUAL PREMIUM PLAN in which a
first-year premium is paid at the mortgage loan closing and annual renewal
payments are paid thereafter. Renewal payments generally are (i) collected
monthly from the borrower along with the mortgage payment and held in escrow by
the loan servicer or (ii) reserved by the loan servicer for annual remittance to
Amerin Guaranty in advance of each renewal year. See "-- Borrower-Paid Mortgage
Insurance and Lender-Paid Mortgage Insurance." The third type of premium payment
plan is a SINGLE PREMIUM PLAN that involves a lump-sum payment at the loan
closing. The single premium can be financed by the borrower by adding it to the
principal amount of the mortgage. Premiums written under any of these plans may
be either non-refundable or refundable if the coverage is canceled by the
insured lender (which generally occurs when the loan is repaid or the LTV is
less than 80% as a result of loan amortization and/or property appreciation).

Amerin Guaranty's customers periodically request mortgage insurance programs
that differ in one or more respects from its existing programs. In response to
such requests, Amerin Guaranty may from time to

44
<PAGE>
time create special programs or products that are designed to meet the Company's
risk and profitability goals. While Amerin Guaranty has not, to date, written
any material business under special programs, the Company expects that requests
for such programs, particularly from Amerin Guaranty's larger customers, are
likely to increase in the future as mortgage originators search for new ways to
insure more loans and different types of loans.

In addition to primary insurance written on a loan-by-loan basis, Amerin
Guaranty may choose to provide primary insurance under terms and pricing
negotiated between Amerin Guaranty and the lender. In addition to newly
originated loans, this business may include seasoned loans (which are originated
prior to the year in which the loans are included in the transaction). To date,
Amerin Guaranty has insured one block of seasoned loans, and management intends
to consider other appropriate opportunities as they arise.

PRICING

Amerin Guaranty's premium rates are based upon the expected risk of a claim
on the insured loan and take into account the LTV, loan type, mortgage term,
occupancy status and coverage percentage. In addition, the Company's premium
rates take into account persistency, operating expenses and reinsurance costs,
as well as profit and capital needs and the prices offered by competitors.
Premium rates cannot be changed after the issuance of coverage. The Company has
structured its operations and products in accordance with its overall business
strategy of reducing the cost of mortgage insurance and passing on these savings
to lenders and borrowers. See "--Sales and Marketing."

Similar to general industry practice, the Company generally employs a
national pricing strategy rather than a regional or local policy, because it
believes that each region of the United States is subject to similar factors
affecting the risk of loss on insurance written. Economic conditions are a
principal determinant of mortgage default rates, and private mortgage insurance
entails risk exposure which lasts for the term of the mortgage loan and does not
permit termination by the insurer or adjustment of renewal premium rates.
Therefore, in establishing premium rates, the Company takes into account
long-term average expected claims incidence on insured mortgage loans. These
long-term average expected claims incidence levels incorporate varying levels of
performance associated with varying economic conditions including moderate and
severe recessionary scenarios. Adverse economic conditions can create levels of
claims incidence in excess of the long-term average expected claims incidence on
which the Company's premium rates are based. The Company seeks broad geographic
diversification of its portfolio in order to reduce its exposure to the economic
performance of any particular region.

The Company's premium rates and policy forms are subject to regulation in
every state in which it is licensed to transact business in order to protect
policyholders against the adverse effects of excessive, inadequate or unfairly
discriminatory rates and to encourage competition in the insurance marketplace.
In all states, premium rates and, in most states, policy forms must be filed
prior to their use. In some states, such rates and forms must also be approved
prior to use. Changes in premium rates must be justified to regulators,
generally on the basis of the insurer's loss experience, expenses and future
trend analysis. The general default experience in the mortgage insurance
industry may also be considered.

SALES AND MARKETING

The Company has introduced innovative mortgage insurance programs to the
mortgage lending market which result in lower monthly payments by the borrower
and increased profitability to lenders. The Company employs sophisticated
marketing materials which provide comparative information and analysis for the
Company's BPMI and LPMI products as well as mortgage insurance products of
several major competitors. The Company also provides a secondary market pricing
model which allows its clients to optimize profitability and borrower benefits
through LPMI pricing to borrowers. The Company's unique operating structure with
its small, noncommissioned sales force and streamlined underwriting and claims

45
<PAGE>
procedures allows the Company to offer its products to both mortgage lenders and
borrowers at lower premium rates than most of its competitors. The Company's
sales and marketing efforts emphasize increased lender profitability, borrower
benefits and operating efficiencies. The main focus of the sales effort is the
senior management of a relatively small number of mortgage lenders. The
Company's regional marketing directors and regional managers work with lender
management to promote the overall benefits of the Company's products and premium
pricing. Where appropriate, the Company's marketing representatives market
directly to certain targeted regional and branch offices of clients which have
not yet fully centralized mortgage insurance purchasing decisions.

At September 30, 1996, the Company's sales force consisted of approximately
19 marketing professionals drawn from various backgrounds in the mortgage
lending and mortgage insurance industries, who operate from the Company's office
in Chicago, Illinois, and from their homes throughout the United States. The
Company's sales force is headed by a National Sales and Marketing Director, and
is comprised of three categories: (i) regional sales directors, who are
responsible for management of relationships with existing clients and the
development of new clients; (ii) regional managers, who are responsible for
sales in a particular geographic territory; and (iii) sales representatives, who
provide day-to-day service to the Company's customers in a particular geographic
territory.

The Company's sales force is compensated by salary and bonus; no commissions
are paid on either new insurance written or renewal premiums. Bonuses are based
on a combination of the individual's performance and achievement of corporate
annual performance objectives.

The Company's marketing services group, which consisted of five individuals
at September 30, 1996, has primary responsibility for advertising, sales
materials, sales training and the creation of sales promotion programs. The
lender operations group of the marketing department, which consisted of one
individual at September 30, 1996, has primary responsibility for assisting
clients in ordering and servicing the Company's mortgage insurance.

CUSTOMERS

Amerin Guaranty's customers are mortgage originators. Mortgage originators
include mortgage bankers, savings institutions, commercial banks and other
mortgage lenders. Amerin Guaranty's customers include eight of the top 10
mortgage originators based on originations in the first nine months of 1966.
Major customers include Bank of America, Bank United of Texas, Chase Manhattan
Mortgage Corporation, Citicorp Mortgage, Countrywide Home Loans, First
Nationwide, FT Mortgage Companies, Fleet Mortgage Group, North American
Mortgage, and Norwest Mortgage, Inc. In addition, the Company has recently added
GMAC Mortgage Corporation and PNC Mortgage Corporation of America as mortgage
insurance customers. Amerin Guaranty is dependent on a small number of lenders
for a substantial majority of its business. Through September 30, 1996 Amerin
Guaranty had done business with 80 MASTER POLICYHOLDERS, of which it considered
44 to be active master policyholders (lenders which had submitted applications
for insurance within the preceding 90 days, excluding branches, affiliates and
companies acquired or merged into other lenders). Ten customers were responsible
for 99.0%, 91.0%, 85.8% and 87.7% of the Company's net premiums written for the
years ended December 31, 1993, 1994 and 1995 and the nine months ended September
30, 1996, respectively. Amerin Guaranty's three largest customers (including
branches and affiliates of such customers) were Norwest Mortgage, Inc.,
Countrywide Home Loans and Bank of America, which accounted for 42.5%, 18.7% and
12.0%, respectively, of the Company's net premiums written for the nine months
ended September 30, 1996. See "Risk Factors--Concentration of Business with
Lenders" and "--Overview of Direct Risk in Force."

To obtain primary insurance from Amerin Guaranty, a mortgage lender must
first apply for and receive a MASTER POLICY from Amerin Guaranty. Amerin
Guaranty's approval of a lender as a master policyholder is based upon an
evaluation of the lender's capacity to originate, underwrite and service
mortgage loans, its financial soundness and its management's demonstrated
adherence to sound loan

46
<PAGE>
origination practices, among other factors. See "--Underwriting
Practices--Lender Approval." Substantially all of the Company's customers obtain
mortgage insurance from more than one insurer.

The master policy sets forth the general published terms and conditions of
Amerin Guaranty's mortgage insurance policy. The master policy does not obligate
the lender to secure insurance from Amerin Guaranty. Because Amerin Guaranty's
master policyholders are granted delegated underwriting by Amerin Guaranty, they
have the authority to approve coverage within certain guidelines. See
"--Underwriting Practices."

The mortgage lending industry has been experiencing an ongoing
consolidation. The Company does not believe that the continuation of the recent
trend of consolidation within the mortgage lending industry will adversely
affect Amerin Guaranty's geographic dispersion of insurance written because
Amerin Guaranty's largest customers do business on a national basis.

COVERAGE

Generally, private mortgage insurers calculate claims payments by applying a
stated coverage percentage to an aggregate amount consisting of (i) the
outstanding principal loan balance at the date of default, (ii) accrued interest
from the date of default to the date a claim is filed, (iii) advances made by
the insured or the servicer with respect to normal and customary real estate
property taxes, hazard insurance premiums, foreclosure costs, reasonable
attorney's fees not exceeding 3% of the sum of such principal amount plus such
accrued interest, and (iv) reasonable expenses (generally requiring prior
approval by the insurer) necessary for the protection and preservation of the
property. See "--Defaults and Claims--Claims."

Through December 31, 1996, Amerin was the only private mortgage insurer that
calculated claims payments by applying a specified coverage percentage to the
original principal amount of the insured loan. While this method was designed to
simplify claims processing for clients, most submitted claims reflected the
claims calculation used by other mortgage insurers and some clients advised
Amerin Guaranty that it was confusing to use more than one method of calculating
claims. As a result, management concluded that Amerin's unique coverage method
was not being integrated into most lenders' claims processing. In addition,
technological developments in claims reporting and processing over the past few
years have resulted in the establishment of a single industry standard for
electronic transmission of claims data which would have prevented Amerin
Guaranty from participating in standardized electronic claims processing using
its unique coverage method.

In light of the above, management decided to implement the industry claims
payment method for all loans insured on and after January 1, 1997. Fannie Mae
and Freddie Mac have agreed that, with respect to all loans owned or securitized
by them, they will accept claims payments from Amerin Guaranty calculated under
the industry claims method for all claims submitted on and after January 1,
1997, irrespective of when the related loan was originally insured by Amerin
Guaranty. With respect to all other loans insured prior to January 1, 1997,
Amerin Guaranty will continue to pay claims under its original coverage method.
Management believes that it will still be able to offer streamlined claims
processing to its clients and that the change will have no material impact on
its business.

In order to more easily compare Amerin Guaranty's portfolio characteristics
to those of the private mortgage insurance industry in general, all coverages in
this Prospectus (including Amerin Guaranty coverages, except as noted) are
expressed in terms of the corresponding industry coverage percentages.

ROLE OF TECHNOLOGY

Technology in the mortgage lending and mortgage insurance industries is
evolving rapidly. The Company's management relies, and will continue to rely,
upon the use of appropriate, cost-effective information technology to support
the Company's low-cost, efficient approach to mortgage insurance. For

47
<PAGE>
the most part, the Company intends to utilize current and new products developed
by vendors which specialize in information technology and which can devote far
greater resources to research and development. Management will continue to
monitor the development and introduction of new technologies, and will seek to
incorporate those which optimize the cost-effectiveness of Amerin Guaranty's
internal operations and improve service to lenders through increased use of
automation.

In addition to utilizing technology developed by outside vendors, Amerin
Guaranty's Information Technology ("IT") group will also continue to develop
certain proprietary products to enhance Amerin Guaranty's ability to process
business and monitor and manage risk. Generally, such internal systems
development will be undertaken only where management believes that technology
required to meet the Company's specific needs is not available from outside
vendors.

MORTGAGE INSURANCE INDUSTRY MARKET SHARE

Amerin Guaranty's market share of new insurance written grew on a quarterly
basis from .1% for the second quarter of 1993 to 6.4% for the first quarter of
1996, and declined to 6.0% and 5.9%, respectively, for the second and third
quarters of 1996. Amerin Guaranty's market share of the industry's total
insurance in force increased from .1% at December 31, 1993 to 1.8% at December
31, 1995, and was 2.7% at September 30, 1996. See "Risk Factors--Competition;
Market Share." Management believes that Amerin Guaranty's growth has resulted
from a number of factors, including: (i) basic product features such as the use
of delegated underwriting and post-closing issuance of insurance certificates on
substantially all of its business, and streamlined claims processing; (ii) the
introduction of LPMI in 1993; and (iii) the introduction in 1994 of BPMI with
premium rates lower than those generally available from the rest of the mortgage
insurance industry. These factors have resulted in increasing levels of business
from existing clients and also have enabled Amerin to attract new customers.
Management believes that the slight decline in market share of new insurance
written in the second and third quarters of 1996 was due primarily to increased
originations by thrifts, particularly with respect to ARMs, resulting in a
reduction in market share for mortgage bankers, which are Amerin's primary
clients. Management believes that the reduction in Amerin's Guaranty's market
share is consistent with the reduction in market share for mortgage bankers.
Management further believes that the aggressive marketing of certain retail
services to certain of Amerin Guaranty's clients by other mortgage insurers
during this period also contributed to Amerin Guaranty's reduction in market
share.

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The following table shows (i) the amount of primary insurance in force for
the periods indicated and new primary insurance written for the periods
indicated for all private mortgage insurers and for Amerin Guaranty and (ii)
Amerin Guaranty's market share for each of those periods.

<TABLE>
<CAPTION>
PRIMARY INSURANCE IN FORCE NEW PRIMARY INSURANCE WRITTEN
(AT PERIOD END) (DURING PERIOD)
-------------------------------------- ------------------------------------
ALL AMERIN ALL AMERIN
PRIVATE GUARANTY PRIVATE GUARANTY
MORTGAGE AMERIN MARKET MORTGAGE AMERIN MARKET
PERIOD INSURERS(1) GUARANTY SHARE INSURERS(2) GUARANTY SHARE
- --------------------------------------------------- ----------- ---------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(IN MILLIONS OF DOLLARS EXCEPT PERCENTAGES)
1993:
1st quarter...................................... $ 293,795 $ -- --% $ 24,239 $ -- --%
2nd quarter...................................... 305,606 39 --% 32,933 39 .1%
3rd quarter...................................... 321,622 147 --% 38,877 109 .3%
4th quarter...................................... 337,780 273 .1% 40,717 127 .3%
---------- -----------
For the Year..................................... 337,780 273 .1% $ 136,766 $ 274 .2%
1994:
1st quarter...................................... 352,679 367 .1% 35,375 96 .3%
2nd quarter...................................... 372,256 649 .2% 36,197 285 .8%
3rd quarter...................................... 390,903 1,718 .4% 32,518 1,076 3.3%
4th quarter...................................... 406,250 2,750 .7% 27,314 1,042 3.8%
---------- -----------
For the Year..................................... 406,250 2,750 .7% $ 131,404 $ 2,499 1.9%
1995:
1st quarter...................................... 418,565 3,689 .9% 20,645 950 4.6%
2nd quarter...................................... 432,276 4,921 1.1% 24,688 1,265 5.1%
3rd quarter...................................... 446,730 6,581 1.5% 33,054 1,808 5.5%
4th quarter...................................... 464,560 8,262 1.8% 31,320 1,900 6.0%
---------- -----------
For the Year..................................... 464,560 8,262 1.8% $ 109,707 $ 5,924 5.4%
1996:
1st quarter...................................... 469,854 9,791 2.1% 29,401 1,883 6.4%
2nd quarter...................................... 482,116 11,619 2.4% 35,150 2,104 6.0%
3rd quarter...................................... 495,956 13,380 2.7% 34,134 1,998 5.9%
---------- -----------

First nine months................................ 495,956 13,380 2.7% $ 98,685 $ 5,984 6.1%

COMPOUND ANNUAL GROWTH RATE
1993 through September 30, 1996.................... 15.0% 312.3%
</TABLE>

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

(1) Amounts shown are at period end and include active and inactive private
mortgage insurers. Sources: MICA FACT BOOK and MICA.

(2) Amounts shown are during period and do not include insurance written on
seasoned loans (loans originated at least 12 months prior to the date on
which they are insured with primary mortgage insurance). Sources: INSIDE
MORTGAGE FINANCE and MICA.

OVERVIEW OF DIRECT RISK IN FORCE

The Company believes that the risk of a claim on a low down payment mortgage
loan is principally a function of the following factors: (i) economic conditions
in the geographic market in which the property is located; (ii) the credit
quality of the borrower; (iii) the loan to value ratio; (iv) the type of loan
instrument (for example, whether the loan is a fixed rate mortgage or is an
adjustable rate mortgage); (v) the purpose for which the loan is made (for
example, a primary residence or a vacation home) and (vi) the underwriting
practices of the lender originating the loan. Beginning in the second half of
1994, because of, among other factors, overcapacity in the home mortgage lending
industry, increased competition among home mortgage lenders to expand their
markets, particularly in response to affordable housing initiatives, and higher

49
<PAGE>
mortgage interest rates that prevailed through most of the first quarter of
1995, a higher proportion of new insurance written by the mortgage insurance
industry generally contained factors (including reduced borrower credit quality
and higher risk loan instruments) indicating a higher risk profile. Such higher
risk loan instruments include 95s, ARMs, ARM 95s, ARMs with potential negative
amortization, and mortgages with original loan amounts in excess of $207,000.
Management believes that the proportion of new insurance written by the mortgage
insurance industry containing such factors declined in the first nine months of
1996. While the proportion of Amerin Guaranty's new insurance written in 1995
and the first nine months of 1996 with these risk factors is slightly lower than
the comparable proportion for the overall mortgage industry, the proportion of
loans with such risk factors in Amerin Guaranty's risk in force is higher than
the comparable proportion for the overall mortgage insurance industry due to
Amerin's recent entry into the mortgage insurance business and an overall
industry trend in recent years toward a greater percentage of 95s.

The Company believes that the claim incidence for 95s is substantially
higher than for loans with LTV ratios of 90% or less, that the claim incidence
for mortgages in which the original loan amount exceeds $200,000 is
substantially higher than for mortgages in which the original loan amount is
$200,000 or less and that the claim incidence for ARMs, including ARMs with
potential negative amortization, during a prolonged period of rising interest
rates would be substantially higher than for fixed rate loans. While there is no
meaningful data on claim incidence for 97s because this product has only been
recently offered by the industry, the Company anticipates that claim incidence
on 97s will be higher than on 95s. In addition, the Company believes that the
presence of multiple higher risk factors in a single loan (for example, reduced
borrower credit quality and a 95) materially increases the likelihood of a claim
on such a loan as compared to a loan containing fewer higher risk factors. As a
result of Fannie Mae and Freddie Mac's deep coverage requirements on 95s and
97s, the average claim amount on loans having such deep coverage is expected to
increase.

The Company believes that the introduction of monthly premium products
throughout the mortgage insurance industry in 1993 and 1994, including by Amerin
Guaranty in the first quarter of 1994, have increased the popularity of 95s by
making these loans affordable to borrowers previously unable to obtain
sufficient funds for closing costs. Amerin Guaranty's premium rates take certain
risk factors, such as higher LTVs or ARMs, into account. However, the premiums
earned on mortgage insurance covering such types of loans, and the associated
investment income, may ultimately prove to be inadequate to compensate for
related future losses.

The Company believes there was a decline in the credit quality of
newly-originated insured loans for the mortgage insurance generally beginning in
the second half of 1994. The Company believes that this decline in credit
quality resulted from, among other factors, overcapacity in the home mortgage
lending industry, increased competition among home mortgage lenders to expand
their markets, particularly in response to affordable housing initiatives, and
higher mortgage interest rates that prevailed through most of the first quarter
of 1995. The Company identified declining overall credit quality among insured
loans originated by certain lenders with which it does business, and worked with
these lenders to establish specific measures for the improvement of the credit
quality of these lenders' originations. The Company believes that borrower
credit quality has subsequently improved and that originations made in the
second quarter of 1995 and thereafter have been of generally higher credit
quality than those made in the second half of 1994 and the first quarter of
1995.

50
<PAGE>
The following table reflects certain characteristics of the Company's
primary risk in force (as determined on the basis of information available on
the date of mortgage insurance) by the categories and as of the dates indicated:

CHARACTERISTICS OF PRIMARY RISK IN FORCE

<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, -------------------------------
1996 1995 1994 1993
---------------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN MILLIONS OF DOLLARS EXCEPT PERCENTAGES)
DIRECT RISK IN FORCE:............................................ $ 3,306.0 $ 1,989.3 $ 580.3 $ 57.0
LENDER CONCENTRATION:
Top 3 lenders(1)............................................... 70.7% 70.8% 64.3% 88.6%
Top 10 lenders(1).............................................. 87.0% 86.8% 89.9% 98.7%
LTV:
97s............................................................ .2% .1% --% --%
95s............................................................ 49.0% 50.6% 54.1% 50.3%
90s(2)......................................................... 46.5% 45.3% 42.4% 46.5%
85s and below.................................................. 4.3% 4.0% 3.5% 3.2%
AVERAGE COVERAGE PERCENTAGE:..................................... 24.7% 24.1% 21.1% 20.9%
LOAN TYPE:
Fixed(3)....................................................... 77.5% 72.3% 58.9% 90.5%
ARMs........................................................... 12.3% 18.5% 36.2% 4.5%
ARMs with potential negative amortization...................... .7% 1.2% .3% .1%
Fixed/Adjustable(4)............................................ 5.0% 5.2% 2.1% --%
Balloon........................................................ 4.3% 2.6% 2.0% 2.2%
Other.......................................................... .2% .3% .5% 2.7%
MORTGAGE TERM:
15 years and under............................................. 2.6% 2.3% 2.1% 4.4%
Over 15 years.................................................. 97.4% 97.7% 97.9% 95.6%
PROPERTY TYPE:
Single family detached......................................... 94.6% 94.5% 92.8% 90.6%
Condominium.................................................... 4.4% 4.3% 6.0% 8.7%
Other(5)....................................................... 1.0% 1.2% 1.2% .7%
OCCUPANCY STATUS:
Primary residence.............................................. 99.3% 99.6% 99.8% 100.0%
Second home.................................................... .7% .4% .2% --%
Non-owner occupied............................................. --% --% --% --%
LOAN AMOUNT:
$100,000 or less............................................... 23.0% 24.0% 23.8% 30.4%
Over $100,000 to $155,250(6)................................... 38.3% 37.6% 39.1% 40.5%
Over $155,250 to $207,000(6)(7)................................ 25.5% 24.3% 26.4% 27.8%
Over $207,000 to $250,000(7)................................... 5.3% 5.9% 5.1% .5%
Over $250,000.................................................. 7.8% 8.0% 5.3% .5%
</TABLE>

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

(1) Based on original application volume.

(2) For the purposes of applying underwriting standards and determining
premiums, Amerin Guaranty considers loans under which the borrower makes a
down payment of at least 10% and finances the mortgage insurance premium as
part of the loan (resulting in a final LTV over 90%) to be 90s. Such loans
are classified as 95s in the above table, and are so classified by Fannie
Mae. At September 30, 1996, .7% of Amerin Guaranty's risk in force consisted
of these types of loans.

(3) Fixed rate loans with temporary buydowns are included as fixed loans.

(4) Loans with fixed interest rates for the first five years or more (and
adjustable rates thereafter).

(5) Includes two-to-four unit dwellings.

(6) $151,725 was the maximum individual loan amount that the FHA could insure.
Such amount was increased to $152,363 in the third quarter of 1994 and
$155,250 in the first quarter of 1996.

(7) $207,000 is the maximum principal balance of loans originated after January
1, 1996 eligible for purchase by Fannie Mae and Freddie Mac. Such amount was
increased to $214,700 for loans originated after January 1, 1997.

51
<PAGE>
LOAN TO VALUE

Approximately 49.0% of Amerin Guaranty's risk in force at September 30, 1996
consisted of 95s, while approximately 50.6% and 54.1% of its risk in force at
December 31, 1995 and 1994, respectively, consisted of 95s. The proportion of
95s among purchase money mortgages is generally higher than among refinancings,
due to limited marketability of refinancing mortgages in excess of 90% LTV and
the opportunity for property value appreciation in advance of a refinancing. The
substantial majority of Amerin's risk in force has been written in the period
beginning in the second quarter of 1994. During this period, refinancing
activity has been relatively slow due to higher mortgage interest rates than
were available in the preceding year. Management believes that the proportion of
95s in Amerin Guaranty's new business in 1995 and the first nine months of 1996
is similar to that of the overall mortgage insurance industry for the same
period.

In November 1994, Fannie Mae expanded its Community Homebuyer Program to
include 97s. Freddie Mac began offering a 97 product in October 1996. Amerin
Guaranty began offering 97s in the third quarter of 1994. 97s are likely to have
even greater risk characteristics than 95s, and, although priced higher, also
have greater uncertainty as to pricing adequacy. Management does not believe
that 97s will constitute a significant portion of the mortgage insurance market
due to the currently limited secondary market for this product and competition
from the FHA's programs. At September 30, 1996, Amerin insured a total of 287
97s with a total risk in force of $7.4 million. Amerin generally does not permit
97s in its delegated underwriting program. See "--Underwriting Practices."

AVERAGE COVERAGE PERCENTAGE

Prior to 1995, the average coverage percentage of Amerin Guaranty's direct
risk in force had not varied significantly. However, effective in the first
quarter of 1995, Fannie Mae and Freddie Mac increased the required coverage
level on 90s and 95s, which has resulted in an increase in Amerin Guaranty's
average coverage percentage from 21.1% at December 31, 1994 to 24.7% at
September 30, 1996. Amerin Guaranty expects that its average coverage percentage
will continue to increase marginally in the future. See "Industry
Overview--Fannie Mae and Freddie Mac."

LOAN TYPE

Amerin Guaranty, like other private mortgage insurers, generally experiences
a major shift in the composition of new insurance written by loan type based on
prevailing interest rate levels and related refinancing activity. In periods of
low interest rates, new borrowers generally select fixed rate loans and existing
holders of ARMs and higher fixed rate loans are more likely to refinance with
lower fixed rate mortgages; in periods of high interest rates, new borrowers are
more likely to select ARMs and refinancing activity is low.

Claim frequency on ARMs is generally higher than on fixed rate loans. ARMs
originated at a deep discount or special introductory rate (defined by the
Company as more than 200 basis points below the relevant market rate) are likely
to exhibit a higher claim frequency than other ARMs because of the potential
"payment shock" associated with a steep increase in monthly mortgage payments as
a result of an upward adjustment in the mortgage interest rate. However, Amerin
Guaranty generally underwrites such ARMs on the basis of adjusted first year
payments to address the potential for "payment shock."

ARMs can be fully indexed, meaning that payments adjust fully with the
interest rate adjustments or ARMs can allow for negative amortization. ARMs
which allow for negative amortization may have scheduled negative amortization
or potential negative amortization, in which the borrower has the option to pay
less than the full interest due if the payment exceeds a cap. Amerin Guaranty's
current underwriting policy is not to issue insurance coverage on ARMs with
scheduled negative amortization. The mortgage insurance industry as a whole has
experienced higher claims frequency and severity with respect to potential
negative amortization loans on which the borrower has exercised an option to cap
the amount of

52
<PAGE>
the monthly mortgage payment. In addition, Amerin Guaranty does not insure ARMs
above 90% LTV which have the potential for negative amortization. At September
30, 1996, ARMs with potential negative amortization accounted for .7% of Amerin
Guaranty's risk in force.

At September 30, 1996, 13.0% of Amerin Guaranty's risk in force consisted of
ARMs, including 95 ARMs (which constituted 7.5% of risk in force) and ARMs with
potential negative amortization. Rising interest rates during 1994 made ARMs a
significant percentage of new mortgage originations during that year. The
subsequent decrease in interest rates in 1995, and relatively stable rates
thereafter, reduced the percentage of Amerin Guaranty's new insurance written
comprised of ARMs from 41.1% for the year ended December 31, 1994 to 14.6% for
1995 and 6.3% for the first nine months of 1996.

Balloon payment mortgage loans constituted 4.3% of Amerin Guaranty's risk in
force at September 30, 1996. A balloon payment mortgage loan has a maturity,
typically five to seven years, that is shorter than the amortization schedule
upon which monthly payments are based. The master policy excludes from coverage
a borrower's default on the balloon payment unless, at maturity, the lender
offers to refinance the principal balance of the loan at the then current market
interest rate.

Amerin Guaranty also insures fixed rate mortgage loans that allow temporary
"buydowns" of the borrower's monthly payments during the early years of the
mortgage loan. A "buydown" occurs when a buyer or seller pays points at closing
which reduce the interest rate on a mortgage loan for a stated period of time.
Typically, the interest rate is bought down 1% to 2% per year during the first
one to three years of the loan term. Fixed rate mortgage loans with temporary
"buydowns" constituted 3.4% of Amerin Guaranty's risk in force at September 30,
1996. To address the possibility of "payment shock" with this type of loan,
Amerin Guaranty's underwriting guidelines take into account the borrower's
ability to afford future scheduled payment increases. Amerin Guaranty charges
higher premiums in respect to loans with temporary "buydowns" than for fixed
rate loans.

MORTGAGE TERM

The Company believes that 15-year mortgages present a lower level of risk
than 30-year mortgages, primarily as a result of the faster amortization of
15-year mortgages resulting in more rapid accumulation of borrower equity in the
property. Accordingly, Amerin Guaranty charges lower premium rates on 15-year
mortgages than on comparable 30-year mortgages. Because 15-year mortgages result
in monthly payments which are significantly higher than those on 30-year
mortgages, 15-year mortgages are more prevalent in low interest rate
environments. For 1995 and the first nine months of 1996, 15-year mortgages
constituted 3.2% and 4.3%, respectively, of Amerin Guaranty's new insurance
written. The Company expects the percentage of 15-year mortgages to decrease if
mortgage interest rates rise.

PROPERTY TYPE

The Company believes that the risk of claim is also affected by the type of
property securing the insured loan. Based on the historical experience of the
mortgage insurance industry as a whole, single-family detached housing has lower
claim frequency than other types of properties. The term "single-family" applies
to all single unit dwellings and includes detached and attached townhouse units
with fee simple ownership, condominiums and cooperatives. The Company believes
that attached housing types, particularly condominiums and cooperatives, are a
higher risk because, in most areas, condominiums and cooperatives tend to
appreciate more slowly and require a longer sale period than single-family
detached housing, and for similar reasons, two-to-four unit dwellings are also
considered by the Company to be a higher risk. Amerin Guaranty's current
underwriting guidelines place restrictions on the insurability of condominiums
and other forms of attached housing, including concentration limits by project
type and geographic location, and ceilings on Amerin Guaranty's concentration in
any one project.

53
<PAGE>
OCCUPANCY STATUS

Based on the historical experience of the mortgage insurance industry as a
whole, the Company believes that loans on non-owner-occupied homes, which are
generally purchased for investment purposes, represent a substantially higher
risk than loans on either primary or second homes, in part because non-
owner-occupied homes are subject to greater value declines. For these reasons,
Amerin Guaranty does not insure loans on homes that are non-owner-occupied at
the time of loan origination. Amerin Guaranty insures loans on owner-occupied
second homes at rates higher than those for primary residences.

LOAN AMOUNT

At September 30, 1996, the average original principal balance of all loans
insured by Amerin Guaranty was approximately $122,701. At September 30, 1996,
86.8% of Amerin Guaranty's risk in force had original principal loan balances at
or below the maximum balance established for purchase by Fannie Mae and Freddie
Mac (commonly referred to as "conforming loans" and currently established at
$214,700 for single family residences). Amerin Guaranty believes that mortgages
with loan balances significantly exceeding conforming loan limits generally have
a higher claim frequency because the underlying property values of such loans
are subject to greater declines in the event of an economic downturn.

DEMOGRAPHIC FACTORS

Demographic factors may affect housing and mortgage insurance demand because
mortgage insurance is typically used by first time home buyers, who have
historically been people in the 25 to 34 year-old age group. As a result of
declining birthrates in the 1960s, the number of people currently in the 25 to
34 year-old age group will decline in the near future. However, management
believes an increase in the number of single people buying homes has stimulated
additional demand for low down payment loans and mortgage insurance in the
1990s. In addition, the Company believes that the growing immigrant population's
demand for housing and the increased purchases by Fannie Mae and Freddie Mac of
low-to-mod loans may increase the demand for mortgage insurance.

GEOGRAPHIC DISPERSION

Amerin Guaranty's long-term strategy is to diversify the geographic mix of
its portfolio to approximate the national distribution of high LTV loans. Amerin
Guaranty seeks to implement this strategy by focusing its marketing efforts on
high quality national and selected regional lenders to balance the geographic
mix of its new business.

In 1994, Amerin developed a high concentration of business in California,
with 45.9% of that year's new insurance written in the state. This concentration
resulted from greater early market penetration by Amerin Guaranty of lenders
active in California relative to other regions. While this level of
concentration exceeded Amerin Guaranty's long-term goals for geographic
concentration, management determined that this concentration would be remedied
by increased market penetration of lenders active in other regions, and has not
sought to limit or reduce the amount of Amerin Guaranty's business in the state.
Amerin achieved greater market share in other regions in 1995, and the
percentages of new insurance written in California in 1995 and the first nine
months of 1996 were 27.0% and 21.1%, respectively. Management expects that the
proportion of Amerin Guaranty's business in California will continue to decline.

The Company reviews and rates economic and real estate market conditions in
large markets across the country on a quarterly basis. Amerin Guaranty has
restricted and in the future may restrict its underwriting guidelines in certain
areas where management believes it is prudent to reduce higher risk lending.

54
<PAGE>
The following table reflects Amerin Guaranty's percentage of primary risk in
force and new primary insurance written at the dates and for the periods
indicated for each of Amerin Guaranty's top 10 states and top 10 Metropolitan
Statistical Areas ("MSAs").
<TABLE>
<CAPTION>
NEW PRIMARY INSURANCE WRITTEN
PRIMARY RISK IN FORCE ---------------------------------------
-------------------------------------------------- NINE MONTHS YEAR ENDED
DECEMBER 31, ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------- SEPTEMBER 30, --------------------
1996 1995 1994 1993 1996 1995 1994
----------------- --------- --------- --------- ----------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
TOP 10 STATES(1)
California................. 26.4% 31.1% 43.2% 18.9% 21.1% 27.0% 45.9%
Texas...................... 5.2 4.3 4.5 6.6 5.9 4.1 4.1
Florida.................... 4.9 4.6 3.2 4.5 5.0 4.9 3.0
Illinois................... 4.0 3.5 2.7 2.7 4.8 4.0 2.7
Massachusetts.............. 3.5 3.4 2.4 3.3 3.9 4.0 2.3
New York................... 3.4 3.4 2.5 3.3 3.2 3.6 2.4
Minnesota.................. 3.4 2.7 1.5 2.0 4.2 3.1 1.5
Colorado................... 3.2 3.3 3.0 5.0 3.4 3.5 2.8
Arizona.................... 3.0 3.3 3.3 6.0 2.7 3.3 2.9
Ohio....................... 2.9 2.5 1.8 2.6 3.3 2.8 1.7
--- --- --- --- --- --- ---
Top 10 total............... 59.9% 62.1% 68.1% 54.9% 57.5% 60.3% 69.3%

TOP 10 MSAS(1)
Los Angeles................ 7.4% 9.0% 15.1% 8.2% 5.4% 6.5% 15.3%
Orange County.............. 3.4 4.2 6.7 3.4 2.4 3.3 7.1
Chicago.................... 3.1 2.7 1.9 1.7 3.9 3.1 2.0
Oakland.................... 2.7 3.3 3.9 1.0 2.0 3.2 4.3
Minneapolis................ 2.2 1.7 1.0 1.1 2.9 2.1 1.0
Washington, D.C............ 2.2 1.9 1.6 2.8 2.5 2.0 1.5
Phoenix.................... 2.2 2.4 2.4 3.8 2.0 2.4 2.2
Boston..................... 2.1 2.1 1.5 2.0 2.3 2.5 1.5
San Diego.................. 2.0 2.3 3.2 .5 1.8 2.0 3.5
San Francisco.............. 1.9 2.3 2.7 .5 1.3 2.3 3.1
--- --- --- --- --- --- ---
Top 10 total............... 29.2% 31.9% 40.0% 25.0% 26.5% 29.4% 41.5%

1993
---------
<S> <C>
TOP 10 STATES(1)
California................. 21.9%
Texas...................... 6.2
Florida.................... 4.5
Illinois................... 2.6
Massachusetts.............. 3.2
New York................... 3.9
Minnesota.................. 1.9
Colorado................... 4.7
Arizona.................... 5.6
Ohio....................... 2.3
---
Top 10 total............... 56.8%
TOP 10 MSAS(1)
Los Angeles................ 9.5%
Orange County.............. 3.9
Chicago.................... 1.6
Oakland.................... 1.2
Minneapolis................ 1.1
Washington, D.C............ 2.7
Phoenix.................... 3.5
Boston..................... 1.9
San Diego.................. .6
San Francisco.............. .6
---
Top 10 total............... 26.6%
</TABLE>

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

(1) Top 10 states and MSAs as determined by total risk in force as of September
30, 1996.

The Company's total risk in force in its top 10 MSAs decreased from 40.0% at
December 31, 1994 to 29.2% at September 30, 1996 and in its top 10 states
decreased from 68.1% at December 31, 1994 to 59.9% at September 30, 1996.

UNDERWRITING PRACTICES

The Company writes substantially all of its insurance on a delegated
underwriting basis. Under delegated underwriting, participating lenders are
permitted to commit a mortgage insurer to insure a loan based on mutually agreed
criteria. Management believes that the Company's delegated underwriting approach
is viewed by many lenders as easier and more efficient and as providing more
certainty than traditional loan-by-loan underwriting, thereby providing the
Company with a competitive advantage. Management further believes that the
various underwriting and risk management features discussed below, taken
together, provide acceptable protection to the Company against the possible
risks associated with writing substantially all business on a delegated
underwriting basis.

55
<PAGE>
Amerin Guaranty generally is not able to cancel coverage on loans which it
insures under delegated underwriting, but may seek reimbursement from lenders in
respect to claims on loans so insured which violate specific loan eligibility
standards. The performance of loans insured through programs of delegated
underwriting, including Amerin's program of delegated underwriting, has not been
tested over an extended period of time or over portfolios almost exclusively
written based on delegated underwriting, nor has the performance of such loans
been tested in a period of adverse economic conditions. The Company does not
generally offer delegated underwriting on 97s and certain other loans with
specific risk factors. To date, the Company has not written any pool insurance,
but may do so on a limited basis in the future, depending on market and
competitive conditions.

RISK MANAGEMENT APPROACH

Although the Company has introduced a number of innovative product features
and operating methods, since its inception the Company's goal has been to
maintain underwriting and risk management standards similar to those of the
overall mortgage insurance industry. The Company's lower pricing approach is the
result of the Company's low cost structure and operating efficiencies, not the
product of a more aggressive approach to underwriting and risk management. See
"--Products--Pricing." The Company believes that its underwriting standards are
generally consistent with the industry. In certain areas, the Company's
underwriting standards are more restrictive than those required by Fannie Mae
and Freddie Mac.

The Company does not insure loans with certain characteristics that the
Company believes involve unacceptable risk, such as loans secured by mortgages
on non-owner occupied property and ARMs with scheduled negative amortization.
Although the Company does insure qualifying 97s, it generally underwrites them
on a loan-by-loan basis. At September 30, 1996 less than .3% of the Company's
risk in force consisted of 97s. In addition, despite the Company's low cost
structure, the Company does not offer rates on 97s, or on 95s where less than a
5% downpayment is provided from the borrower's own funds ("3/2s"), which are
lower than those generally available from the rest of the mortgage insurance
industry.

Mortgage insurance coverage cannot be canceled by Amerin Guaranty, except
for nonpayment of premiums or certain material violations of Amerin Guaranty's
master policy, and remains renewable at the option of the insured for the life
of the loan at a rate fixed when the insurance on the loan was initially issued.
As a result, the impact of increased claims and incurred losses from policies
originated in a particular year generally cannot be offset by renewal premium
increases on policies in force or mitigated by nonrenewal of insurance coverage.
If a lender should commit Amerin Guaranty to insure a loan which does not comply
with the applicable underwriting guidelines, Amerin Guaranty is generally
obligated to insure such loan.

The Company's risk management objective is to build a portfolio of insured
loans whose claims incidence is equal to or less than the long-term average
expected claims rates on which its premium rates are based. In order to meet
this objective, the Company's risk management efforts are concentrated in five
principal areas: underwriting guidelines; lender approval; market analysis; loan
and portfolio monitoring; and lender audits.

UNDERWRITING GUIDELINES

The Company publishes underwriting guidelines which are employed by lenders
in determining if loans qualify for Amerin insurance under delegated
underwriting, and are also employed by the Company's underwriters in evaluating
loans submitted for insurance under non-delegated underwriting. Amerin seeks to
closely align its underwriting guidelines with those published by Fannie Mae and
Freddie Mac, in order to achieve the broadest applicability of its insurance.
The Company imposes additional guidelines more restrictive than those of Fannie
Mae or Freddie Mac where management believes such guidelines are

56
<PAGE>
prudent. Amerin regularly reviews its underwriting guidelines to address changes
in the mortgage market and economic conditions.

LENDER APPROVAL

Because the Company writes substantially all of its insurance on a delegated
underwriting basis, the Company has stringent lender approval requirements. The
Company assigns delegated underwriting authority only to lenders with adequate
financial resources, acceptable management and operations, and established
records of originating good quality loans over a period of time. The Company's
risk management personnel conduct a thorough review of each candidate lender,
including reviews of the lender's financial statements, the historical
performance of loans originated by the lender, on-site interviews with the
lender's executive and line management, and review of the lender's policies,
procedures and loan programs. Special attention is paid to the quality of a
lender's underwriting, on-site quality control and servicing, and to its
compliance with underwriting guidelines. The Company also performs an
underwriting review of a statistically valid sample of loans recently closed by
the candidate lender. This loan review provides the Company with a picture of
the quality of the lender's originations and underwriting decisions. Following
these reviews and investigations, in order for a lender to be accepted into the
delegated underwriting program, the Company's risk management personnel must
first recommend the candidate lender for approval, and approval must be granted
by the Executive Committee of Amerin Guaranty.

Upon approval of a lender, Amerin Guaranty executes a Lender Agreement with
the lender which sets forth the lender's duties under Amerin Guaranty's
delegated underwriting program, including the lender's obligation to reimburse
Amerin for any claims paid in respect to loans insured under the delegated
underwriting program which violate Amerin's specific loan eligibility
requirements. Amerin Guaranty must approve each loan program in writing before a
lender may approve loans under such program for Amerin insurance. Amerin may
also grant specific waivers to certain of its underwriting guidelines to
individual lenders, where Amerin believes such waivers are justified by the
lender's prudent practices. Amerin Guaranty provides the lender with assistance
in implementing its programs, including assistance in transmitting loan and
servicing information to Amerin Guaranty. Pursuant to such implementation and
the execution of the Lender Agreement, the lender is furnished with a master
policy and may commence insuring loans with Amerin Guaranty.

MARKET ANALYSIS

Amerin Guaranty reviews economic and real estate market conditions in over
60 metropolitan areas on a quarterly basis. Amerin Guaranty employs the results
of its market analysis in evaluating new business opportunities and the
composition of its portfolio. Amerin Guaranty also may impose more restrictive
underwriting guidelines on markets adversely rated in its National Housing
Market Review.

LOAN AND PORTFOLIO MONITORING

In order for Amerin Guaranty to commit to insure a loan, it must receive a
substantial amount of data in respect to such loan. This data includes all
information needed to provide coverage on the loan, plus additional data
elements used by Amerin Guaranty to assess the risk of the loan. Amerin Guaranty
evaluates this data at several levels to determine the risk of its insured loans
and take any actions required to maintain the quality of its portfolio. Where
Amerin determines that a lender's mix of business presents an excessive level of
risk, Amerin may take corrective actions with that lender. Such corrective
actions may include greater training of lender personnel, limitation of loans
with specific risk factors to a percentage of a lender's insured volume,
reduction in the volume of insured loans Amerin Guaranty will accept from the
lender, or termination of the lender's delegated underwriting authority.

DAILY MONITORING. Amerin Guaranty's systems generate reports of all loans
committed for insurance which possess certain high risk criteria. These criteria
include elements such as high debt ratios, self-

57
<PAGE>
employed borrowers and attached housing. Risk management personnel review the
data received by Amerin in respect to all such loans on a daily basis, and
contact the lender to establish that the level of risk on these loans is
acceptable. If it is determined that a lender is approving loans with excessive
risk for Amerin insurance, Amerin's senior risk management personnel will
promptly contact the lender's management and take appropriate corrective action
with the lender, up to and including restrictions on or termination of the
lender's delegated underwriting authority.

CREDIT SCORING. Amerin obtains credit scores from a third-party vendor for
all loans committed for insurance on a daily basis. Amerin uses these scores to
provide a timely, objective evaluation of borrower creditworthiness. Amerin
reviews the average scores of each lender's borrowers, the number of borrowers
with scores below certain thresholds, and the percentage of borrowers with
insufficient credit histories to score. Management believes that borrower
creditworthiness is the greatest manageable source of risk to Amerin in current
market conditions. Amerin Guaranty uses credit scores to evaluate the quality of
a lender's business, and may take appropriate corrective action with a lender if
credit scores indicate that the lender's business presents an undue level of
risk to Amerin Guaranty.

PORTFOLIO MONITORING. Amerin reviews the composition of its overall
portfolio and its business by lender and within geographic markets to identify
concentrations of risk. Specific elements which are reviewed by Amerin include
LTV, loan type, loan amount, property type, occupancy status and borrower
employment. Amerin may take appropriate corrective actions with a lender or
adjust its underwriting guidelines on a regional or national basis to correct
concentrations of risk at these levels.

LENDER AUDITS

Amerin Guaranty conducts thorough on-site review of each lender
periodically. Lenders with significant insured volume are reviewed at least
quarterly. These audits center on the re-underwriting of a statistically valid
sample of the Amerin-insured loans originated by the lender in the preceding
period. This sample is augmented by any loans with certain risk factors or
insured under waivers to Amerin's underwriting guidelines, if any, granted to
the lender, and may be further increased to target specific risk factors
identified in the periodic monitoring of the lender's business. Loans are
reviewed to identify errors in the loan data transmitted to Amerin, to determine
compliance with Amerin's underwriting guidelines and eligible loan criteria, to
assess the quality of a lender's underwriting decisions and to rate the risk of
the loans. Audits are graded based on the risk ratings of the loans reviewed,
lender compliance and data integrity. In addition to the re-underwriting, any
changes in the lender's policies, procedures or management are examined and
lender quality control reports are reviewed. The results of each audit are set
forth in a report to the lender which requires the lender to address any
deficiencies identified in the review. If issues raised by the report are not
resolved in a manner and within a time period acceptable to Amerin Guaranty, the
lender's delegated underwriting authority may be restricted or terminated.

UNDERWRITING PERSONNEL

At September 30, 1996, Amerin Guaranty employed an underwriting staff of 15,
of whom five are located in Amerin Guaranty's office in Chicago, Illinois, and
10 operate out of their homes in eight states. Amerin Guaranty's five portfolio
managers have an average of over 15 years of loan underwriting experience.
Amerin Guaranty's underwriting personnel are compensated by salary. In addition,
the portfolio managers participate in a management incentive program based on
Amerin Guaranty's profitability and individual performance.

DEFAULTS AND CLAIMS

DEFAULTS

The claim process begins with the insurer's receipt of notification of a
default from the insured on an insured loan. Default is defined in the primary
master policy as the failure by the borrower to pay when

58
<PAGE>
due an amount at least equal to the scheduled monthly mortgage payment under the
terms of the mortgage. The master policy requires insureds to notify Amerin
Guaranty of defaults, generally within 120 days after the initial default.
Generally, defaults are reported sooner, and the average time for default
reporting in the first nine months of 1996 by Amerin Guaranty insureds was
approximately 60 days after initial default. Amerin Guaranty uses this earlier
notification to facilitate workout analysis and loss mitigation efforts. The
incidence of default is affected by a variety of factors, including the
reduction of the borrower's income, unemployment, divorce, illness, the
inability to manage credit and, in the case of ARMs, the level of interest
rates. Defaults that are not cured result in a claim to Amerin Guaranty. See
"--Claims." Borrowers may cure defaults by making all delinquent loan payments
or by selling the property in full satisfaction of all amounts due under the
mortgage.

The following table shows the number of loans insured by Amerin Guaranty,
related loans in default, default rate, dollar amount of insured loans in
default and dollar amount of direct risk with respect to insured loans in
default at the dates indicated.

HISTORICAL DEFAULT RATES
TOTAL INSURED LOANS IN FORCE
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------------------------
1996 1995 1994 1993
------------- --------- --------- ---------
<S> <C> <C> <C> <C>
(IN MILLIONS OF DOLLARS EXCEPT LOANS AND
RATIOS)

<CAPTION>
<S> <C> <C> <C> <C>
Number of insured loans in force................................. 109,383 68,112 22,937 2,473
Number of loans in default....................................... 1,174 605 42 4
Default rate..................................................... 1.07% .89% .18% .16%
Dollar amounts of insurance in force............................. $ 13,380 $ 8,262 $ 2,750 $ 272
Dollar amounts of risk in force.................................. $ 3,306 $ 1,989 $ 580 $ 57
Dollar amounts of risk in force with respect to insured loans in
default........................................................ $ 32.8 $ 16.2 $ 1.1 $ .1
</TABLE>

Default rates differ from region to region in the United States depending
upon economic conditions and cyclical growth patterns. The table below sets
forth the default rates in Amerin Guaranty's 10 largest states by risk in force
as of September 30, 1996. Due to recessionary conditions in California in recent
years and policy aging, the default rate on all policies in force in that state
was 1.81% at September 30, 1996, compared to 1.42% at December 31, 1995 and .30%
at December 31, 1994. Claim sizes on California policies tend to be larger than
the average claim size due to high loan balances relative to other states.

DEFAULT RATES BY TOTAL RISK IN FORCE(1)

<TABLE>
<CAPTION>
DEFAULT RATE AS OF
PERCENT OF AMERIN --------------------------------------------------
GUARANTY'S PRIMARY RISK DECEMBER 31,
IN FORCE AS OF SEPTEMBER 30, -------------------------------
SEPTEMBER 30, 1996 1996 1995 1994 1993
------------------------- ----------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
California.............................. 26.4% 1.81% 1.42% .30% --%
Texas................................... 5.2% .77% .76% .28% .52%
Florida................................. 4.9% 1.20% 1.17% --% --%
Illinois................................ 4.0% 1.13% .96% --% --%
Massachusetts........................... 3.5% .62% .39% --% --%
New York................................ 3.4% 1.70% 1.32% --% --%
Minnesota............................... 3.4% .45% .45% .23% --%
Colorado................................ 3.2% .58% .45% --% --%
Arizona................................. 3.0% .91% .86% .57% --%
Ohio.................................... 2.9% .85% .63% .18% 1.49%
Total Portfolio......................... 100.0% 1.07% .89% .18% .16%
</TABLE>

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

(1) Top 10 states as determined by total risk in force as of September 30, 1996.
Default rates are shown by state based on location of the underlying
property.

59
<PAGE>
CLAIMS

Claims result from defaults that are not cured. The frequency of claims does
not directly correlate to the frequency of defaults due primarily to borrowers'
ability to overcome temporary financial setbacks. Whether an uncured default
leads to a claim principally depends on the borrower's equity at the time of
default and the borrower's (or the insured's) ability to sell the home for an
amount sufficient to satisfy all amounts due under the mortgage loan. In some
cases, during the default period, Amerin Guaranty works with the insured for
possible early disposal of the underlying property when the chance of the loan
reinstating is minimal. Such dispositions typically result in a savings to
Amerin Guaranty over the percentage coverage amount payable under the master
policy.

Generally, private mortgage insurers, including Amerin Guaranty since
January 1, 1997, calculate claims payments by applying a stated coverage
percentage to an aggregate amount consisting of (i) the outstanding principal
loan balance at the date of default, (ii) accrued interest from the date of
default to the date a claim is filed, (iii) advances made by the insured or the
servicer with respect to normal and customary real estate property taxes, hazard
insurance premiums, foreclosure costs, reasonable attorneys' fees not exceeding
3% of the sum of such principal amount plus such accrued interest, and (iv)
reasonable expenses (generally requiring prior approval by the insurer)
necessary for the protection and preservation of the property. See "--Coverage."

Under the terms of Amerin Guaranty's new master policy, the lender is
required to file a claim with Amerin Guaranty no later than approximately 60
days after it has acquired title to the underlying property, usually through
foreclosure.

Depending on the applicable state foreclosure law, an average of
approximately 12 months elapses from the date of default to payment of a claim
on an uncured default. To ensure continued coverage should the loan reinstate,
the insured frequently continues to pay premiums after notice of default until
the insured acquires title to the underlying property. Amerin Guaranty's current
master policy excludes coverage on loans secured by property with physical
damage, whether caused by fire, earthquake or other hazard, unless the property
is restored to its condition at the time the policy was originated. See
"--Regulation--Direct Regulation." Amerin Guaranty must pay each claim within 60
days after it has been filed. Before a claim is filed, Amerin Guaranty may also
agree with a lender on a settlement amount based on a prearranged sale of the
property, which settlement amount may be less than an amount equal to a claim
payment calculated under the terms of Amerin Guaranty's master policy. Of the
186 claim payments paid by Amerin Guaranty from inception through September 30,
1996, 39 were settled on the basis of a prearranged sale.

Claim activity is not spread evenly throughout the coverage period of a
primary book of business. Based on historical overall mortgage insurance
industry experience, the majority of claims occur in the third through sixth
years after loan origination, and substantially fewer claims are paid during the
first two years after loan origination. Insurance written by Amerin Guaranty
since October 1, 1994 represented 91% of Amerin Guaranty's insurance in force as
of September 30, 1996. This means that less than 10% of Amerin Guaranty's
insurance in force has reached the beginning of its expected peak claims period.
Because of the Company's limited operating history and historical industry claim
experience, the Company's loss experience is expected to significantly increase
as its policies continue to age.

LOSS RESERVES

A significant period of time may elapse between the occurrence of the
borrower's default on mortgage payments (the event triggering a potential future
claims payment), the reporting of such default to Amerin Guaranty and the
eventual payment of the claim related to such uncured default. To recognize the
liability for unpaid losses related to the DEFAULT INVENTORY, in accordance with
industry practice and GAAP, Amerin Guaranty establishes loss reserves in respect
of defaults included in such inventory, based upon the estimated claim rate and
estimated average claim amount. Included in loss reserves are LOSS ADJUSTMENT

60
<PAGE>
EXPENSES ("LAE"), if any, and INCURRED BUT NOT REPORTED ("IBNR") reserves. These
reserves are estimates and there can be no assurance that Amerin Guaranty's
reserves will prove to be adequate to cover ultimate loss developments on
reported defaults. The Company's profitability and financial condition would be
adversely affected to the extent that the Company's loss reserves are
insufficient to cover the actual related claims paid and expenses incurred.
Consistent with industry practices and GAAP, Amerin Guaranty does not establish
loss reserves in respect of estimated potential defaults that may occur in the
future. See "Risk Factors--Potential Increase in Claims--Loss Experience; Loss
Reserves."

Amerin Guaranty's reserving process for primary insurance utilizes an
industry data base of mortgage insurers' nationwide report year delinquency
experience for over 10 years. Delinquencies of various ages for such report
years are tracked to determine the rate at which such delinquencies convert to
actual claims. Such rates are then applied to Amerin Guaranty's population of
actual reported delinquencies, multiplying the covered amount for delinquencies
of various ages by the appropriate rate. Amerin reviews its claim rate and claim
amount assumptions on at least a semi-annual basis and adjusts its loss reserves
accordingly. The impact of inflation is not explicitly isolated from other
factors influencing the reserve estimates, although inflation is implicitly
included in the estimates. Amerin Guaranty does not discount its loss reserves
for financial reporting purposes.

Amerin Guaranty's reserving process is based upon the assumption that past
overall industry loss experience, adjusted for the anticipated effect of current
economic conditions and projected future economic trends, provides a reasonable
basis for estimating future events. However, estimation of loss reserves is a
difficult process, especially in light of the rapidly changing economic
conditions over the past few years in certain regions of the United States. In
addition, economic conditions that have affected the development of the loss
reserves in the past may not necessarily affect development patterns in the
future. In accordance with statutory requirements, the Company's loss reserves
are reviewed annually by a qualified actuary. Management believes that the
reserve for losses at September 30, 1996 is appropriately established in the
aggregate and adequate to cover the ultimate net cost of reported and unreported
claims arising from defaults which had occurred by that date. Loss reserves are
necessarily based on estimates; the ultimate net cost may vary from such
estimates and such variation may be material. These estimates are regularly
reviewed and updated using the most current information available. Any resulting
adjustments are reflected in current operations.

61
<PAGE>
The following table is a reconciliation of the beginning and ending reserve
for losses and loss adjustment expenses for the periods shown:
<TABLE>
<CAPTION>
NINE YEAR ENDED DECEMBER 31,
MONTHS ENDED -------------------------------
SEPTEMBER 30, 1996 1995 1994 1993
------------------ --------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)

<CAPTION>
<S> <C> <C> <C> <C>
Balance, January 1.................................... $ 7,092 $ 262 $ -- $ --
Less reinsurance recoverables......................... -- -- -- --
------- --------- --------- ---------
Net balance, January 1................................ 7,092 262 -- --
------- --------- --------- ---------
Losses and loss adjustment expenses (principally in
respect of default notices occurring in)
Current year........................................ 13,346 7,037 262 --
Prior years......................................... 612 720 -- --
------- --------- --------- ---------
Total losses and loss adjustment expense............ 13,958 7,757 262 --
------- --------- --------- ---------
Losses and loss adjustment expense payments
(principally in respect of default notices occurring
in)
Current year........................................ 1,348 520 --
Prior years......................................... 4,327 407 -- --
------- --------- --------- ---------
Total payments...................................... 5,675 927 -- --
------- --------- --------- ---------
Net balance, end of period............................ 15,375 7,092 262 --
------- --------- --------- ---------
Plus reinsurance recoverables......................... -- -- -- --
------- --------- --------- ---------
Balance, end of period................................ $ 15,375 $ 7,092 $ 262 $ --
------- --------- --------- ---------
------- --------- --------- ---------
</TABLE>

REINSURANCE

Amerin Guaranty currently uses reinsurance from Amerin Re to remain in
compliance with the insurance regulations of certain states requiring that a
mortgage insurer limit its coverage percentage of any single risk to 25%. Amerin
Guaranty currently intends to use reinsurance provided by Amerin Re solely for
purposes of such compliance. Amerin Re does not currently intend to provide
reinsurance to other mortgage guaranty insurance companies.

In October 1996, the OCC, which regulates banks, announced that Captive
Arrangements were permissible for subsidiaries of banks, and that the OCC would
consider applications from banks for approval of Captive Arrangements. On
January 22, 1997, the OCC granted approval to Chase Manhattan Bank USA, NA
("Chase"), an affiliate of Chase Manhattan Mortgage Corporation, to enter into a
Captive Arrangement. In December 1996, the OTS, which regulates thrifts,
announced that it would consider applications from thrifts for approval of
Captive Arrangements. Management believes that these announcements by the OCC
and the OTS, and the approval by the OCC of the Chase Captive Arrangement,
increase the likelihood of Captive Arrangements with Amerin Guaranty or other
mortgage insurers. To date, the OTS has not approved any Captive Arrangements.
No assurance can be given as to when or whether any approvals from the OTS or
additional approvals from the OCC will be forthcoming or

62
<PAGE>

whether such approvals will contain any conditions on any Captive Arrangements.
See "Risk Factors-- Certain Legal Matters Relating to Captive Mortgage
Reinsurance Arrangements."

In April 1996, Amerin Guaranty met with HUD and presented its position that
Amerin Guaranty's Captive Arrangements are in compliance with RESPA. To date,
HUD has not made any pronouncement with respect to Captive Arrangements. Based
on the advice of Patton Boggs, L.L.P., Amerin believes that its Captive
Arrangements comply with RESPA. There can be no assurance, however, that HUD
will not challenge the compliance of Captive Arrangements under RESPA. A ruling
by HUD that limits or prohibits the use of Captive Arrangements could have a
material adverse effect on Amerin's business and financial results.

To provide against the possibility that rapid growth of the Company's
business may generate levels of risk in force that could not be supported solely
by internally-generated capital, the Company entered into an excess loss
agreement with a major reinsurer at the end of 1995, with coverage provided from
January 1, 1996, and cancelable by the Company for a fee beginning in 2000. The
claims-paying ability of the reinsurer is rated AA by S&P. This agreement
provides additional capital support in the event that the Company's
risk-to-capital ratio and its combined ratio both exceed specified levels and
will be taken into account by S&P in measuring the Company's risk-to-capital
ratio to the extent required by rapid growth. Premiums payable with respect to
any quarterly period may vary to the extent that the Company's combined
insurance risk-to-capital ratio exceeds certain specified levels.

In the future Amerin Guaranty may elect to use additional reinsurance to
maintain risk to capital ratios at acceptable levels by utilizing insurance
involving the proportional sharing of risks, commonly known as quota share
reinsurance, or may elect to use additional excess loss reinsurance to manage
risk. Reinsurance that provides capital support also can be used to help support
the claims-paying ability rating of the insurer.

Reinsurance does not discharge Amerin Guaranty, as the primary insurer, from
liability to a policyholder. The reinsurer agrees to indemnify Amerin Guaranty
for the reinsurer's share of losses incurred under a reinsurance agreement,
unlike an assumption arrangement, where the assuming reinsurer's liability to
the policyholder is substituted for that of Amerin Guaranty.

AMERIN RE CORPORATION

Pursuant to the deep coverage requirements that were imposed by Fannie Mae
and Freddie Mac in the first quarter of 1995, 95s and 97s eligible for sale to
such agencies require insurance with a coverage percentage of 30%, in contrast
to the 25% and 28% coverages, respectively, previously required. Certain states
limit the amount of risk a mortgage insurer may retain with respect to coverage
of an insured loan to 25% of the claim amount, and, as a result, the deep
coverage portion of such insurance must be reinsured. To minimize reliance on
third party reinsurers and to permit the Company to retain the premiums (and
related risk) on deep coverage business, the Company formed Amerin Re in
November 1994 to provide reinsurance of such deep coverage to Amerin Guaranty.
Amerin Guaranty currently intends to use reinsurance provided by Amerin Re
solely for purposes of compliance with statutory coverage limits. Amerin Re does
not currently intend to provide reinsurance to other mortgage guaranty insurance
companies. Amerin Re was capitalized with a $5.3 million capital contribution
from the Company, and the Company contributed $25.0 million of the net proceeds
of the Initial Public Offering as additional capital to Amerin Re. Amerin
Guaranty began ceding reinsurance to Amerin Re in the fourth quarter of 1994.

CLAIMS-PAYING ABILITY RATINGS

Certain national mortgage lenders and a large segment of the mortgage
securitization market, including Fannie Mae and Freddie Mac, generally will not
purchase mortgages or mortgage-backed securities unless the private mortgage
insurance on the mortgages has been issued by an insurer with a claims-paying
ability rating of at least "Aa3" from Moody's or "AA-" from S&P, D&P or Fitch.

63
<PAGE>
Amerin Guaranty has its claims-paying ability rated by Moody's and S&P.
These ratings are an indication to a mortgage insurer's customers of the
insurer's present financial strength and its capacity to pay future claims.
Ratings are generally considered an important element in a mortgage insurer's
ability to compete for new insurance business. In September 1992, Moody's and
S&P issued claims-paying ability ratings for Amerin Guaranty of "Aa3" and "AA,"
respectively. On January 4, 1996, S&P reaffirmed its "AA" rating of Amerin
Guaranty's claims-paying ability.

Moody's defines insurance companies whose claims-paying ability is rated
"Aa" to offer excellent financial security. A claims-paying ability rating of
"Aa" by Moody's is the second highest generic ranking possible from such agency
out of nine possible rating categories ("Aaa" being the highest). Moody's
further distinguishes the ranking of an insurer within its generic rating
classification from Aa to B with "1," "2," or "3" ("1" being the highest). S&P
defines insurers rated "AA" as offering excellent financial security and having
capacity to meet policyholder obligations that is strong under a variety of
economic and underwriting conditions. Such a claims-paying ability rating by S&P
is the second highest ranking possible out of eight possible generic rating
categories. Ratings from S&P may be modified with a "+" or "-" sign to indicate
the relative position of a company within its category.

When assigning a claims-paying ability rating, Moody's and S&P generally
consider: (i) the specific risks associated with the mortgage insurance
industry, such as regulatory climate, market demand, growth and competition;
(ii) management depth, corporate strategy and effectiveness of operations; (iii)
historical operating results and expectations of current and future performance;
and (iv) long-term capital structure, near-term liquidity and cash flow levels,
as well as any reinsurance relationships and the claims-paying ability ratings
of such reinsurers. Claims-paying ability ratings are based on factors relevant
to policyholders, agents, insurance brokers and intermediaries. Such ratings are
not directed to the protection of investors and do not apply to any securities
issued by the Company, including the Common Stock offered hereby. Claims-paying
ability ratings can be withdrawn or changed at any time by Moody's and S&P for
any reason. Amerin Guaranty's claims-paying ability ratings by S&P and Moody's
should be evaluated independently of each other.

RATING AGENCY AGREEMENTS. The Company and Amerin Guaranty are parties to
agreements (the "Rating Agency Agreements") required by Moody's and S&P as a
condition of the issuance to Amerin Guaranty and maintenance of their respective
claims-paying ratings of "Aa3" and "AA." Failure to comply with the provisions
of either of the Rating Agency Agreements could result in the withdrawal or
reduction of Amerin Guaranty's claims-paying rating by one or both of the rating
agencies, which would have a material adverse effect on the Company. See "Risk
Factors--Claims-Paying Ability Ratings."

The Rating Agency Agreements each contain certain limitations on the ability
of the Company and Amerin Guaranty to declare or pay dividends or other
distributions on their capital stock or to redeem or repurchase capital stock,
to issue additional stock, to enter into certain transactions which might result
in a change of control (as defined) of Amerin Guaranty, or to incur indebtedness
(subject to certain exceptions). The Rating Agency Agreements also contain
certain risk to capital requirements which prohibit Amerin Guaranty from writing
additional insurance if minimum ratios are not met. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Statutory Capital
and Dividend Capacity of Amerin Guaranty." Upon an initial failure to observe
certain of such limitations, the Company is obligated to take corrective action,
which could include making adjustments to Amerin Guaranty's investment
portfolio, entering into quota share reinsurance arrangements and limiting
underwriting of further risks. Management believes that the limitations set
forth in the Rating Agency Agreements are not materially more restrictive than
those that would be otherwise imposed on the Company and Amerin Guaranty by the
rating agencies as a condition of maintenance of Amerin Guaranty's claims-paying
ratings, absent such agreements.

64
<PAGE>
INVESTMENT PORTFOLIO

POLICY AND STRATEGY

The income from the Company's investment portfolio is one of its primary
sources of cash flow and earnings. All investments of the Company are managed by
Scudder, Stevens & Clark pursuant to the terms of an agreement which provides
for an annual management fee based on the average value of the portfolio under
management. The agreement may be terminated earlier upon 90 days' notice by
either party.

Amerin Guaranty's investment strategy is the result of various interrelated
investment considerations including protection of principal, appreciation
potential, tax consequences and yield. The Company typically maintains its
investment portfolio with a longer average duration than its anticipated claims
development in order to achieve higher yields. The Company intends to meet any
cash mismatch with cash generated from operations or sales of investments. The
Company also seeks to maintain a diversified portfolio, and except for direct or
indirect obligations of the U.S. Government, at September 30, 1996 no more than
2.2% of its investment portfolio and no more than 2.1% of its assets were
invested in securities of a single issuer.

At September 30, 1996, based on carrying value, 91.8% of the Company's
investments were in fixed income securities, 98.6% of which were invested in
securities rated "A" or better, with 72.5% rated "AAA" and 15.1% rated "AA," in
each case by at least one nationally recognized rating organization. The Company
does not currently intend to invest in equity securities.

The Company's long-term investment portfolio is principally invested in
municipal, government and corporate obligations. However, all or a portion of
the income derived from tax-exempt municipal bonds is included in the expanded
income base on which the alternative minimum tax ("AMT") is calculated. If the
Company were to have levels of underwriting income such that the Company's
regular income tax (i.e., 35% of the Company's taxable income) were less than
the Company's AMT (i.e., 20% of the expanded income base), the Company would
incur an AMT liability. The Company will monitor the AMT effect of its
investments in municipal bonds and may adjust its portfolio to include a greater
proportion of taxable securities to avoid incurring AMT liability. To the extent
the Company receives greater after-tax returns on tax-exempt municipal bonds, a
shift in the investment portfolio from tax-exempt to taxable securities could
have an adverse effect on net income.

The Company's investment policies and strategies are subject to change
depending upon regulatory, economic and market conditions and the existing or
anticipated financial condition and operating requirements, including the tax
position, of the Company.

The Illinois insurance law contains rules governing the types and amounts of
investments which are permitted for domestic insurers such as Amerin Guaranty
and Amerin Re. The Illinois insurance law enumerates specific classes of
eligible investments, including obligations of the United States government and
its agencies, corporate debt obligations, preferred and common stock and
obligations of state and local governments. Illinois also imposes certain
quantitative limitations, including limitations on the percentage of assets
invested in a single entity and invested in certain types of investments.

65
<PAGE>
INVESTMENT OPERATIONS

At September 30, 1996, the carrying value of the Company's investment
portfolio was $311.7 million and amortized cost was $315.6 million. The
diversification of the Company's investment portfolio at September 30, 1996 is
shown in the table below.

CONSOLIDATED INVESTMENT POSITION
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
-----------------------------------------
CARRYING PERCENT OF TOTAL AMORTIZED
VALUE(2) CARRYING VALUE COST
---------- ----------------- ----------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)

<CAPTION>
<S> <C> <C> <C>
Fixed income securities(1):
Municipal bonds............................................ $ 200,117 64.2% $ 202,169
U.S. government............................................ 57,552 18.5 59,301
Corporate obligations...................................... 28,342 9.1 28,454
Short-term................................................... 25,690 8.2 25,690
---------- ----- ----------
Total...................................................... $ 311,701 100.0% $ 315,614
---------- ----- ----------
---------- ----- ----------
Unrealized gain (loss)..................................... $ (3,913)
----------
----------
</TABLE>

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

(1) All fixed income securities have been designated as available for sale.

(2) All securities are carried at market value except for short-term securities,
which are carried at amortized cost.

The following table shows the scheduled maturities at September 30, 1996 of
the fixed income securities held in the Company's investment portfolio.

INVESTMENT PORTFOLIO SCHEDULED MATURITY
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
---------------------------
CARRYING VALUE PERCENTAGE
-------------- -----------
<S> <C> <C>
(IN THOUSANDS OF DOLLARS)

<CAPTION>
<S> <C> <C>
Less than one year........................................................ $ 12,345 4.3%
One to five years......................................................... 23,667 8.3
Five to ten years......................................................... 46,623 16.3
Ten to twenty years....................................................... 151,867 53.1
Over twenty years......................................................... 51,509 18.0
-------------- -----
Totals.............................................................. $ 286,011 100.0%
-------------- -----
-------------- -----
</TABLE>

Expected maturities may differ from the contractual maturities shown in the
foregoing table because certain borrowers have the right to call or prepay
obligations with or without call or prepayment penalties.

66
<PAGE>
The following table shows the investment results of the Company's investment
portfolio for the periods indicated.

INVESTMENT PORTFOLIO RESULTS

<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------
SEPTEMBER 30, 1996 1995 1994 1993
------------------ ---------- --------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Average invested assets(1).................................. $ 304,341 $ 196,614 $ 84,170 $ 72,837
Net pre-tax investment income............................... 12,401 7,612 4,818 4,252
Pre-tax realized net capital gains (losses)................. (133) 491 435 707
</TABLE>

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

(1) Average of beginning of period and end of period balances. As of December
31, 1994, due to the implementation of SFAS No. 115, all fixed income
securities are classified as "Available for Sale" and are carried at fair
value in the Company's Consolidated Financial Statements. Amounts for prior
years are carried at amortized cost.

The following table summarizes net investment income from the Company's
portfolio for the periods shown.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, 1996 1995 1994
------------------------------------- --------------------------------------- -----------
REALIZED REALIZED
PRE-TAX GAINS PRE-TAX GAINS
INCOME YIELD(1) (LOSSES) INCOME YIELD(1) (LOSSES) INCOME
--------- ------------- ----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS EXCEPT PERCENTAGES)

<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed income securities:
Long-term tax-exempt.............. $ 6,700 6.6%(2) $ (245) $ 1,858 3.9%(2) $ 52 $ 1,328
Long-term taxable................. 4,699 7.6% 113 4,826 6.8% 444 3,368
Short-term........................ 1,273 2.0% (1) 1,087 1.4% (5) 239
--------- ----------- ----------- ----- -----------
Total......................... $ 12,672 5.6% $ (133) $ 7,771 4.0% $ 491 $ 4,935
----------- -----
----------- -----
Less investment expense............. 271 159 117
--------- ----------- -----------
Total......................... $ 12,401 $ 7,612 $ 4,818
--------- ----------- -----------
--------- ----------- -----------

1993
---------------------------------------
REALIZED REALIZED
PRE-TAX GAINS PRE-TAX GAINS
YIELD(1) (LOSSES) INCOME YIELD(1) (LOSSES)
------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>

<S> <C> <C> <C> <C> <C>
Fixed income securities:
Long-term tax-exempt.............. 4.7%(2) $ 442 $ 2,210 6.2%(2) $ 32
Long-term taxable................. 6.7% (7) 2,099 5.8% 675
Short-term........................ 4.4% -- 54 5.7% --
----------- ----------- -----
Total......................... 5.9% $ 435 $ 4,363 6.0% $ 707
----------- -----
----------- -----
Less investment expense............. 111
-----------
Total......................... $ 4,252
-----------
-----------
</TABLE>

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

(1) Pre-tax yield is calculated as investment income divided by the average of
the beginning and end of period investment balances. For the purpose of this
calculation, investment balances were carried at fair value at September 30,
1996 and December 31, 1995 and 1994 and at amortized cost at December 31,
1993.

(2) For purposes of comparison to yields on taxable securities, these yields on
tax-exempt securities are equivalent to pre-tax yields of 9.6% for the nine
months ended September 30, 1996, 5.7% for 1995, 6.8% for 1994 and 9.1% for
1993, assuming that the tax rate was 35% for the nine months ended September
30, 1996 and in 1995, 1994 and 1993, and further assuming that 15% of the
tax-exempt interest was subject to federal income tax under certain
provisions applicable only to insurance companies.

MUNICIPAL BONDS. At September 30, 1996, the Company held $200.1 million of
municipal bonds, constituting 64.2% of its total investments. At that date the
portfolio had an average duration of 8.0 years. The Company's investment policy
with respect to its municipal bond investments is to maintain an S&P average
quality rating of "A," or better or equivalent rating of another
nationally-recognized rating service, or equivalent ratings established by the
Securities Valuation Office of the NAIC. At September 30, 1996, 100% of the
municipal bond portfolio was rated investment grade. In addition, all municipal
bond holdings were designated as available for sale. The portfolio is
well-diversified and at September 30, 1996 consisted of 96 issues representing
85 issuers. The Company's largest exposure to a single municipal bond issuer is
less than 3.4% of its municipal bond portfolio. The two largest types of
municipal bonds, totaling 97.8% of

67
<PAGE>
the municipal bond portfolio at September 30, 1996, are general obligation
issues and revenue bonds. General obligation and revenue bond issues constituted
20.6% and 77.2% of this portfolio, respectively, at September 30, 1996. Insured
municipal bonds constituted 68.1% of the municipal bond portfolio at September
30, 1996.

The table below shows the distribution of the municipal bond portfolio by
the ten largest states as of September 30, 1996.
<TABLE>
<CAPTION>
CARRYING AMORTIZED PERCENT OF
STATE VALUE COST CARRYING VALUE
- -------------------------------------------------------- ---------- ---------- ---------------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS EXCEPT
PERCENTAGES)

<CAPTION>
<S> <C> <C> <C>
Texas................................................... $ 20,826 $ 20,928 10.4%
California.............................................. 19,587 19,637 9.8
Illinois................................................ 18,723 18,917 9.4
Florida................................................. 18,545 18,645 9.3
New York................................................ 10,258 10,468 5.1
New Jersey.............................................. 9,806 9,965 4.9
Massachusetts........................................... 8,896 9,092 4.4
Pennsylvania............................................ 8,659 8,973 4.3
Kentucky................................................ 8,549 8,646 4.3
Washington.............................................. 6,460 6,446 3.2
Other................................................... 69,808 70,451 34.9
---------- ---------- -----
Total................................................... $ 200,117 $ 202,168 100.0%
</TABLE>

REGULATION

DIRECT REGULATION

STATE REGULATION

GENERAL. The Company and its insurance subsidiaries are subject to
comprehensive, detailed regulation for the protection of policyholders, rather
than for the benefit of investors, by the insurance departments of the various
states in which they are licensed to transact business. Although their scope
varies, state insurance laws in general grant broad powers to supervisory
agencies or officials to examine companies and to enforce rules or exercise
discretion touching almost every significant aspect of the insurance business.
These include the licensing of companies to transact business and varying
degrees of control over claims handling practices, reinsurance arrangements,
premium rates, the forms and policies offered to customers, financial
statements, periodic financial reporting, permissible investments (see
"--Investment Portfolio") and adherence to financial standards relating to
statutory surplus, establishment and maintenance of required reserves, dividends
and other criteria of solvency intended to assure the satisfaction of
obligations to policyholders.

Mortgage insurers are generally restricted by state insurance laws and
regulations to writing residential mortgage insurance business only. This
restriction prohibits Amerin Guaranty and Amerin Re from directly writing other
types of insurance.

INSURANCE HOLDING COMPANY REGULATION. All states have enacted legislation
that requires each insurance company in a holding company system to register
with the insurance regulatory authority of its state of domicile and to furnish
to such regulator financial and other information concerning the operations of
companies within the holding company system that may materially affect the
operations, management or financial condition of the insurers within the system.
Most states also regulate transactions between insurance companies and their
parents and affiliates.

68
<PAGE>
Because Amerin Corporation is an insurance holding company and Amerin
Guaranty and Amerin Re are Illinois insurance companies, the Illinois insurance
laws regulate, among other things, certain transactions in the Company's Common
Stock and certain transactions between Amerin Guaranty and Amerin Re and their
parent or affiliates. Specifically, no person may, directly or indirectly, offer
to acquire or acquire "control" of Amerin Corporation, Amerin Guaranty or Amerin
Re unless such person files a statement and other documents with the Illinois
Director of Insurance and obtains the Director's prior approval. The Director
may hold a public hearing on the matter. "Control" is presumed to exist if 10%
or more of Amerin Guaranty's or Amerin Re's voting securities is owned or
controlled, directly or indirectly, by a person, although the Illinois Director
of Insurance may find that "control" in fact does or does not exist where a
person owns or controls either a lesser or greater amount of securities. In
addition, material transactions between Amerin Guaranty and Amerin Re and their
parent or affiliates are subject to certain conditions, including that they be
"fair and reasonable." These restrictions generally apply to all persons
controlling or under common control with Amerin Guaranty or Amerin Re. Certain
transactions between Amerin Guaranty or Amerin Re and their parent or affiliates
may not be entered into unless the Illinois Director of Insurance is given 30
days prior notification and does not disapprove the transaction during such 30
day period.

Amerin Guaranty currently is subject to the California Insurance Holding
Company System Regulatory Act because Amerin Guaranty is considered to be
commercially domiciled in California. An insurer is considered commercially
domiciled in California if, during the preceding three fiscal years, (i) the
insurer has, on average, written more gross premiums in California than in the
state of the insurer's domicile, and (ii) the insurer's gross premiums written
in California represent 20% or more of the insurer's gross written premiums on
all business. The Company expects that Amerin Guaranty will continue to be
deemed commercially domiciled in California for the foreseeable future.
California, requires the prior approval of the California Commissioner of
Insurance for any acquisition of control, with "control" presumed to be the
acquisition of 10% or more of Amerin Guaranty's voting securities. An
acquisition of control will be deemed to be approved if the California
Commissioner of Insurance does not disapprove of the transaction within the
applicable statutory period of time. California also regulates material
transactions between a commercially domiciled insurer and its parent or
affiliates. Such transactions that are statutorily defined to be of an
extraordinary type must receive the prior approval of the California
Commissioner of Insurance before they may be consummated.

RESERVES. Amerin Guaranty is required under the insurance laws of Illinois
and certain other states to establish a special contingency reserve with annual
additions of amounts typically equal to 50% of premiums earned. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "--Statutory Capital and
Dividend Capacity of Amerin Guaranty."

RISK TO CAPITAL. For a discussion of risk to capital requirements affecting
Amerin Guaranty, see "Risk Factors--Claims-Paying Ability Ratings" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "--Statutory Capital and
Dividend Capacity of Amerin Guaranty."

DIVIDENDS. Amerin Guaranty's and Amerin Re's ability to pay dividends is
limited under Illinois insurance laws and, so long as Amerin Guaranty continues
to be commercially domiciled in California, Amerin Guaranty's ability to pay
dividends is also limited under California insurance laws. The Company expects
that Amerin Guaranty will continue to be deemed commercially domiciled in
California for the foreseeable future. See "Risk Factors--No Intention to Pay
Dividends" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and
"--Statutory Capital and Dividend Capacity of Amerin Guaranty."

In addition to the dividend restrictions referred to above, insurance
regulatory authorities have broad discretion to limit the payment of dividends
by insurance companies. For example, if insurance regulators

69
<PAGE>
determine that payment of a dividend or any other payments to an affiliate (such
as payments under a tax sharing agreement, payments for employee or other
services, or payments pursuant to a surplus note) would, because of the
financial condition of the paying insurance company or otherwise, be hazardous
to such insurance company's policyholders or creditors, the regulators may block
payments that would otherwise be permitted without prior approval.

PREMIUM RATES AND POLICY FORMS. Amerin Guaranty's premium rates and policy
forms are subject to regulation in every state in which it is licensed to
transact business in order to protect policyholders against the adverse effects
of excessive, inadequate or unfairly discriminatory rates and to encourage
competition in the insurance marketplace. In most states, premium rates and
policy forms must be filed prior to their use. In some states, such rates and
forms must also be approved prior to use. Changes in premium rates are subject
to being justified, generally on the basis of the insurer's loss experience,
expenses and future trend analysis. The general default experience in the
mortgage insurance industry may also be considered.

REINSURANCE. Certain restrictions apply under the laws of several states to
any licensed company ceding business to unlicensed reinsurer. Under such laws,
if a reinsurer is not admitted or approved in such states, the company ceding
business to the reinsurer cannot take credit in its statutory financial
statements for the risk ceded to such reinsurer absent compliance with certain
reinsurance security requirements. Amerin Re is admitted in Illinois, and
therefore Amerin Guaranty receives credit on its statutory financials for
business ceded to Amerin Re. In addition, several states also have special
restrictions on mortgage guaranty insurance. Also, several states limit the
amount of risk a mortgage insurer may retain with respect to coverage of an
insured loan to 25% of the insured's claim amount. Coverage in excess of 25%
(i.e., deep coverage) must be reinsured. All reinsurance agreements between
Amerin Guaranty and Amerin Re are subject to approval by the Illinois Director
of Insurance.

EXAMINATION. Amerin Guaranty and Amerin Re are subject to examination of
their affairs by the insurance departments of each of the states in which they
are licensed to transact business. The Illinois Director of Insurance
periodically conducts a financial examination of insurance companies domiciled
in Illinois, not less frequently than once every five years. As of June 17,
1993, Amerin Guaranty changed its state of domicile from Pennsylvania to
Illinois. To date, the Illinois Insurance Department has not conducted or
scheduled an examination of Amerin Guaranty. See "Risk Factors--History of
Losses; Limited Operating History." The most recent examination of Amerin
Guaranty was conducted by the Pennsylvania Insurance Department for the period
ended December 31, 1988, at which time Amerin Guaranty was named "U. S. Mortgage
Insurance Company." This examination covered a period prior to the acquisition
of Amerin Guaranty by Amerin Corporation in April 1992. Under the California
Insurance Code the California Commissioner of Insurance may conduct an
examination of an admitted insurance company as often as the Commissioner deems
appropriate, but at a minimum, not less frequently than once every five years.
The authority of the California Commissioner of Insurance includes the right to
examine Amerin Guaranty, a foreign insurer admitted in California. In lieu of
examining a foreign insurer, the California Commissioner may accept an
examination report by a state which has been accredited by the NAIC. To date the
California Commissioner has not conducted or scheduled an examination of Amerin
Guaranty or Amerin Re.

FEDERAL REGULATION

POTENTIAL REGULATION OF INSURANCE. In early 1993, proposed federal
legislation was introduced that would create new federal regulatory roles for
oversight of the insurance industry. Alternative federal bills would establish
federal agencies charged with some measure of responsibility for regulating the
affairs of insurance companies. Federal regulation under these proposals would
coexist with state insurance regulation, but certain state standards could be
preempted. No prediction can be made as to the eventual disposition of these
proposals by Congress or the impact of any such legislation on the mortgage
industry.

70
<PAGE>
RESPA. Overruling prior case law, the Housing and Community Development Act
of 1992 established that the origination of a federally related mortgage loan is
a settlement service, and, therefore subject to the Real Estate Settlement
Procedures Act of 1974, and the regulations promulgated thereunder
(collectively, "RESPA") and, in addition, broadened the scope of RESPA to
include refinanced loans and second lien loans. In December 1992, new
regulations were issued which made clear that mortgage insurance is also a
settlement service and, therefore, that mortgage insurers are subject to
provisions of Section 8(a) of RESPA, which generally prohibits persons from
accepting anything of value for referring real estate settlement services to any
provider of such services. Although many states prohibit mortgage insurers from
giving rebates, RESPA has been interpreted to cover many non-fee services as
well. HUD's interest in pursuing violations of RESPA has increased awareness of
both mortgage insurers and their customers of the possible sanctions of this
law.

In March 1993, Amerin Guaranty submitted a written request to HUD which
asked that HUD provide written confirmation that Amerin Guaranty's lender-paid
mortgage insurance and the Award Plus Plan were in compliance with the
requirements of RESPA. In January 1996, Rick Lazio (R-NY), Chairman of the House
Subcommittee on Banking and Community Opportunity, sent a letter to HUD asking
for written guidance with respect to whether LPMI complies with RESPA. In August
1996, HUD responded to Representative Lazio. While not passing on the legality
of any private mortgage insurer's LPMI product or marketing practice, the HUD
response stated that regular, non-experience-based "LPMI products pose no RESPA
concerns." With respect to LPMI products that offer mortgage lenders
experience-based premiums, such as Amerin's Award Plus Plan, HUD further
concluded that "there is nothing inherently violative of Section 8 of RESPA."
The Company believes its Award Plus Plan satisfies the general criteria
discussed in the HUD response regarding compliance with Section 8 of RESPA. See
"--Products."

HMDA. Most originators of mortgage loans are required to collect and report
data relating to a mortgage loan applicant's race, nationality, gender, marital
status and census tract to HUD or the Federal Reserve under the Home Mortgage
Disclosure Act of 1975 ("HMDA"). The purpose of HMDA is to detect possible
discrimination in home lending and, through disclosure, to discourage such
discrimination. Mortgage insurers are not required pursuant to any law or
regulation to report HMDA data, although under the laws of several states,
mortgage insurers are currently prohibited from discriminating on the basis of
certain classifications.

The active mortgage insurers, through their trade association, MICA, have
entered into an agreement with the Federal Financial Institutions Examinations
Council ("FFIEC") to report the same data on loans submitted for insurance as is
required for most mortgage lenders under HMDA. The first report of HMDA-type
data was collected by MICA from its members for the fourth quarter of 1993 and
reported to the FFIEC in the first quarter of 1994. Subsequent reports of 1994
HMDA-type data for the mortgage insurance industry were submitted by MICA to
FFIEC in March 1995 and 1996. Management is not aware of any pending or expected
actions by governmental agencies in response to the reports submitted by MICA to
FFIEC.

From time to time, proposals have been advanced in Congress which would
permit or require cancellation of mortgage insurance under certain conditions.
No prediction can be made as to the eventual disposition of such proposals by
Congress or the impact of any such legislation on the mortgage insurance
industry.

OTHER DIRECT REGULATION

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS. The NAIC has developed a
rating system, the Insurance Regulatory Information System ("IRIS"), primarily
intended to assist state insurance departments in overseeing the statutory
financial condition of all insurance companies operating within their respective
states. IRIS consists of 11 financial ratios which are intended to indicate
unusual fluctuations in an insurer's statutory financial position and/or
operating results. A "usual range" of results for each ratio is

71
<PAGE>
developed by the NAIC and used as a benchmark. Each insurer's results are
compared against these benchmarks and departures from the usual range in four or
more of the ratios in any year could lead to inquiries from individual state
insurance regulatory agencies. For the year ended December 31, 1995, Amerin
Guaranty had three financial ratios outside of the "usual range." These unusual
ratios were (i) change in surplus (due to the capital contributions to Amerin
Guaranty by the Company from the proceeds of the Initial Public Offering), (ii)
decrease in investment yield (due to the fact that the capital contributions
were made in December 1995), and (iii) change in net writings (due to the
significant increase in business in 1995 compared to 1994).

In the fourth quarter of 1993, the NAIC adopted a risk-based capital ("RBC")
formula designed to help regulators assess the capital adequacy of property and
casualty insurers; however, mortgage insurers are currently exempt from the RBC
formula.

FANNIE MAE AND FREDDIE MAC. As the dominant purchasers and sellers of
conventional mortgage loans and beneficiaries of private mortgage insurance,
Fannie Mae and Freddie Mac are able to directly influence certain aspects of the
operations of all private mortgage insurers, including the Company.

In September 1992, Fannie Mae issued guidelines for mortgage insurance
master policies covering loans eligible for purchase. Revisions to those
guidelines were issued in November 1993. All active mortgage insurers, including
Amerin Guaranty, received approval from Fannie Mae in 1994 for new policy forms
and filed them in the various states in which they transact business. In 1994,
Amerin Guaranty received approval from Fannie Mae and Freddie Mac of its new
master policy, received approval from all states which require approval of
policy forms, and commenced issuing coverage under its new master policy. In
late 1996, Amerin Guaranty received approval from Fannie Mae and Freddie Mac of
its new master policy which incorporated the industry coverage method, and
received approval from all states which require approval of policy forms. Amerin
Guaranty commenced issuing coverage under its new master policy on January 1,
1997. See "--Coverage."

The new master policy first issued in 1997, like the prior master policy,
provides an exclusion for coverage in the event of physical damage of the
underlying property. Under the new master policy, the exclusion does not apply
if (i) the borrower's default was not caused primarily by an uninsured casualty,
or (ii) the property is restored to its condition at the time the policy was
originated. Under the new master policy, the presence of radon gas, lead paint
or asbestos on the property is deemed not to be physical damage. However, the
new master policy is not materially different from Amerin Guaranty's prior
master policy.

Fannie Mae and Freddie Mac impose eligibility requirements, which may change
from time to time, on private mortgage insurers in order for such insurers to be
eligible to insure loans sold to such agencies, including limitations on the
type of risk insured, standards for the geographic and customer diversification
of risk, procedures for claims handling, acceptable underwriting practices and
financial requirements which generally mirror state insurance regulatory
requirements. In January 1994, Freddie Mac instituted a two-tier approach to
approving mortgage insurers under its eligibility standards. Type I insurers are
those rated at or above "AA-" or "Aa3" while Type II insurers are those insurers
with lower ratings, no rating or that are in RUNOFF. As of January 1, 1996, Type
I insurers are required to have minimum required ratings from at least two
designated credit rating agencies. All approved mortgage insurers must comply
generally with applicable state law, maintain a minimum of $5 million of
statutory capital, and maintain contingency reserves and loss reserves either as
required by applicable law if so regulated or in accordance with the NAIC Model
Act provisions for these reserves. Amerin Guaranty is an approved Type I insurer
by Freddie Mac and an approved mortgage insurer for Fannie Mae. See "Industry
Overview--Fannie Mae and Freddie Mac."

Legislation has been passed which reforms the oversight of Fannie Mae and
Freddie Mac. This legislation requires Fannie Mae and Freddie Mac to conduct a
study that would examine, among other topics, whether the underwriting standards
used by private mortgage insurers inhibit the purchase of mortgages on homes
located in mixed-use, urban center and predominantly minority neighborhoods or
on

72
<PAGE>
homes occupied by low or moderate income families. It is possible that such a
study could lead to legislation that could prohibit private mortgage insurers,
including Amerin Guaranty, from using certain geographically-based underwriting
restrictions and practices on loans insured and sold to Fannie Mae and Freddie
Mac. See "--Underwriting Practices."

INDIRECT REGULATION

The Company and Amerin Guaranty are also indirectly, but significantly,
impacted by laws and regulations affecting originators and purchasers of
mortgage loans, particularly Fannie Mae and Freddie Mac, and regulations
affecting governmental insurers such as the FHA and VA. Private mortgage
insurers, including Amerin Guaranty, are highly dependent upon federal housing
legislation and other laws and regulations which affect the demand for private
mortgage insurance and the housing market generally. For example, housing
legislation enacted in 1992 permits up to 100% of borrower closing costs to be
financed by loans insured by the FHA, a significant increase from the previous
57% limit. Also, in April 1992, the FHA stopped charging renewal premiums if a
loan insured by the FHA was refinanced, which made FHA insurance for
refinancings relatively more attractive. In April 1994, HUD reduced the initial
premium (payable at loan origination) for FHA insurance from 3.0% to 2.25%. This
reduction has not had a significant effect to date on the relative market shares
of FHA insurance and private mortgage insurance. In addition, in the third
quarter of 1994, the maximum individual loan amount that the FHA could insure
was increased from $151,725 to $152,363 and was recently increased to $155,250,
and the maximum individual loan amount that the VA could insure was increased
from $184,000 to $203,150 in the fourth quarter of 1994 and was since increased
to $207,000. Legislation that increases the number of persons eligible for FHA
or VA mortgages could have an adverse effect on the Company's ability to compete
with the FHA or VA.

Proposals have been advanced which would allow Fannie Mae and Freddie Mac
additional flexibility in determining the amount and nature of alternative
recourse arrangements or other credit enhancements which they could utilize as
substitutes for private mortgage insurance. The Company cannot predict if or
when any of the foregoing legislation or proposals will be adopted, but if
adopted and depending upon the nature and extent of revisions made, demand for
private mortgage insurance may be adversely affected. There can be no assurance
that other federal laws affecting such institutions and entities will not
change, or that new legislation or regulations will not be adopted. In addition,
Fannie Mae and Freddie Mac have entered into, and may in the future seek to
enter into, alternative recourse arrangements or other credit enhancements based
on their existing legislative authority.

The Cranston-Gonzalez National Affordable Housing Act and the Omnibus Budget
Reconciliation Act of 1990 and the rules and regulations thereunder
(collectively, the "1990 National Housing Legislation") made major revisions to
the FHA's mortgage insurance programs, effective July 1, 1991. The revisions
included requiring the FHA to charge additional premiums based on the LTV of the
loan. For example, under FHA pricing for a 95% LTV loan, the new rules require
(i) an annual renewal premium of .5% of the mortgage principal amount payable
for 12 years for loans originated in 1994 and for 30 years for loans originated
in 1995 and thereafter, (ii) a premium payable at loan origination which is 3.0%
for loans originated prior to April 17, 1994 and 2.25% for loans originated
thereafter and (iii) renewal premium increases from .50% to .55% for LTVs over
95%. These revisions have increased the cost of FHA mortgage insurance and,
therefore, made private mortgage insurance relatively more attractive.
Accordingly, the Company believes that the 1990 National Housing Legislation
increased demand for private mortgage insurance.

Pursuant to FIRREA, the OTS issued risk-based capital rules in 1990 for
savings institutions. These rules establish a lower capital requirement for a
low down payment loan that is insured with private mortgage insurance, as
opposed to remaining uninsured. Furthermore, the guidelines for real estate
lending policies applicable to savings institutions and commercial banks provide
that such institutions should require appropriate credit enhancement in the form
of either mortgage insurance or readily marketable collateral for any mortgage
with an LTV that equals or exceeds 85% at origination. See "Industry
Overview--Legislative and Regulatory Changes." To the extent FIRREA's risk-based
capital

73
<PAGE>
rules or the guidelines for real estate lending policies applicable to savings
institutions and commercial banks are changed in the future, some of the
anticipated benefits of FIRREA and the guidelines for real estate lending
policies to the mortgage insurance industry, including Amerin Guaranty, may be
curtailed or eliminated.

Political and monetary pressures to reduce the nation's budget deficit
could, among other things, result in the partial or entire loss of the U.S.
federal income tax deduction for mortgage loan interest, which could result in
downward pressure on housing prices. Any reduction or loss of such deduction
could reduce the volume of low down payment mortgages originated and private
mortgage insurance written and adversely impact mortgage default patterns, and
would materially adversely affect the Company's LPMI business.

There can be no assurance that the above-mentioned federal laws and
regulations or other federal laws and regulations affecting lenders, private and
governmental mortgage insurers, or purchasers of insured mortgage loans, will
not be amended, or that new legislation or regulations will not be adopted, in
either case in a manner which will adversely affect the demand for private
mortgage insurance.

For a discussion of certain other recent legislative and regulatory
developments indirectly affecting private mortgage insurers, such as Amerin
Guaranty, see "Industry Overview."

PROPERTIES

The Company leases its principal executive offices in Chicago, Illinois,
which consists of approximately 30,000 square feet of office space. The Company
believes that its existing property is adequate for its present operations.

EMPLOYEES

As of September 30, 1996, the Company employed approximately 91 individuals.
Of its total work force, approximately 35 employees were engaged in sales and
marketing and approximately 56 were devoted to risk management, support, finance
and administrative activities. None of the Company's employees is a member of a
labor union. The Company believes that it maintains good relations with its
employees.

LEGAL PROCEEDINGS

From time to time, the Company is involved in certain routine legal
proceedings arising in the normal course of its business, none of which is
currently expected to have a material adverse effect on the Company's
consolidated financial condition or results of operations.

74
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding Amerin
Corporation's directors and executive officers.

<TABLE>
<CAPTION>
NAME AND AGE POSITION
- --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Gerald L. Friedman (59)................ Chairman of the Boards of Directors, President and Chief Executive
Officer of Amerin Corporation and Amerin Guaranty
Roy J. Kasmar (40)..................... Executive Vice President, Operations, Chief Operating Officer and
Director of Amerin Guaranty
George G. Freudenstein (43)............ Senior Vice President, Chief Financial Officer and Treasurer of Amerin
Corporation and Amerin Guaranty and Director of Amerin Guaranty
Randolph C. Sailer II (42)............. Senior Vice President, General Counsel and Secretary of Amerin
Corporation and Amerin Guaranty and Director of Amerin Guaranty
James G. Engelhardt (45)............... Executive Vice President, Director of Risk Management of Amerin Guaranty
and Director of Amerin Guaranty
Jerome J. Selitto (55)................. Executive Vice President, National Director of Marketing and Sales of
Amerin Guaranty and Director of Amerin Guaranty
Ronald D. Gaither (38)................. Senior Vice President, Operations of Amerin Guaranty
John F. Peterson (49).................. Senior Vice President, Western Regional Sales, of Amerin Guaranty
R. Bruce Van Fleet, III (45)........... Senior Vice President, Eastern Regional Sales, of Amerin Guaranty
Philip P. Yee (43)..................... Senior Vice President, Marketing Services and Corporate Communications,
of Amerin Guaranty
Peter H. Gleason (52).................. Director of Amerin Corporation and Amerin Guaranty
Alan E. Goldberg (42).................. Director of Amerin Corporation and Amerin Guaranty
Howard I. Hoffen (33).................. Director of Amerin Corporation and Amerin Guaranty
Timothy A. Holt (43)................... Director of Amerin Corporation and Amerin Guaranty
Larry E. Swedroe (45).................. Director of Amerin Corporation
</TABLE>

Mr. Friedman founded the Company and has been Chairman of the Boards of
Directors of Amerin Corporation and Amerin Guaranty since April 1992 and
President of Amerin Corporation and Amerin Guaranty since December 1996. Prior
thereto, he founded and served as Chairman and President of Financial Guaranty
Insurance Corporation ("FGIC") (a AAA rated financial guarantor) from September
1983 to December 1990. Mr. Friedman began his career with MGIC in 1961, and,
from 1978 to 1981, he was President of MGIC Investment Corporation, the holding
company of MGIC.

Mr. Kasmar has been Executive Vice President of Operations at Amerin
Guaranty since May 1996 and Chief Operating Officer of Amerin Guaranty and a
director of Amerin Guaranty since December 1996. Prior to joining Amerin
Guaranty, Mr. Kasmar was Managing Director for Prudential Home Mortgage's
Capital Markets from May 1988 to April 1996. He was Vice President in charge of
Secondary Marketing and Chief Operating Officer at First Boston Capital Group
from 1984 to 1988.

Mr. Freudenstein has been Senior Vice President, Chief Financial Officer,
Treasurer and Chief Administrative Officer of Amerin Corporation and Amerin
Guaranty since July 1992. Prior thereto, he was an independent financial
consultant in Israel from July 1987 to July 1992. From May 1984 to August 1986,
Mr. Freudenstein served as chief accounting officer of FGIC, with primary
responsibility for accounting, financial reporting and regulatory compliance.
From February 1977 to May 1984, he served on the

75
<PAGE>
professional staff of Coopers & Lybrand, most recently as a general practice
manager specializing in reporting for property and casualty companies. Mr.
Freudenstein has been a member of Amerin Guaranty's board of directors since
June 1993.

Mr. Sailer has been Senior Vice President, General Counsel and Secretary of
Amerin Corporation and Amerin Guaranty since November 1992 and Vice President,
General Counsel and Secretary of Amerin Corporation and Amerin Guaranty from
August 1992 to November 1992. Prior thereto, he was Vice President and Assistant
General Counsel of Connie Lee Insurance Company in Washington, D.C. from
February 1990 to July 1992. He served as Vice President and Assistant General
Counsel of FGIC from October 1985 to January 1990, and worked in the securities
law and corporate and municipal finance departments of three major New York
firms from September 1980 to September 1985. Mr. Sailer has been a member of
Amerin Guaranty's board of directors since September 1993.

Mr. Engelhardt has been Executive Vice President and Director of Risk
Management since December 1995 and Senior Vice President and Director of Risk
Management of Amerin Guaranty from November 1992 through December 1995. Prior
thereto he was Regional Director of MGIC's mid-Atlantic region from April 1990
to October 1992, and Director of Underwriting for the Northeast Division of MGIC
from March 1987 to March 1990.

Mr. Selitto has been Executive Vice President and National Director of
Marketing and Sales of Amerin Guaranty since December 1995 and Senior Vice
President and National Director of Marketing of Amerin Guaranty from September
1994 through December 1995 and a director of Amerin Guaranty since December
1996. Prior thereto he was Senior Vice President and Director of Marketing for
Amerin Guaranty's Central Region from October 1992 to September 1994. Prior to
joining Amerin Guaranty, Mr. Selitto was managing director and manager of the
Asset-Backed Securities Group at First Chicago Capital Markets, Inc. from August
1989 to October 1992.

Mr. Gaither has been Senior Vice President of Operations at Amerin Guaranty
since May 1996. Prior thereto, he was Senior Vice President and Senior Credit
Policy Officer at The Prudential Home Mortgage Company ("PHMC") from May 1994 to
April 1996, Senior Vice President & Treasurer in the Treasury Department of PHMC
from May 1992 to May 1994, and Vice President of Warehouse Lending for PHMC from
January 1992 to June 1992. Mr. Gaither was Manager in Mortgage Banking Finance
Division at First Union National Bank ("First Union") from August 1989 to
January 1992, and was Vice President & Manager in First Union's Syndicated
Credits Division from September 1988 to August 1989.

Mr. Peterson has been Senior Vice President and Director of Marketing for
Amerin Guaranty's Western Region since December 1992. Prior to joining Amerin
Guaranty, Mr. Peterson was Vice President, Manager of Asset Sales and
Acquisitions at Bank of America's Residential Loan Division from August 1989 to
December 1992, and regional manager of sales in the western United States for
Bear Stearns & Company, Mortgage Capital Division from May 1986 to July 1989.

Mr. Van Fleet has been Senior Vice President and Director of Marketing for
Amerin Guaranty's Eastern Region since December 1995. Prior to joining Amerin
Guaranty, Mr. Van Fleet was Senior Vice President of Corporate Sales for
Strategic Mortgage Services from August 1993 until December 1995, and a Director
of National Accounts at PMI Mortgage Insurance Company from december 1990 until
August 1993.

Mr. Yee has been Senior Vice President, Marketing Services and Corporate
Communications for Amerin Guaranty since December 1995 and Vice President,
Director of Marketing Services and Corporate Communications from June 1994 to
December 1995. Prior thereto, he was Director of Creative Services at Chemical
Residential Mortgage Corporation from January 1993 to June 1994, and Director of
Marketing for Bank of America's Residential Loan Division from January 1990 to
April 1992.

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<PAGE>
Mr. Gleason has been a director of Amerin Corporation and Amerin Guaranty
since July 1995. He has been a director and a Manager of JPMCC since March 1991
and was a Vice President of J.P. Morgan & Co. Incorporated from 1989 through
March 1991. He is also a director of Consep, Inc.

Mr. Goldberg has been a director of Amerin Corporation and Amerin Guaranty
since April 1992. He has been a Managing Director of MS&Co since January 1988,
is Co-Head of MS&Co's Merchant Banking Division and Vice Chairman of Morgan
Stanley Leveraged Equity Fund II, Inc. ("MSLEF, Inc."), which is the general
partner of MSLEF, and of Morgan Stanley Capital Partners III, Inc. Mr. Goldberg
also serves as director of CIMIC Holdings Limited, CAT Limited, Hamilton
Services Limited, Jefferson Smurfit Corporation, Direct Response Corporation and
several private companies.

Mr. Hoffen has been a director of Amerin Corporation and Amerin Guaranty
since January 1993. He is currently a Principal of MS&Co. From February 1994
through November 1996 he was a Vice President and from September 1989 through
February 1994 he was an Associate at MS&Co. He is a Vice President of MSLEF,
Inc. and a Director of Coho Energy Inc. and several private companies.

Mr. Holt has been a director of Amerin Corporation and Amerin Guaranty since
September 1992. He has been Senior Vice President of Aetna Life Insurance and
Annuity Company since February 1996 and has been a Vice President of Aetna Life
Insurance Company since June 1987.

Mr. Swedroe has been a director of Amerin Corporation since April 1996. He
has been a principal of Buckingham Asset Management, Inc., a personal investment
advisory firm, since May 1996. From January 1994 through April 1996 he was Vice
Chairman of Residential Services Corporation of America ("RSCA"), the holding
company for Prudential Home Mortgage and Lender's Service, Inc. Prior thereto,
Mr. Swedroe served as a Managing Director of RSCA from November 1986 through
December 1993.

There are no family relationships between any of the aforementioned persons.

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<PAGE>
CERTAIN TRANSACTIONS

STOCKHOLDERS AGREEMENT

In connection with the Initial Public Offering, Amerin Corporation, the
Principal Stockholders and Messrs. Friedman and Brafman entered into the
Stockholders Agreement, which sets forth certain rights and obligations of the
parties with respect to the Common Stock of the Company and the ownership and
corporate governance of the Company, as described below.

DESIGNATION AND ELECTION OF DIRECTORS. Each party to the Stockholders
Agreement other than JPMCC and each Plan Grantee is required to vote its shares
of Common Stock and each party to the Stockholders Agreement is required to take
such other action necessary to elect to the board persons designated for
election in accordance with the following procedures: (i) MSLEF may designate
one member of the board so long as it and its "Permitted Transferees" (as
defined in the Stockholders Agreement) hold at least 2.5% of the aggregate
outstanding Common Equity and an additional member of the board so long as they
hold at least 5% of the aggregate outstanding Common Equity; (ii) Aetna Life
Insurance Company ("Aetna") may designate one member of the board so long as it
and its Permitted Transferees hold at least 2.5% of the aggregate outstanding
Common Equity; and (iii) a majority in number of the Principal Stockholders
(other than JPMCC and MSLEF), acting together with their Permitted Transferees,
may designate a representative or employee of any of the Principal Stockholders
as an additional member of the board, provided that not more than two members of
the board may be representatives, employees or affiliates of the same Principal
Stockholder or its Permitted Transferees. In addition, each party to the
Stockholders Agreement other than JPMCC and each Plan Grantee is required to
vote its shares of Common Stock and each party to the Stockholders Agreement is
required to take such other action necessary such that, so long as Mr. Friedman
is an employee of the Company, Amerin Guaranty or Amerin Re, Mr. Friedman will
be a member of the board. The foregoing provisions of the Stockholders Agreement
terminate if the Original Stockholders, together with their Permitted
Transferees and the Plan Grantees, collectively own less than 20% of the
outstanding Common Equity.

Notwithstanding the foregoing, any party to the Stockholders Agreement that
holds (together with its Permitted Transferees) two-thirds of the outstanding
shares of Common Equity held by the Original Stockholders is entitled to
designate at least two-thirds of the members of the board. Upon consummation of
the Offering, the largest Original Stockholder will own 38.6% of the outstanding
Common Equity held by the Original Stockholders and, therefore, no party to the
Stockholders Agreement will have the right to designate at least two-thirds of
the board.

Upon the request of a party to the Stockholders Agreement designating a
director, each party to the Stockholders Agreement other than JPMCC and each
Plan Grantee is required to vote its shares of Common Stock and each party to
the Stockholders Agreement is required to take such other action necessary to
remove and designate a replacement for such director.

REGISTRATION RIGHTS. The stockholders party to the Stockholders Agreement
have demand registration rights with respect to "Registrable Stock" (as defined
therein) held by them. One or more of such stockholders may demand registration
so long as (i) the Registrable Stock sought to be registered constitutes at
least 10% of the outstanding Common Equity, or (ii) if such group includes Mr.
Friedman or Mr. Brafman, the Registrable Stock sought to be registered by Mr.
Friedman and Mr. Brafman, in the aggregate, constitutes at least 1% of the
outstanding Common Equity, provided that no demand relying on the foregoing
clause (ii) may be made within 12 months of the effective date of a registration
statement filed pursuant to a demand registration relying on such clause (ii).
This Offering is being effected pursuant to such demand registration rights. In
addition, if at any time prior to the tenth anniversary of the consummation of
the Inital Public Offering the Company proposes to file a registration statement
under the Securities Act, either for its own account or the account of others
(other than a registration statement relating to employee benefit or
compensation plans, business combinations, exchange offers with existing
security holders or certain other types of registrations), then each other party
to the Stockholders

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<PAGE>
Agreement has the opportunity, subject to certain procedures, restrictions and
priorities, to register such number of shares of Registrable Stock as such
stockholder may request, in which case the Company is obligated to use its best
efforts to permit the inclusion in the registration statement of the Registrable
Stock so requested to be included on the same terms and conditions as any
similar securities of the Company included therein.

The Company has agreed to pay all expenses associated with the exercise of
registration rights under the Stockholders Agreement other than underwriting
fees, discounts or commissions attributable to the sale of Registrable Stock or
any out-of-pocket expenses of the selling stockholders. Under the Stockholders
Agreement, the Company on the one hand and each stockholder selling Registrable
Stock on the other hand have agreed to indemnify each other for certain
liabilities, including liabilities under the Securities Act.

Pursuant to the Stockholders Agreement, holders of the foregoing
registration rights may not exercise an additional demand registration right for
a period of six months following the effective date of any registration
statement relating to the Common Stock (including the registration statement
relating to this Offering). The exercise or the perceived ability to exercise
such registration rights in the future could adversely affect the market price
for the Common Stock and could impair the Company's ability to raise capital
through future offerings of equity securities. See "Shares Eligible for Future
Sale."

AFFILIATE TRANSACTIONS. The Stockholders Agreement requires that any
transactions between the Company, Amerin Guaranty or Amerin Re on the one hand
and any other party thereto or any of their affiliates on the other hand must be
on an arm's length basis and requires the approval of the majority of the
disinterested members of the board.

OTHER PROVISIONS. The Stockholders Agreement provides certain "tag along"
rights, allowing stockholders party thereto to participate in private and open
market sales of Common Stock proposed by other stockholders party thereto, and
certain "drag along" rights, allowing three (but not including JPMCC) of the
five Principal Stockholders holding at least 55% of the Common Equity then held
by the Principal Stockholders, Messrs. Friedman and Brafman and the Plan
Grantees (but not including Common Equity held by JPMCC and its Permitted
Transferees) to require the other stockholders party thereto to sell all or a
portion of their shares of Common Equity, to the same purchaser and on the same
terms as the stockholders originally proposing such sales. The "tag along"
rights terminate at such time as less than 20% of the outstanding Common Equity
is held by stockholders party to the Stockholders Agreement and the Plan
Grantees.

The Stockholders Agreement places a variety of other requirements and
restrictions on transfers of Common Equity held by the stockholders party
thereto. Any sales must be made in accordance with applicable securities laws.
Any transfer other than to a permitted transferee must generally be a sale for
cash unless each other stockholder party to the Stockholders Agreement consents.
Transfers may not be made if the board has determined in its sole discretion and
good faith judgment that the proposed transferee is or is potentially adverse to
certain interests of the Company or a competitor of the Company.

Messrs. Friedman and Brafman have agreed in the Stockholders Agreement not
to compete with the Company, Amerin Guaranty, Amerin Re or any of their
respective affiliates for, in the case of Mr. Friedman, 10 years following the
termination of employment, and in the case of Mr. Brafman, 3 years following the
termination of employment, except for certain passive investments.

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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth, as of December 31, 1996, and as adjusted to
reflect the sale of the shares of Common Stock offered hereby, certain
information with respect to the beneficial ownership of the Company's Common
Stock by (a) each person known by the Company to own beneficially more than five
percent of the outstanding shares of Common Stock; (b) each Selling Stockholder;
(c) each director; (d) each of the Company's Chief Executive Officer and the
other four most highly compensated executive officers of the Company; and (e)
all executive officers and directors of the Company as a group. See "Management"
and "Certain Transactions."

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES SHARES BENEFICIALLY OWNED
BEFORE THE OFFERING BEING SOLD AFTER THE OFFERING(2)
----------------------------- IN THE -----------------------------
NAME(1) NUMBER PERCENT OFFERING(2) NUMBER PERCENT
- ----------------------------------------------- ---------------- ----------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
The Morgan Stanley Leveraged Equity
Fund II, L.P................................. 4,654,625(3) 20.3% 1,639,278 3,015,347(3) 12.3%
1221 Avenue of the Americas
33rd Floor
New York, NY 10020
Aetna Life Insurance Company................... 1,525,875(4) 6.7% 537,387 988,488(4) 4.0%
Aetna Investment Group
RC21 151 Farmington Ave.
Hartford, CT 06156-9000
First Plaza Group Trust........................ 1,606,125(5) 6.8% 565,649 1,040,476(5) 4.1%
Mellon Bank, N.A., as Trustee
One Mellon Bank Center
Pittsburgh, PA 15258
J.P. Morgan Capital Corporation................ 1,142,875(6) 4.9% 526,425 968,325(6) 3.9%
60 Wall Street, 14th Floor
New York, NY 10260-0060
Leeway & Co.................................... 816,125(7) 3.6% 287,425 528,700(7) 2.1%
AT&T Investment Management Organization
One Oak Way, Room IED189
Berkeley Heights, NJ 07922
Gerald L. Friedman............................. 1,485,068(8) 6.6% 523,015(8) 962,053(8) 3.9%
Stuart M. Brafman.............................. 485,034(9) 2.2% 170,821(9) 314,213(9) 1.3%
Peter H. Gleason............................... 1,142,875(10) 4.9% 968,325(10) 3.9%
Alan E. Goldberg............................... 4,654,625(11) 20.3% 3,015,347(11) 12.3%
Howard I. Hoffen............................... 4,654,625(11) 20.3% 3,015,347(11) 12.3%
Timothy A. Holt................................ 1,525,875(12) 6.7% 988,488(12) 4.0%
Larry E. Swedroe............................... 830 * 830 *
James G. Engelhardt............................ 49,288(13) * 49,288(13) *
George G. Freudenstein......................... 37,938(14) * 37,938(14) *
John F. Peterson............................... 83,438(15) * 83,438(15) *
Jerome J. Selitto.............................. 119,440(16) * 119,440(16) *
All directors and executive officers as a group
(15 persons)................................. 9,634,981(17) 39.8% 6,589,930(17) 26.0%
J. & W. Seligman
& Co. Incorporated...........................
100 Park Avenue
New York, NY 10017 1,466,288(19) 6.5% 1,466,288(19) 6.0%
</TABLE>

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

* Less than one percent.

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

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<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)

(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares beneficially owned.
All share amounts reflect beneficial ownership determined pursuant to Rule
13d-3 under the Exchange Act. All information with respect to beneficial
ownership has been furnished by the respective director, executive officer
or stockholder, as the case may be.

(2) Assumes no exercise of the U.S. Underwriters' over-allotment option as to
637,500 shares of Common Stock held by the Selling Stockholders. If the
over-allotment option is exercised in full, an additional 245,892 shares,
80,608 shares, 84,847 shares, 78,964 shares, 43,114 shares, 78,452 shares
and 25,623 shares, respectively, will be sold by MSLEF, Aetna Life Insurance
Company, First Plaza Group Trust, JPMCC, Leeway & Co., Mr. Friedman and Mr.
Brafman, respectively.

(3) Includes 510,000 shares of Common Stock before the Offering (0 shares after
the Offering) issuable upon conversion of an equal number of shares of
Nonvoting Common Stock. See note 18 below for a description of a certain
stockholders agreement to which the beneficial owner is a party. MSLEF is an
affiliate of both MS&Co, a representative of the U.S. Underwriters, and
MS&Co International, a representative of the International Underwriters.

(4) Includes 136,250 shares before the Offering (0 shares after the Offering)
of Common Stock issuable upon conversion of an equal number of shares of
Nonvoting Common Stock. See note 18 below for a description of a certain
stockholders agreement to which the beneficial owner is a party.

(5) Includes 1,288,250 shares before the Offering (722,601 shares after the
Offering) of Common Stock issuable upon conversion of an equal number of
shares of Nonvoting Common Stock. Mellon Bank, N.A., acts as the trustee
(the "Trustee") for First Plaza Group Trust ("First Plaza"), a trust
organized for the benefit of certain employee benefit plans of General
Motors Corporation ("GM") and its subsidiaries. These shares may be deemed
to be owned beneficially by General Motors Investment Management Corporation
("GMIMCo"), a wholly owned subsidiary of GM. GMIMCo's principal business is
providing investment advice and investment management services with respect
to the assets of certain employee benefit plans of GM and its subsidiaries
and with respect to the assets of certain direct and indirect subsidiaries
of GM and associated entities. GMIMCo is serving as First Plaza's investment
manager with respect to these shares and in that capacity it has the sole
power to direct the Trustee as to the voting and disposition of these
shares. Because of the Trustee's limited role, beneficial ownership of the
shares by the Trustee is disclaimed. See note 18 below for a description of
a certain stockholders agreement to which the beneficial owner is a party.

(6) Includes 825,000 shares before the Offering (650,450 shares after the
Offering) of Common Stock issuable upon conversion of an equal number of
shares of Nonvoting Common Stock. JPMCC also holds 351,875 shares before the
Offering (0 shares after the Offering) of Nonvoting Common Stock which JPMCC
is not permitted to convert to Common Stock under the terms of the
Certificate and regulatory requirements applicable to JPMCC. See note 18
below for a description of a certain stockholders agreement to which the
beneficial owner is a party. JPMCC is an affiliate of both J.P. Morgan
Securities Inc., a representative of the U.S. Underwriters, and J.P. Morgan
Securities Ltd., a representative of the International Underwriters.

(7) As nominee for the AT&T Master Pension Trust, a trust under and for the
benefit of certain pension plans of AT&T Corp. and certain of its
affiliates. Includes 498,250 shares before the Offering (210,825 shares
after the Offering) of Common Stock issuable upon conversion of an equal
number of shares of Nonvoting Common Stock. See note 18 below for a
description of a certain stockholders agreement to which the beneficial
owner is a party.

(8) Includes 45,000 shares held by the Friedman Family Foundation (the
"Foundation"), a private charitable foundation, 160,000 shares held by the
Gerald L. Friedman Charitable Remainder Unitrust

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

81
<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)

of 1997 (the "GLF Unitrust"), a charitable remainder trust, 160,000 shares
held by the Sheree A. Friedman Charitable Remainder Unitrust of 1997 (the
"SAF Unitrust"), a charitable reminder trust, 10,375 shares (as to which Mr.
Friedman disclaims beneficial ownership) held by the Sarah Beth Friedman
1989 Trust (the "SBF Trust"), a trust created for the benefit of Mr.
Friedman's daughter, 10,375 shares (as to which Mr. Friedman disclaims
beneficial ownership) held by Rachael L. Friedman (Mr. Friedman's daughter),
and 10,500 shares (as to which Mr. Friedman disclaims beneficial ownership)
held by Daniel B. Rand (as to which Mr. Friedman disclaims beneficial
ownership). All of the foregoing shares are subject to the provisions of the
stockholders agreement described in note 18 with respect to transfer and
sale. The 523,015 shares to be sold in the Offering by Mr. Friedman or
related parties will be comprised of (i) all 365,000 shares held in the
aggregate by the Foundation, the GLF Unitrust and the SAF Unitrust, (ii)
3,500 shares held by the SBF Trust, (iii) 3,500 shares held by Ms. Friedman,
(iv) 3,500 shares held by Mr. Rand, and (v) 147,515 shares held by Mr.
Friedman.

(9) Includes 83,400 shares held by the Brafman Limited Partnership and 45,000
shares held by the Stuart Brafman Charitable Remainder Annuity Trust (the
"SB Trust"). All of the foregoing shares are subject to the provisions of
the stockholders agreement described in note 18 with respect to transfer and
sale. The 170,821 shares to be sold in the Offering by Mr. Brafman or
related parties will be comprised of (i) all 45,000 shares held by the SB
Trust and (ii) 125,821 shares held by Mr. Brafman.

(10) All of the shares shown are held by JPMCC. They include 317,875 shares of
Common Stock and 825,000 shares before the Offering (650,450 shares after
the Offering) of Nonvoting Common Stock which are immediately convertible by
JPMCC into Common Stock. JPMCC also holds 351,875 shares before the Offering
(0 shares after the Offering) of Nonvoting Common Stock which JPMCC is not
permitted to convert into Common Stock under the terms of the Certificate
and regulatory requirements applicable to JPMCC. Mr. Gleason is an officer
and director of JPMCC. He may be deemed to share the power to vote and
dispose of the shares of Common Stock held by JPMCC and may therefore be
deemed the beneficial owner of such shares. Mr. Gleason disclaims beneficial
ownership of such shares.

(11) Mr. Goldberg and Mr. Hoffen are the Vice Chairman, and a Vice President,
respectively, of MSLEF, Inc., the general partner of MSLEF. Share data shown
for such individuals reflects shares shown as held by MSLEF as set forth in
the table and note 3 above, as to which such individuals disclaim beneficial
ownership.

(12) Mr. Holt is a Vice President of Aetna Life Insurance Company. Share data
for Mr. Holt reflects shares shown as held by Aetna Life Insurance Company
in the table and note 4 above, as to which Mr. Holt disclaims beneficial
ownership.

(13) Includes 37,563 shares of Common Stock issuable upon exercise of stock
options.

(14) Includes 33,063 shares of Common Stock issuable upon exercise of stock
options.

(15) Includes 59,313 shares of Common Stock issuable upon exercise of stock
options.

(16) Includes 91,250 shares of Common Stock issuable upon exercise of stock
options.

(17) Includes 243,089 shares of Common Stock issuable upon exercise of stock
options, 1,142,875 shares before the Offering and 968,325 shares after the
Offering for Mr. Gleason, 4,654,625 shares before the Offering and 3,015,347
shares after the Offering in the aggregate for Messrs. Goldberg and Hoffen
and 1,525,875 shares before the Offering and 988,488 shares after the
Offering for Mr. Holt. Messrs. Gleason, Goldberg, Hoffen and Holt have
disclaimed beneficial ownership of such shares as described in notes 10, 11
and 12.

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

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<PAGE>
(FOOTNOTES CONTINUED FROM PRECEDING PAGE)

(18) The beneficial owner is a party to the Amended and Restated Shareholders
Agreement, dated as of November 1, 1995, which sets forth certain rights and
obligations of the parties with respect to the Common Stock of the Company
and the ownership and corporate governance of the Company, as more fully
described under "Certain Transactions--Stockholders Agreement."

(19) Based on information provided by J. & W. Seligman & Co. Incorporated
("Seligman") in its Form 13F for the quarter ended September 30, 1996. All
such shares are Common Stock. Based on such Form 13F, Seligman has sole
investment discretion with respect to all such shares, sole voting power
with respect to 1,191,700 shares and no voting power with respect to 274,588
shares.

SHARES ELIGIBLE FOR FUTURE SALE

The Company has 26,080,839 shares of Common Equity outstanding, consisting
of 22,471,214 shares before the Offering (24,496,963 shares after the Offering)
of Common Stock and 3,609,625 shares before the Offering (1,583,876 shares after
the Offering) of Nonvoting Common Stock. Of these shares, the 4,250,000 shares
of Common Stock sold by the Selling Stockholders in the Offering and 13,527,414
shares that were outstanding prior to the Offering will be freely tradeable in
the public market without restriction or further registration under the
Securities Act, except for any such shares held by "affiliates" (as defined in
the Securities Act) of the Company.

All the remaining shares (the "Restricted Shares") were issued and sold by
the Company in private transactions in reliance upon the exemption contained in
Section 4(2) of the Act and are restricted securities under Rule 144 or Rule 701
under the Securities Act. Neither Restricted Shares nor shares held by an
"affiliate" may be sold unless they are registered under the Securities Act or
are sold pursuant to an applicable exemption from registration, including
pursuant to Rule 144. In general, under Rule 144 as currently in effect, a
person (or persons whose shares are aggregated) who has beneficially owned
Restricted Shares for at least two years, including affiliates of the Company,
would be entitled to sell in brokers' transactions or to market makers within
any three-month period a number of Restricted Shares that does not exceed the
greater of 1% of the then outstanding shares of the Company's Common Stock
(approximately 260,808 shares, based on the number of shares to be outstanding
immediately after the Offering) or the average weekly trading volume of the
Common Stock in the Nasdaq National Market during the four calendar weeks
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission. Sales under Rule 144 are also subject to certain notice
requirements and the availability of current public information about the
Company. A person who is not an "affiliate" of the Company at any time during
the 90 days preceding a sale and who has beneficially owned Restricted Shares
for at least three years is currently entitled to sell such Restricted Shares
under Rule 144 without regard to the availability of current public information,
volume limitations, manner of sale provisions or notice requirements. However,
under Rule 144, Restricted Shares held by "affiliates" must continue, after the
three-year holding period, to be sold in brokers' transactions or to market
makers and are subject to the volume and other limitations described above.
Under Rule 701 under the Securities Act, persons who purchase shares upon the
exercise of options granted prior to the effective date of the Initial Public
Offering are entitled to sell such shares in reliance on Rule 144, without
complying with the holding period requirements of Rule 144 and, except for
"affiliates," without complying with the public information, volume limitation
or notice provisions of Rule 144. None of the Restricted Shares are freely
tradeable under Rule 701 or Rule 144 by the holder thereof without regard to the
availability of public information, volume limitation or notice requirements.
All 7,817,602 Restricted Shares are tradeable subject to compliance with volume
and other limitations under Rule 144. In addition, if MSLEF, which will own
3,015,347 Restricted Shares following the Offering (assuming no exercise of the
Underwriters' overallotment option), were to distribute to its partners all of
its remaining holdings, such shares of Common Stock would generally be freely
tradeable under Rule 144 by the partners thereof without regard to the
availability of public information, volume limitations or notice requirements.
In addition, following the

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Offering, holders of 7,817,602 shares of Common Equity will be entitled to
registration rights with respect to such shares. See "Certain
Transactions--Stockholders Agreement."

No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock or Nonvoting Common Stock, or the availability of such
shares for future sale, will have on the market price of the Common Stock
prevailing from time to time. Sales of substantial amounts of Common Stock in
the public market, or the perception that such sales could occur, could
adversely affect the prevailing market price of the Common Stock or the ability
of the Company to raise capital through a public offering of its equity
securities.

The Securities and Exchange Commission has proposed reducing the periods of
beneficial ownership of "restricted securities" required by Rule 144. Under the
proposal, persons who have beneficially owned restricted securities for at least
one year, instead of two years as currently required, would be able to resell
such securities by complying with the volume limitations described above. In the
case of a person who is not deemed to be an affiliate of the Company during the
preceding three months, the proposal would permit sales without regard to the
limitations described above as long as such person had held the securities for
at least two years, instead of three years as currently required. There can be
no assurance that the proposed revisions to Rule 144 will be adopted by the
Commission.

The Company, the Original Stockholders, and the directors and other
executive officers of the Company, have agreed, subject to certain limited
exceptions, not to (i) offer, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (whether such shares or any such
securities are now owned by such party or hereafter acquired) or (ii) enter into
any swap or other arrangement that transfers to another, in whole or in part,
the economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or other securities, in cash or otherwise for a period of 90
days after the date of this Prospectus, without the prior written consent of the
representatives of the U.S. Underwriters in the case of MSLEF, or of MS&Co, in
the case of the Company and the other Selling Stockholders. See "Underwriters."

As of December 31, 1996, the Company had outstanding options to purchase
943,180 shares of Common Stock pursuant to the Stock Incentive Plan. All stock
and options to purchase stock issued under the Stock Incentive Plan (other than
the 750,000 shares granted to Mr. Brafman in 1992), together with the 1,957,605
additional shares of Common Stock available for grant under the Stock Incentive
Plan, have been registered under the Securities Act. Shares of Common Stock
granted under the Plan and shares of Common stock issued upon exercise of
outstanding stock options after the effective date of such registration
statement (other than shares issued to affiliates) generally will be freely
tradeable without restriction or further registration under the Securities Act.

Pursuant to the Stockholders Agreement, subject to certain conditions, the
Original Stockholders have certain demand registration rights with respect to
the shares of Common Equity that they currently own and this Offering is being
effected pursuant to such demand registration rights. See "Certain
Transactions--Stockholders Agreement." Pursuant to the Stockholders Agreement,
additional demand registration rights may not be exercised for six months after
the effective date of the registration statement relating to this Offering.
Subject to this six month limitation and the lock-up period described above, one
or more of the Original Stockholders may choose to dispose of the Common Stock
owned by them. The timing of such sales or other dispositions will depend on
market and other conditions, but could occur relatively soon after the lock-up
period described above, including pursuant to the exercise of their registration
rights (subject to the six month limitation). Such dispositions could be
privately negotiated transactions or public sales, or in the case of MSLEF,
distributions to its limited partners, in whose hands such shares of Common
Stock would generally be freely tradeable and not subject to the provisions of
the Stockholders Agreement.

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DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 100,000,000 shares
of common stock, par value $.01 per share, and 10,000,000 shares of preferred
stock, par value $.01 per share, with the class of such common stock comprised
of 50,000,000 authorized shares of voting common stock ("Common Stock"), of
which 24,496,963 shares will be outstanding upon consummation of the Offering,
and 50,000,000 authorized shares of nonvoting common stock ("Nonvoting Common
Stock"), of which 1,583,876 shares will be outstanding upon consummation of the
Offering. In addition, the Certificate authorizes the board of directors of the
Company to authorize and issue up to 10,000,000 shares of preferred stock (see
"--Preferred Stock").

Reference is made to the Certificate and the Company's Amended and Restated
By-Laws (the "By-Laws") which are included as exhibits to the Registration
Statement of which this Prospectus is a part for a more complete description of
the capital stock of the Company.

For purposes of the discussion below, Common Stock and Nonvoting Common
Stock are referred to collectively as "Common Equity."

COMMON EQUITY

The holders of outstanding shares of Common Equity are entitled equally and
ratably to receive dividends out of assets legally available therefor at such
times and in such amounts as the board of directors may from time to time
determine. The shares of Common Equity are not redeemable, and the holders
thereof have no preemptive or subscription rights to purchase any securities of
the Company, except that holders of Nonvoting Common Stock may convert such
Nonvoting Common Stock into Common Stock and Regulated Stockholders (as defined
in the Certificate) or certain of their transferees may convert Common Stock
into Nonvoting Common Stock, subject to certain limitations set forth in the
Certificate. The shares of Common Stock being sold in the Offering are not
convertible into shares of Nonvoting Common Stock, except by Regulated
Stockholders in accordance with the terms of the Certificate. Shares of
Nonvoting Common Stock may be transferred in the form of shares of Nonvoting
Common Stock regardless of whether the transferee is a Restricted Stockholder;
such shares do not automatically convert into shares of Common Stock upon
transfer. Transferees of Nonvoting Common Stock may convert their shares of
Nonvoting Common Stock into Common Stock, subject to certain limitations set
forth in the Certificate. All of the outstanding shares of Common Equity are
fully paid and nonassessable. Upon liquidation, dissolution or winding up of the
Company, the holders of Common Equity are entitled to receive pro rata the
assets of the Company which are legally available for distribution, after
payment of all debts and other liabilities and subject to the prior rights of
any holders of preferred stock then outstanding.

Each outstanding share of Common Stock is entitled to one vote on all
matters submitted to a vote of stockholders. Except as set forth in this
paragraph or as otherwise required by law, each outstanding share of Nonvoting
Common Stock shall not be entitled to vote on any matter on which the
stockholders of the Company shall be entitled to vote, and shares of Nonvoting
Common Stock shall not be included in determining the number of shares voting or
entitled to vote on any such matters. On any matter on which the holders of
shares of Common Stock and Nonvoting Common Stock are entitled to vote, the two
classes of Common Equity entitled to vote shall vote together as a single class,
and each holder of shares of Nonvoting Common Stock entitled to vote shall be
entitled to one vote for each share of such stock held by such holder.
Notwithstanding the foregoing, holders of shares of Nonvoting Common Stock shall
be entitled to vote as a separate class on any amendment, repeal or modification
of any provision of the Certificate that adversely affects the powers,
preferences or special rights of holders of the Nonvoting Common Stock. There is
no cumulative voting.

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PREFERRED STOCK

The Certificate authorizes the board of directors to issue up to 10,000,000
shares of preferred stock in classes or series and to fix the designations,
preferences, qualifications, limitations or restrictions of any class or series
with respect to the rate and nature of dividends, the price and terms and
conditions on which shares may be redeemed, the amount payable in the event of
voluntary or involuntary liquidation, the terms and conditions for conversion or
exchange into any other class or series of the stock, voting rights and other
terms. The Company may issue, without the approval of the holders of Common
Equity, preferred stock which has voting, dividend or liquidation rights
superior to the Common Equity and which may adversely affect the rights of
holders of Common Equity. Under certain circumstances, the issuance of such
preferred stock may tend to discourage a merger, tender offer, proxy contest,
the assumption of control by a holder of a large block of the Company's
securities, or the removal of incumbent management.

LISTING

The Common Stock is listed on the Nasdaq National Market under the symbol
"AMRN."

CERTAIN CERTIFICATE AND BY-LAW PROVISIONS

Certain provisions of the Certificate and By-Laws could have anti-takeover
effects and may delay, defer or prevent a takeover attempt that a stockholder
might consider in its best interest. These provisions are intended to enhance
the likelihood of continuity and stability in the composition of and in the
policies formulated by the board of directors. In addition, these provisions
also are intended to ensure that the board of directors will have sufficient
time to act in what the board of directors believes to be the best interests of
the Company and its stockholders.

The Certificate and By-Laws require that (i) any action required or
permitted to be taken by stockholders of the Company must be effected at a duly
called annual or special meeting of the stockholders and may not be effected by
a consent in writing and (ii) special meetings of the stockholders of the
Company may be called only by the board of directors, the Chairman of the Board,
or the President.

The Certificate and By-Laws require that in order for action to be taken by
the board of directors, such action must be duly approved by a two-thirds vote,
that the vote of the holders of two-thirds of the Company's shares entitled to
vote is required to amend the Certificate or By-Laws and that certain other
actions, including the removal of directors and amending certain provisions of
the By-Laws relating to calling special meetings of stockholders and nominating
and removing directors, be approved by a vote of the holders of 85% of the
Company's shares entitled to vote thereon.

The By-Laws establish advance notice procedures with regard to the
nomination, other than by or at the direction of the board of directors or a
committee thereof, of candidates for election as directors. These procedures
provide that the notice of proposed stockholder nominations for the election of
directors must be given in writing to the Secretary of the Company prior to the
meeting at which directors are to be elected. In addition, the Company's By-Laws
provide that the Company's stockholders (by the affirmative vote of two-thirds
of the holders of the outstanding shares) and the board of directors (by the
affirmative vote of two-thirds of the total number of directors if there were no
vacancies) each have the power to amend or repeal the By-Laws or to adopt new
By-Laws.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in a business combination (as defined therein) with an "interested
stockholder" (defined generally as any person (other than a Principal
Stockholder or Management Stockholder) who beneficially owns 15% or more of the
outstanding voting stock of the Company or any person affiliated with such
person) for a period of three years following the

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date that such stockholder became an interested stockholder, unless (i) prior to
such date the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction that resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation at the
time the transaction commenced (excluding for purposes of determining the number
of shares outstanding those shares owned (a) by directors who are also officers
of the corporation and (b) by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer); or
(iii) on or subsequent to such date the business combination is approved by the
board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of at least 66 2/3% of the outstanding
voting stock of the corporation not owned by the interested stockholder.

Additionally, the Certificate contains provisions analogous to Section 203
of the Delaware General Corporation Law.

LIMITATION ON DIRECTORS' AND OFFICERS' LIABILITY

The Certificate limits the liability of directors to the fullest extent
permitted by the Delaware General Corporation Law. In addition, the By-Laws
provide that the Company shall indemnify directors and officers of the Company
to the fullest extent permitted by such law.

TRANSFER AGENT

The transfer agent and registrar for the Common Stock is Wilmington Trust
Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001. Immediately after the Offering, the Company expects to appoint
Norwest Bank Minnesota, N.A., 161 North Concord Exchange Street, South St. Paul,
Minnesota 55075-0738, as transfer agent and registrar for the Common Stock.

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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES

The following discussion is a summary of the material U.S. federal income
tax consequences of the acquisition, ownership and disposition of the Common
Stock, and is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury regulations promulgated thereunder (the "Treasury
Regulations"), judicial authority and current administrative rulings and
practice, all of which are subject to change at any time by legislative,
judicial or administrative action. The U.S. federal income tax consequences to
any particular holder of the Common Stock may be affected by matters not
discussed below. For example, certain types of holders (including life insurance
companies, tax exempt organizations and taxpayers who may be subject to the
alternative maximum tax) may be subject to special rules not addressed herein.
In addition, the discussion is limited to investors who will hold the Common
Stock as "capital assets," within the meaning of the Code. There also may be
state, local or foreign income tax or estate and gift tax considerations
applicable to each holder. EACH PURCHASER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF THE COMMON
STOCK UNDER U.S. FEDERAL AND ANY APPLICABLE STATE, LOCAL AND FOREIGN TAX LAWS.

U.S. HOLDERS

The following is a general discussion of certain U.S. federal income tax
consequences of the ownership and disposition of Common Stock by holders who are
(i) citizens or resident aliens (including certain former citizens and
residents) of the United States, (ii) corporations or partnerships organized in
the United States or under the laws of the United States or of any State, (iii)
estates the income of which is includable in gross income for U.S. federal
income tax purposes regardless of source or (iv) any trust having an
administration that is subject to the primary supervision of a United States
court and having at least one United States fiduciary with the authority to
control all of such trusts' substantial decisions ("U.S. Holders").

An individual who is not a U.S. citizen may, subject to certain exceptions,
be deemed to be a resident alien (as opposed to a non-resident alien) by virtue
of being present in the United States on at least 31 days in the calendar year
and for an aggregate of at least 183 days during a three-year period ending in
the current calendar year (counting for such purposes all of the days present in
the current year, one-third of the days present in the immediately preceding
year, and one-sixth of the days present in the second preceding year).

GAIN ON DISPOSITION OF COMMON STOCK. Upon the sale or exchange of shares of
the Common Stock, a U.S. Holder will recognize capital gain or loss measured by
the difference between the amount realized and the holder's tax basis in such
shares. Further, if the U.S. Holder's holding period exceeds one year, such
capital gain or loss will be long-term. A redemption of shares of Common Stock
will be treated as a sale or exchange subject to the foregoing rules if it (i)
results in a "complete termination" of the holder's interest in stock of the
Company, (ii) is "substantially disproportionate" with respect to that interest,
or (iii) is "not essentially equivalent to a dividend" to that holder, in each
case within the meaning of the Code and the Treasury Regulations and taking
certain indirect and constructive ownership attribution rules into account.

DIVIDENDS. The Company does not currently intend to pay dividends on shares
of Common Stock. See "Dividend Policy." In the event that dividends are paid on
shares of Common Stock, such dividends will be subject to tax as ordinary income
to the extent of the Company's current or accumulated earnings and profits as
computed for U.S. federal income tax purposes. To the extent that the amount of
any dividend paid on the Common Stock exceeds the Company's current and
accumulated earnings and profits for U.S. federal income tax purposes, such
dividend will be treated first as a nontaxable return of capital which will be
applied against and reduce the adjusted tax basis of the Common Stock in the
hands of the U.S. Holder. Any amount in excess of such U.S. Holder's adjusted
tax basis would then be taxed as capital gain, and would be long-term capital
gain if such U.S. Holder's holding period for the Common Stock exceeds one year.

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For purposes of the remainder of this discussion of U.S. federal income tax
consequences, the term "dividend" refers to a distribution out of current or
accumulated earnings and profits and taxed as ordinary income as described
above, unless the context indicates otherwise.

A partial dividends received deduction may be available with respect to
dividends paid by the Company to U.S. Holders that are corporations. However, a
corporate U.S. Holder that disposes of shares within 45 days of their date of
acquisition cannot claim the dividends received deduction for dividends on such
shares. (This time period is extended for periods during which the taxpayer's
risk of loss with respect to such shares is diminished, for example, by an
offsetting position.) In addition, under section 246A of the Code, if a
corporation incurs indebtedness for the purpose of making or carrying a
portfolio stock investment (which would include the Common Stock), the dividends
received deduction will generally be disallowed with respect to the dividends on
that portion of such stock which was acquired or carried by means of such
indebtedness.

Section 1059 of the Code imposes a special basis reduction rule that
requires a corporate stockholder to reduce its basis (but not below zero) for
stock owned by it to the extent of the nontaxed portion of any extraordinary
dividend if, as of the earliest of the date on which the payor corporation
declares, announces or agrees to the amount or payment of such dividend, the
corporate stockholder has not held such stock for more than two years.
Generally, the nontaxed portion of an extraordinary dividend is the amount
excluded from income under section 243 of the Code (relating to the deduction
for dividends received by corporations). An extraordinary dividend is generally
defined as a dividend equaling or exceeding a prescribed threshold percentage
(10%, in the case of common stock) of the corporate stockholder's adjusted basis
in such stock. Under certain circumstances the corporate stockholder may elect
to use fair market value rather than adjusted basis in computing the threshold
percentage for determining whether an extraordinary dividend has been received.
In addition, a corporate stockholder shall recognize, in the year such stock is
sold or otherwise disposed of, as gain from the sale or exchange of stock, an
amount equal to the aggregate nontaxed portions of any extraordinary dividends
with respect to such stock which did not reduce the basis of such stock by
reason of the limitation on reducing basis below zero.

President Clinton proposed legislation in his 1996 Budget Plan that would
allow a dividends-received deduction only to those corporate stockholders that
satisfy the 45 day holding period during the periods immediately before or
immediately after such holders become entitled to receive each dividend. The
proposal would have been effective for dividends paid or accrued more than 30
days after the date of enactment. In addition, President Clinton also proposed
legislation that would require immediate recognition of gain by corporate
holders (a) whenever the amount of an extraordinary dividend received exceeds
such holder's basis in stock or (b) if a redemption of common stock is treated
as a dividend due to stock options being treated as stock ownership and the
nontaxed portion of such deemed dividend (in whole or in part) exceeds the basis
of the shares surrendered. These proposals were not enacted during the 1996
legislative session; however, Kenneth J. Kies, the chief of staff of the Joint
Committee on Taxation, has stated that the tax proposals will be reintroduced to
Congress for approval as early as February 1997. The Company cannot predict
whether these proposals, or others which may adversely affect holders of the
Common Stock, will be enacted into law.

INFORMATION REPORTING AND BACKUP WITHHOLDING. A U.S. Holder of the Common
Stock will be subject to backup withholding at the rate of 31% with respect to
dividends paid with respect to the Common Stock, unless such holder (i) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (ii) provides a taxpayer identification number,
certifies that it has not lost its exemption from backup withholding and
otherwise complies with applicable requirements of the Treasury Regulations.

Backup withholding is not an additional tax. Rather, the U.S. federal income
tax liability of a U.S. Holder subject to backup withholding will be reduced by
the amount of tax withheld.

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NON-U.S. HOLDERS

The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by
"Non-U.S. Holders." In general, a "Non-U.S. Holder" is any individual or entity
other than a U.S. Holder. This discussion does not consider specific facts and
circumstances that may be relevant to a particular Non-U.S. Holder's tax
position (including the tax position of certain former citizens or residents of
the United States) and therefore does not address all aspects of U.S. federal
tax that may be relevant to Non-U.S. Holders in light of their specific
circumstances. This discussion also does not deal with U.S. state and local or
non-U.S. tax consequences of a Non-U.S. Holder's ownership or disposition of
Common Stock. EACH PROSPECTIVE NON-U.S. HOLDER OF COMMON STOCK IS URGED TO
CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL TAX
CONSEQUENCES OF ACQUIRING, HOLDING AND DISPOSING OF COMMON STOCK AS WELL AS ANY
TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE OR MUNICIPALITY
OR ANY OTHER TAX JURISDICTION.

GAIN ON DISPOSITION OF COMMON STOCK. A Non-U.S. Holder generally will not
be subject to U.S. federal income tax in respect of gain realized on a
disposition of Common Stock unless: (i) the gain is effectively connected with a
trade or business of the Non-U.S. Holder in the United States, or if an income
tax treaty applies, is attributable to a U.S. permanent establishment of such
Non-U.S. Holder; (ii) in the case of a Non-U.S. Holder who is an individual,
such Holder is present in the United States for 183 or more days in the taxable
year of the sale and certain other conditions are met; or (iii) the Company has
been at some time during the five-year period ending on the date of the
disposition of the Common Stock a "U.S. real property holding corporation" for
U.S. federal income tax purposes. The Company has not been and does not
anticipate becoming a "U.S. real property holding corporation" for U.S. federal
income tax purposes. If the Company is or has been a "U.S. real property holding
corporation" at any time during the five-year period ending on the date of
disposition (or such shorter period that the Common Stock was held), a Non-U.S.
Holder will not be subject to U.S. federal income tax if the Common Stock is
regularly quoted on an established securities market and such Non-U.S. Holder
did not hold, directly or indirectly, more than 5% of the Common Stock.

If a Non-U.S. Holder falls under clause (i) above, he or she will be taxed
on the net gain derived from the sale of Common Stock under regular U.S. federal
income tax rates (and, with respect to corporate Non-U.S. Holders, may also be
subject to the branch profits tax described below). If an individual Non-U.S.
Holder falls under clause (ii) above, he or she will generally be subject to a
30% tax on the gain derived from the sale.

DIVIDENDS. The Company does not currently intend to pay dividends on shares
of Common Stock. See "Dividend Policy." In the event that dividends are paid on
shares of Common Stock, except as described below, such dividends paid to a
Non-U.S. Holder of Common Stock will be subject to withholding of U.S. federal
income tax at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty, unless the dividends are effectively connected with the
conduct of a trade or business within the United States or, if an income tax
treaty applies, are attributable to a U.S. permanent establishment of such
Non-U.S. Holder. Dividends that are effectively connected with such Non-U.S.
Holder's conduct of a trade or business in the United States or, if an income
tax treaty applies, are attributable to a U.S. permanent establishment of such
Non-U.S. Holder, are subject to tax on a net income basis at rates applicable to
U.S. citizens, resident aliens and domestic U.S. corporations, and are not
generally subject to withholding so long as such Non-U.S. Holder complies with
certain certification and disclosure requirements. Any such effectively
connected dividends received by a foreign corporation may, under certain
circumstances: (i) be entitled to the benefit of a dividends received deduction
under U.S. federal income tax law; and (ii) be subject to an additional "branch
profits tax" (which is generally imposed on a foreign corporation's effectively
connected earnings and profits, subject to certain adjustments) at a 30% rate
(or such lower rate as may be specified by an applicable income tax treaty).

Under current Treasury Regulations, dividends paid to an address in a
foreign country may be presumed to be paid to a resident of that country (unless
the payor has knowledge to the contrary) for

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purposes of the withholding discussed above and, under the current
interpretation of the Treasury Regulations, for purposes of determining the
applicability of a tax treaty rate. Under proposed Treasury Regulations (the
"Proposed Regulations"), not currently in effect, however, a Non-U.S. Holder of
Common Stock wishing to claim the benefit of an applicable treaty rate would be
required to satisfy applicable certification and other requirements. The
Proposed Regulations would also provide special rules to determine whether, for
purposes of determining the applicability of a tax treaty, dividends paid to a
Non-U.S. Holder that is an entity should be treated as paid to the entity or
those holding an interest in that entity. If such regulations are finally
adopted, they are generally proposed to be effective with respect to dividends
paid after December 31, 1997 (December 31, 1999 for certain certification
requirements).

Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient, and the amount, if any, of tax withheld.
A similar report is sent to the recipient. Pursuant to certain tax treaties or
other international agreements, the IRS may make its reports available to tax
authorities in the recipient's country of residence.

A Non-U.S. Holder of Common Stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts currently withheld by filing an appropriate claim for refund with the
IRS.

INFORMATION REPORTING AND BACKUP WITHHOLDING. U.S. information reporting
requirements, other than the reporting of dividend payments for purposes of the
30% withholding tax described above, and backup withholding tax generally will
not apply to dividends paid to Non-U.S. Holders that are either subject to the
30% withholding discussed above or that are not so subject because any
applicable tax treaty reduces such withholding. Otherwise, backup withholding of
U.S. federal income tax at a rate of 31% may apply to dividends paid with
respect to the Common Stock to Non-U.S. Holders that are not "exempt recipients"
and that fail to provide certain information (including the Non-U.S. Holder's
U.S. taxpayer identification number) in the manner required by U.S. law and
applicable regulations or to report certain payments which are taxable for U.S.
federal income tax purposes.

Payment through a U.S. office of a broker of the proceeds of a sale of
Common Stock is currently subject to both U.S. backup withholding and
information reporting rules unless the Seller, under penalties of perjury,
certifies, among other things, its status as a Non-U.S. Holder, or otherwise
establishes an exemption. Generally, U.S. information reporting and backup
withholding requirements will not apply to a payment made outside the United
States of the proceeds of a sale of Common Stock through an office outside the
United States of a foreign broker. However, U.S. information reporting
requirements (but not backup withholding) will apply to a payment made outside
the United States of the proceeds of a sale of Common Stock through an office
outside the United States of a broker that is a U.S. person, that derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States, or that is a "controlled foreign corporation" as
determined under U.S. federal income tax law, unless the broker has documentary
evidence in its records that the Seller is a Non-U.S. Holder and certain
conditions are met, or the Seller otherwise establishes an exemption. The
Proposed Regulations would alter the foregoing rules in certain respects. Among
other things, the Proposed Regulations would provide certain presumptions under
which a Non-U.S. Holder would be subject to backup withholding and information
reporting unless the Company receives certification from the holder of its
non-U.S. status.

Backup withholding is not an additional tax. Rather, the tax liability of a
Non-U.S. Holder subject to backup withholding will be reduced by the amount of
tax withheld. If backup withholding results in an overpayment of taxes, a
Non-U.S. Holder generally may obtain a refund of any excess amounts withheld
under the backup withholding rules by filing the appropriate claim for refund
with the IRS.

FEDERAL ESTATE TAXES. Common Stock owned or treated as owned by an
individual Non-U.S. Holder at the time of death will generally be included in
such holder's gross estate for U.S. federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise, and may be subject to U.S.
federal estate tax.

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UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below, for whom Morgan Stanley & Co. Incorporated, Credit Suisse First
Boston Corporation, Donaldson, Lufkin & Jenrette Securities Corporation and J.P.
Morgan Securities Inc. are serving as U.S. Representatives, have severally
agreed to purchase, and the Selling Stockholders have severally agreed to sell
to them, and the International Underwriters named below, for whom Morgan Stanley
& Co. International Limited, Credit Suisse First Boston (Europe) Limited,
Donaldson, Lufkin & Jenrette Securities Corporation and J.P. Morgan Securities
Ltd. are serving as International Representatives, have severally agreed to
purchase, and the Selling Stockholders have severally agreed to sell to them,
the respective number of shares of the Common Stock set forth opposite the names
of such Underwriters below:

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ------------------------------------------------------------------------------------- -----------------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated..................................................
Credit Suisse First Boston Corporation.............................................
Donaldson, Lufkin & Jenrette Securities Corporation................................
J.P. Morgan Securities Inc. .......................................................

-----------------
Subtotal......................................................................... 3,400,000
-----------------

International Underwriters:
Morgan Stanley & Co. International Limited.........................................
Credit Suisse First Boston (Europe) Limited........................................
Donaldson, Lufkin & Jenrette Securities Corporation................................
J.P. Morgan Securities Ltd.........................................................

-----------------
Subtotal......................................................................... 850,000
-----------------
Total................................................................................ 4,250,000
-----------------
-----------------
</TABLE>

The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters," and the U.S. Representatives and the
International Representatives are collectively referred to as the
"Representatives." The Underwriting Agreement provides that the obligations of
the several Underwriters to pay for and accept delivery of the shares of Common
Stock offered hereby are subject to the approval of certain legal matters by
their counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of Common Stock offered hereby (other than
those covered by the U.S. Underwriters' over-allotment option described below)
if any such shares are taken.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any U.S. Shares (as defined

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below) for the account of anyone other than a United States or Canadian Person
(as defined below) and (ii) it has not offered or sold, and will not offer or
sell, directly or indirectly, any U.S. Shares or distribute any prospectus
relating to the U.S. Shares outside the United States or Canada or to anyone
other than a United States or Canadian Person. Pursuant to the Agreement Between
U.S. and International Underwriters, each International Underwriter has
represented and agreed that, with certain exceptions: (i) it is not purchasing
any International Shares (as defined below) for the account of any United States
or Canadian Person and (ii) it has not offered or sold, and will not offer or
sell, directly or indirectly, any International Shares or distribute any
prospectus relating to the International Shares within the United States or
Canada or to any United States or Canadian Person. With respect to any
Underwriter that is a U.S Underwriter and an International Underwriter, the
foregoing representations or agreements (i) made by it in its capacity as a U.S.
Underwriter shall apply only to shares of Common Stock purchased by it in its
capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter shall apply only to shares of Common Stock purchased
by it in its capacity as an International Underwriter. The foregoing limitations
do not apply to stabilization transactions or to certain other transactions
specified in the Agreement Between U.S. and International Underwriters. As used
herein, "United States or Canadian Person" means any national or resident of the
United States or Canada, or any corporation, pension, profit-sharing or other
trust or other entity organized under the laws of the United States or Canada or
of any political subdivision thereof (other than a branch located outside the
United States and Canada of any United States or Canadian Person) and includes
any United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person. All shares of Common Stock to be purchased by the
U.S. Underwriters and the International Underwriters are referred to herein as
the "U.S. Shares" and the "International Shares," respectively.

Pursuant to the Agreement Between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of any
number of shares of Common Stock to be purchased pursuant to the Underwriting
Agreement as may be mutually agreed. The per share price of any shares sold
shall be the public offering price set forth on the cover page hereof, in United
States dollars, less an amount not greater than the per share amount of the
concession to dealers set forth below.

Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in any
province or territory of Canada or to or for the benefit of, any resident of any
province or territory of Canada in contravention of the securities laws thereof
and has represented that any offer or sale of Common Stock in Canada will be
made only pursuant to an exemption from the requirement to file a prospectus in
the province or territory of Canada in which such offer or sale is made. Each
U.S. Underwriter has further agreed to send to any dealer who purchases from it
any shares of Common Stock a notice stating in substance that, by purchasing
such Common Stock, such dealer represents and agrees that it has not offered or
sold, and will not offer or sell, directly or indirectly, any of such Common
Stock in any province or territory of Canada or to, or for the benefit of, any
resident of any province or territory of Canada in contravention of the
securities laws thereof and that any offer or sale of Common Stock in Canada
will be made only pursuant to an exemption from the requirement to file a
prospectus in the province or territory of Canada in which such offer or sale is
made, and that such dealer will deliver to any other dealer to whom it sells any
of such Common Stock a notice to the foregoing effect.

Pursuant to the Agreement Between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, during the period of six months from the date hereof, will not
offer or sell, any shares of Common Stock to persons in the United Kingdom
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995 (the "Regulations"); (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 and the Regulations with respect to

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<PAGE>

anything done by it in relation to the shares of Common Stock offered hereby in,
from or otherwise involving the United Kingdom; and (iii) it has only issued or
passed on and will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the offer of the shares of Common
Stock if that person is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996, or is a
person to whom such document may otherwise lawfully be issued or passed on.

The Underwriters initially propose to offer part of the Common Stock
directly to the public at the public offering price set forth on the cover page
hereof and part to certain dealers at a price which represents a concession not
in excess of $ per share under the public offering price. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $ per
share to other Underwriters or to certain dealers. After the initial offering of
the Common Stock offered hereby, the offering price and other selling terms may
from time to time be varied by the Representatives.

Pursuant to the Underwriting Agreement, the Selling Stockholders have
granted to the U.S. Underwriters an option, exercisable for 30 days from the
date of the Prospectus, to purchase up to 637,500 additional shares of Common
Stock at the public offering price set forth on the cover page hereof, less
underwriting discounts and commissions. The U.S. Underwriters may exercise such
option to purchase solely for the purpose of covering over-allotments, if any,
made in connection with the Offering. To the extent such option is exercised,
each U.S. Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares as the
number set forth next to such Underwriter's name in the preceding table bears to
the total number of shares of Common Stock offered by the U.S. Underwriters
hereby.

The Common Stock is listed on the Nasdaq National Market under the symbol
"AMRN."

Pursuant to regulations promulgated by the Commission, market makers in the
Common Stock who are Underwriters of prospective underwriters ("passive market
makers") may, subject to certain limitations, make bids for or purchases of
shares of Common Stock until the earlier of the time of commencement (the
"Commencement Date") of offers or sales of the Common Stock contemplated by this
Prospectus or the time at which a stabilizing bid for such shares is made. In
general, on and after the date two days prior to the Commencement Date (1) such
market maker's net daily purchases of the Common Stock may not exceed 30% of the
average daily trading volume in such stock for the two full consecutive calendar
months immediately preceding the filing date of the registration statement of
which this Prospectus forms a part, (2) such market maker may not effect
transactions in, or display bids for, the Common Stock by persons who are not
passive market makers and (3) bids made by passive market makers must be
identified as such.

The Company, the Original Stockholders, and the directors and other
executive officers of the Company, have agreed, subject to certain limited
exceptions, not to (i) offer, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock (whether such shares or any such
securities are now owned by such party or hereafter acquired) or (ii) enter into
any swap or other arrangement that transfers to another, in whole or in part,
the economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or other securities, in cash or otherwise, for a period of 90
days after the date of this Prospectus, without the prior written consent of the
representatives of the U.S. Underwriters in the case of MSLEF, or of MS&Co, in
the case of the Company and the other Selling Stockholders. See "Shares Eligible
for Future Sale."

The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

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<PAGE>

Affiliates of MS&Co, MS&Co International, J.P. Morgan Securities Inc. and
J.P. Morgan Securities Ltd. are selling shares in the Offering. See "Principal
and Selling Stockholders." Upon consummation of the Offering, affiliates of
MS&Co will own approximately 12.3% and 11.6%, of the outstanding shares of
Common Stock and Common Equity, respectively (11.2% and 10.6%, respectively, if
the U.S. Underwriters' over-allotment option is exercised in full). Upon
consummation of the Offering, affiliates of J.P. Morgan Securities Inc. will own
1.3% and 3.7% of the Common Stock and Common Equity, respectively (1.3% and
3.5%, respectively, if the U.S. Underwriters' over-allotment option is exercised
in full). See "Principal and Selling Stockholders."

VALIDITY OF SECURITIES

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Jones, Day, Reavis & Pogue, New York, New York, and
certain insurance regulatory matters will be passed upon for the Company by
Lord, Bissell & Brook, Chicago, Illinois. Certain legal matters will be passed
upon for the Underwriters by Davis Polk & Wardwell, New York, New York. Davis
Polk & Wardwell has in the past provided, and continues to provide, legal
services to the Company and its subsidiaries.

EXPERTS

The consolidated financial statements of Amerin Corporation at December 31,
1995 and 1994, and for each of the three years in the period ended December 31,
1995, appearing in this Prospectus and Registration Statement and appearing in
Amerin Corporation's Annual Report on Form 10-K for the year ended December 31,
1995 (incorporated herein by reference), have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein or incorporated herein by reference. Such consolidated financial
statements are included herein or incorporated herein by reference in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048; and Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Such reports, proxy statements and other information can also be
inspected at the offices of the Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006, on which the Company's Common Stock is listed. In
addition, the Commission maintains a Website on the Internet
(http://www.sec.gov) that contains such reports, proxy statements and other
information.

The Company has filed with the Commission a Registration Statement on Form
S-3 (of which this Prospectus is a part) under the Securities Act with respect
to the shares of Common Stock offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto. Statements contained in this Prospectus as to the
contents of any contract or any other document are not necessarily complete, and
in each instance, reference is made to the copy of such contract or document
filed as an exhibit or schedule to the Registration Statement, each such
statement being qualified in all respects by such reference. Copies of the
Registration Statement and the exhibits are on file with the Commission and the
Nasdaq National Market and may be obtained at the above locations.

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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, heretofore filed by the Company with the Commission
(File No. 0-27146) pursuant to the Exchange Act, are incorporated herein by
reference and made a part hereof:

1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.

2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1996.

3. The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1996.

4. The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996.

5. The Description of the Company's Capital Stock contained in Company's
Registration Statement on Form 8-A dated November 3, 1995.

Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the Offering shall be deemed to be incorporated by reference in this
Prospectus.

Any statements contained in a document incorporated by reference herein
shall be deemed to be modified, replaced or superseded for all purposes of this
Prospectus to the extent that a statement contained herein modifies, replaces or
supersedes such statement. Any such statement so modified, replaced or
superseded shall not be deemed, except as so modified, replaced or superseded,
to constitute a part of this Prospectus.

The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any document incorporated by reference in this Prospectus (other than
exhibits unless such exhibits are expressly incorporated by reference in such
documents). Requests should be directed to the Company at 200 East Randolph
Drive, 49th Floor, Chicago, Illinois 60601-7125, Attention: Investor Relations
(telephone: (312) 540-0078).

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<PAGE>
GLOSSARY OF SELECTED MORTGAGE INSURANCE TERMS
(OTHER DEFINED TERMS ARE PRINTED IN BOLD FACE TYPE)

<TABLE>
<S> <C>
ANNUAL PREMIUM PLAN A premium payment plan that requires the payment of an initial
annual premium at loan closing and the payment of an annual
renewal premium in advance each year thereafter.
BORROWER A person who borrows money in the form of a mortgage loan with
his or her home pledged as collateral security for the note by
a mortgage or deed of trust.
BORROWER-PAID MORTGAGE Mortgage insurance which is paid for by the borrower, and for
INSURANCE ("BPMI") which the lender maintains a separate escrow account in the
name of the borrower.
CEDE OR CEDING The ceding or reinsurance by an insurer to a reinsurer (a
"cession") of all or a portion of the insurer's risk, in
consideration of the payment of a portion of the insurer's
premium (generally net of a CEDING COMMISSION) to the
reinsurer. The insurer remains primarily liable for its
obligations under the underlying policies unless such policies
are also assumed by the reinsurer.
CEDING COMMISSION The amount of commission received by an insurer from a
reinsurer in payment for the business CEDED.
CLAIM AMOUNT The total of the outstanding loan principal, delinquent
interest and certain expenses associated with a default and the
subsequent foreclosure of a mortgage loan. See "Loss Adjustment
Expenses."
CLAIM FREQUENCY The percentage of insured loans that have resulted in a paid
claim.
CLAIM RATE The estimated percentage of insured mortgage loans then in
default that the insurer believes will eventually result in a
paid claim.
CLAIM SEVERITY The ratio (expressed as a percentage) of the dollar amount of a
paid claim on an insured loan to the original RISK IN FORCE
relating to such loan.
COMBINED RATIO The sum of the LOSS RATIO and the EXPENSE RATIO. The COMBINED
RATIO is a principal indicator of a private mortgage insurer's
profitability. In respect of any year, the lower the COMBINED
RATIO, the higher an insurer's earnings from its insurance
underwriting activities, with a COMBINED RATIO of less than
100% indicating an UNDERWRITING profit for such year.
COMMERCIALLY DOMICILED Subject to certain insurance laws of a jurisdiction other than
the state of domicile due to the amount of premium written in
such jurisdiction over certain periods.
CONTINGENCY RESERVE A SAP balance sheet reserve required by statute or regulation
generally equal to 50% of PREMIUMS EARNED for a particular
year, which amount must be maintained in the reserve for a
period of 10 years, unless earlier released to the extent
incurred losses in any year exceed the greater of (i) 35% of
PREMIUMS EARNED for such year or (ii) 70% of the amount
contributed to the contingency reserve for such year.
COVERAGE PERCENTAGE The percentage of the total CLAIM AMOUNT subject to payment by
the mortgage insurer in the event of a claim on a mortgage loan
that is the subject of primary insurance. For the industry in
general, the COVERAGE PERCENTAGE has typically ranged from 12%
to 30%. For DEEP COVERAGE, the COVERAGE PERCENTAGES range up to
35%.
</TABLE>

97
<PAGE>
<TABLE>
<S> <C>
DEEP COVERAGE Coverage provided by a primary mortgage guaranty insurance
policy with a COVERAGE PERCENTAGE in excess of (or "deeper
than") 25%, or that portion of such coverage in excess of 25%,
as the context requires. Mortgage guaranty insurance laws
generally limit the COVERAGE PERCENTAGE that a mortgage insurer
may retain with respect to any one mortgage to 25%,
necessitating that the excess portion of any risk be reinsured.
DEFAULT INVENTORY The number of insured loans reported to be in default as of a
specified date.
DEFAULT RATE The percentage of insured loans in force which are in default
at any given date.
DELEGATED UNDERWRITING A program whereby certain lenders are permitted to commit an
insurer to insure loans utilizing UNDERWRITING guidelines that
have been agreed to by the insurer and the lender.
DIRECT (WHEN USED WITH The entire amount before REINSURANCE.
RESPECT TO INSURANCE,
PREMIUMS AND RISK IN FORCE)

ELECTRONIC DATA INTERCHANGE The electronic exchange of business transaction information in
("EDI") a standardized computer-recognizable format. This technology
allows the replacement of the current exchange of paper
documents with an electronic exchange between the computer
systems of a mortgage insurer and its customers in a standard
electronic format.
EXCESS LOSS OR EXCESS LOSS REINSURANCE that indemnifies the CEDING company against all or
REINSURANCE a portion of losses in excess of a specified retention.
EXPENSE RATIO The ratio (expressed as a percentage) of (i) UNDERWRITING
EXPENSES to (ii) NET PREMIUMS EARNED (when the ratio is being
calculated in accordance with GAAP) or NET PREMIUMS WRITTEN
(when the ratio is being calculated in accordance with SAP).
The expense ratio is a key indicator of an insurer's efficiency
of administration. Generally, the lower the expense ratio, the
more cost efficient the insurer is in managing its business.
GAAP United States generally accepted accounting principles.
HIGH LTV With respect to mortgage loans, a loan with a ratio (expressed
as a percentage) of the loan amount to the value of the real
property greater than 80%.
INCURRED BUT NOT REPORTED A liability for claims and loss adjustment expenses that it is
("IBNR") RESERVE estimated will result from defaults that the mortgage insurer,
based on past experience, anticipates have already occurred but
have not yet been reported by the LOAN SERVICER to the mortgage
insurer. The IBNR RESERVE is included in the LOSS RESERVE.
INCURRED LOSSES The total amount of claims and LOSS ADJUSTMENT EXPENSES paid,
plus the increase (or minus the decrease) in the LOSS RESERVE
during the applicable period.
INSURANCE IN FORCE The current principal balance of all mortgage loans that are
currently insured.
INSURANCE WRITTEN The aggregate principal amount of mortgages insured by an
insurer during a given period under PRIMARY INSURANCE policies.
LENDER-PAID MORTGAGE Mortgage insurance for which the sole responsibility for
INSURANCE ("LPMI") payment of the premium resides in the lender rather than the
borrower.
</TABLE>

98
<PAGE>
<TABLE>
<S> <C>
LOAN SERVICER A person or entity that services a mortgage loan on behalf of
the mortgage owner.
LOAN TO VALUE RATIO ("LTV") The ratio (expressed as a percentage) of the dollar amount of
the mortgage loan to the value of the property (at the lower of
purchase price or appraised value) on the date of the loan.
LOSS ADJUSTMENT EXPENSES The insurer's cost of investigating and settling claims,
("LAE") including legal fees, as well as certain expenses of
administering the claims adjustment process.
LOSS ADJUSTMENT EXPENSE A liability established for estimated unpaid LOSS ADJUSTMENT
RESERVE EXPENSES in respect of defaults reported on or prior to the
applicable balance sheet date. The LOSS ADJUSTMENT EXPENSE
RESERVE is included in the LOSS RESERVE.
LOSS RATIO The ratio (expressed as a percentage) of (i) INCURRED LOSSES to
(ii) NET PREMIUMS EARNED, determined in accordance with SAP or
GAAP. In accordance with industry practices, the loss ratio is
computed without regard to changes in the CONTINGENCY RESERVE.
The lower the loss ratio the better the insurer's loss
development on its portfolio.
LOSS RESERVE A liability equal to the total estimated cost of claims
payments and the related expenses that the insurer will
ultimately be required to pay in the future in respect of
losses relating to defaults reported on or prior to the
applicable balance sheet date. The LOSS RESERVE also includes
the IBNR RESERVE and the LOSS ADJUSTMENT EXPENSE RESERVE.
LOW DOWN PAYMENT A down payment made by a home buyer that is less than 20% of
the purchase price for the property.
LOW-TO-MODERATE A mortgage loan to a BORROWER having 80% to 100% of the median
("LOW-TO-MOD") LOAN income for the relevant census tract as reported by the United
States Bureau of the Census.
MASTER POLICY The contract of PRIMARY INSURANCE issued to a lender in the
form of an insurance policy, setting forth the general
published terms and conditions for PRIMARY INSURANCE on
mortgage loans.
MASTER POLICYHOLDER An entity that originates or purchases residential mortgage
loans and has applied for and been granted a master policy.
MONTHLY PREMIUM PLAN A premium payment plan in which premiums are paid monthly over
the term of the coverage.
MORTGAGE BROKER A person or an entity who originates loans for funding by other
mortgage lenders, and who typically does not service such
loans.
MORTGAGE ORIGINATOR Any entity that generates residential mortgage loans including,
but not limited to, mortgage bankers, MORTGAGE BROKERS,
commercial banks and savings institutions.
NEGATIVE AMORTIZATION An increase in the principal balance of a loan due to
contractual loan payments being in an amount insufficient to
pay the interest accruing on such loan. A scheduled negative
amortization loan is a loan for which an increase in the
principal loan balance is predetermined and assured as of the
first payment. All other negative amortization loans are
potential negative amortization loans. In the case of potential
negative amortization loans, negative amortization usually
results when the BORROWER exercises an option to cap the amount
of the monthly payment under the terms of his or her mortgage.
</TABLE>

99
<PAGE>
<TABLE>
<S> <C>
NET (WHEN USED WITH RESPECT The amount retained after third-party REINSURANCE.
TO INSURANCE, PREMIUMS AND
RISK IN FORCE)
PERSISTENCY As of any date, the percentage of insurance policies in force
12 months prior to such date which remain in force on such
date.
POLICYHOLDERS' SURPLUS The dollar amount remaining after all liabilities, including
the LOSS RESERVE, are subtracted from all assets permitted to
be included on the insurer's balance sheet, all as determined
in accordance with SAP.
POOL INSURANCE A type of mortgage insurance that, in the case of traditional
pool insurance, covers the full amount of loss (less the
proceeds from any primary mortgage insurance coverage that may
be in place) on individual mortgage loans held within a group
or pool of loans, with an aggregate loss limit usually
expressed as a percentage of the initial aggregate loan
balances of the pool of loans. Modified pool insurance covers a
percentage of the balance of each loan determined at the time
the insurance is issued up to an agreed upon aggregate loss
limit. Unless otherwise specified, pool insurance as used
herein refers to both traditional pool insurance and modified
pool insurance.
PREMIUMS EARNED The amount of premiums recognized as revenue for accounting
purposes during a given period. Generally, premiums are earned
ratably over the term of the related policy.
PREMIUMS WRITTEN The amount of gross premiums received by an insurer during a
given period in respect of insurance written by it.
PRIMARY INSURANCE A type of insurance protection offered to mortgage lenders to
protect them against losses on an individual mortgage loan with
a stated COVERAGE PERCENTAGE applicable to such loan.
QUOTA SHARE REINSURANCE A form of REINSURANCE whereby an insurer CEDES a fixed
percentage of premiums and losses on insurance written by such
insurer to one or more reinsurers.
REINSURANCE A contract whereby a reinsurer agrees to indemnify an insurer
for part or all of the losses incurred under a policy or
policies of insurance issued by such insurer. The insurer pays
the reinsurer a portion of the underlying premium, generally
net of a CEDING COMMISSION.
RENEWAL PREMIUM The amount of insurance premium received which relates to the
continuation of coverage subsequent to the initial coverage
period (one month for MONTHLY PREMIUM PLANS and one year for
ANNUAL PREMIUM PLANS).
RISK IN FORCE The dollar amount equal to, in the case of PRIMARY INSURANCE,
the product of each insured mortgage loan's current principal
balance multiplied by such loan's COVERAGE PERCENTAGE.
RISK TO CAPITAL RATIO NET RISK IN FORCE divided by STATUTORY CAPITAL.
RUNOFF The period during which an insurance company is not writing new
insurance but has risk in force greater than zero.
SINGLE PREMIUM PLAN A premium payment plan where the initial premium payment
purchases coverage that extends for more than one year. The
premium is typically financed as part of the underlying
mortgage loan.
</TABLE>

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<PAGE>
<TABLE>
<S> <C>
STATUTORY ACCOUNTING Recording accounting transactions and preparing financial
PRACTICES OR "SAP" statements in accordance with the rules and procedures
prescribed or permitted by state insurance regulatory agencies.
For an explanation of certain differences between generally
accepted accounting principles and statutory accounting
practices, see Note 3 of Notes to Consolidated Financial
Statements.
STATUTORY CAPITAL The sum of POLICYHOLDERS' SURPLUS plus the CONTINGENCY RESERVE
calculated in accordance with STATUTORY ACCOUNTING PRACTICES.
This total is used in the calculation of the RISK TO CAPITAL
RATIO.
UNASSIGNED SURPLUS Refers to unassigned funds (surplus), a statutory balance sheet
item equal to POLICYHOLDERS' SURPLUS less certain items,
principally paid-in capital. As Illinois insurance
corporations, Amerin Guaranty and Amerin Re may pay dividends
only from unassigned surplus.
UNDERWRITING The process established by an insurance company to apply a set
of standards to the risks presented to it to determine whether
or not to insure such risks. Underwriting also enables an
insurance company to evaluate and shape the risk profile of its
insurance portfolio.
UNDERWRITING EXPENSES All operating expenses of a mortgage insurer, exclusive of LAE
and investment expenses.
UNDERWRITING INCOME The pre-tax income or loss experienced by an insurance company
after deducting incurred losses and LAE and operating expenses
from NET PREMIUMS EARNED. This profit or loss calculation
includes REINSURANCE assumed and CEDED but excludes investment
income.
</TABLE>

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AMERIN CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors............................................................................. F-2
Consolidated Balance Sheets at December 31, 1995 and 1994.................................................. F-3
Consolidated Statements of Operations For the Years Ended December 31, 1995, 1994 and 1993................. F-4
Consolidated Statements of Redeemable Preferred Stock and Common Stockholders'
Equity for the Years Ended December 31, 1995, 1994 and 1993.............................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995,
1994 and 1993............................................................................................ F-6
Notes to Consolidated Financial Statements................................................................. F-7

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets at September 30, 1996 (Unaudited) and
December 31, 1995........................................................................................ F-22
Condensed Consolidated Statements of Operations for the Nine Months Ended
September 30, 1996 and 1995 (Unaudited).................................................................. F-23
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 1996 and 1995 (Unaudited).................................................................. F-24
Notes to Condensed Consolidated Financial Statements (Unaudited)........................................... F-25
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
AMERIN CORPORATION

We have audited the accompanying consolidated balance sheets of Amerin
Corporation and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, redeemable preferred stock and common
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Amerin
Corporation and subsidiaries at December 31, 1995 and 1994, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.

As discussed in Note 2 to the consolidated financial statements, in 1994,
the Company changed its method of accounting for investments in debt securities.

ERNST & YOUNG LLP

Chicago, Illinois
February 21, 1996

F-2
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1995 1994
---------- ----------

<CAPTION>
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
ASSETS
Investments (NOTES 2 AND 4):
Fixed maturities available-for-sale, at fair value...................................... $ 151,021 $ 86,296
Short-term investments.................................................................. 145,961 9,950
---------- ----------
Total investments......................................................................... 296,982 96,246
Cash and cash equivalents................................................................. 1,054 694
Accrued investment income................................................................. 2,376 1,551
Premiums receivable....................................................................... 2,375 1,144
Deferred policy acquisition costs......................................................... 4,419 2,874
Other receivables......................................................................... 345 112
Leasehold improvements, furniture and equipment, at cost, net of accumulated depreciation
of $939 in 1995 and $466 in 1994 (NOTE 2)............................................... 4,199 1,041
Goodwill, net of accumulated amortization of $546 in 1995 and $397 in 1994 (NOTE 2)....... 2,431 2,580
Other intangibles, net of accumulated amortization of $1,137 in 1995 and $814 in 1994..... 478 802
Other assets.............................................................................. 1,669 217
---------- ----------
Total assets.............................................................................. $ 316,328 $ 107,261
---------- ----------
---------- ----------

LIABILITIES, REDEEMABLE PREFERRED STOCK,
AND COMMON STOCKHOLDERS' EQUITY
Liabilities:
Unearned premiums....................................................................... $ 12,710 $ 6,323
Loss reserves........................................................................... 7,092 262
Current income taxes.................................................................... 600 --
Deferred income taxes................................................................... 1,783 --
Payable for securities.................................................................. 15,724 --
Accrued expenses and other liabilities.................................................. 4,282 1,840
---------- ----------
Total liabilities....................................................................... 42,191 8,425
Commitments and contingencies (NOTES 7, 11, 12 AND 13)....................................
Redeemable preferred stock (NOTE 10):
13.5% Redeemable Cumulative Convertible Preferred Stock, $.01 par value, $1,000 stated
value, 113,173 shares authorized, 40,754.74 shares issued and outstanding in 1994..... -- 40,755
Common stockholders' equity (NOTES 10 AND 15):
Voting Common Stock, $.01 par, 50,000,000 shares authorized, 22,381,818 and 17,789,500
shares issued and outstanding in 1995 and 1994, respectively.......................... 224 178
Nonvoting Common Stock, $.01 par, 50,000,000 shares authorized, 3,609,625 shares issued
and outstanding in 1995 and 1994...................................................... 36 36
Additional paid-in capital.............................................................. 314,614 78,723
Net unrealized investment gains (losses)................................................ 3,229 (4,988)
Retained-earnings deficit............................................................... (43,966) (15,868)
---------- ----------
Total common stockholders' equity......................................................... 274,137 58,081
---------- ----------
Total liabilities, redeemable preferred stock, and common stockholders' equity.......... $ 316,328 $ 107,261
---------- ----------
---------- ----------
</TABLE>

See accompanying notes.

F-3
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
<S> <C> <C> <C>
1995 1994 1993
---------- --------- ---------

<CAPTION>
(IN THOUSANDS OF DOLLARS, EXCEPT
PER SHARE DATA)
<S> <C> <C> <C>
Revenues:
Net premiums written........................................................... $ 33,946 $ 10,274 $ 1,611
Increase in unearned premiums.................................................. (6,387) (5,037) (1,285)
---------- --------- ---------
Net premiums earned............................................................ 27,559 5,237 326
Net investment income (NOTE 4)................................................. 7,612 4,818 4,252
Realized investment gains (NOTE 4)............................................. 491 435 707
---------- --------- ---------
Total revenues................................................................... 35,662 10,490 5,285

Expenses:
Losses incurred................................................................ 7,757 262 --
Policy acquisition costs....................................................... 6,641 2,455 2,677
Underwriting and other expenses (NOTES 8, 9, 11 AND 13)........................ 6,915 5,765 5,403
Compensation charge resulting from initial public offering
(NOTE 15).................................................................... 35,741 -- --
---------- --------- ---------
Total expenses................................................................... 57,054 8,482 8,080
---------- --------- ---------
Income (loss) before income taxes................................................ (21,392) 2,008 (2,795)
---------- --------- ---------
Income tax expense:
Current........................................................................ 1,375 -- --
Deferred....................................................................... 44 -- --
---------- --------- ---------
Total........................................................................ 1,419 -- --
---------- --------- ---------
Net income (loss)................................................................ (22,811) 2,008 (2,795)

Pay-in-kind dividends on preferred stock (NOTE 10)............................... 5,287 5,067 4,437
---------- --------- ---------
Net loss applicable to common stockholders....................................... $ (28,098) $ (3,059) $ (7,232)
---------- --------- ---------
---------- --------- ---------
Net loss per common share (NOTE 15).............................................. $ (2.32) $ (.36) $ (.99)
---------- --------- ---------
---------- --------- ---------
Average common and common equivalent shares outstanding
(in thousands) (NOTE 15)....................................................... 12,106 8,467 7,328
</TABLE>

See accompanying notes.

F-4
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED
STOCK AND COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCKHOLDERS' EQUITY (NOTE 15)
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REDEEMABLE VOTING NONVOTING ADDITIONAL NET UNREALIZED RETAINED-
PREFERRED COMMON COMMON PAID-IN INVESTMENT EARNINGS
STOCK STOCK STOCK CAPITAL GAINS (LOSSES) DEFICIT
----------- ----------- ------------- ---------- -------------- ----------

<CAPTION>
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993........................ $ 31,251 $ 171 $ 11 $ 53,372 $ -- $ (5,577)
Net loss........................................ -- -- -- -- -- (2,795)
Pay-in-kind dividends on preferred stock........ 4,437 -- -- -- -- (4,437)
Shares issued under long-term incentive plan.... -- -- -- 94 -- --
----------- ----- --- ---------- ------- ----------
Balance, December 31, 1993...................... 35,688 171 11 53,466 -- (12,809)
Net income...................................... -- -- -- -- -- 2,008
Issuance of common stock........................ -- 6 25 24,979 -- --
Pay-in-kind dividends on preferred stock........ 5,067 -- -- -- -- (5,067)
Shares issued under long-term incentive plan.... -- 1 -- 278 -- --
Cumulative effect of change in accounting
principle (NOTE 2)............................ -- -- -- -- 3,054 --
Net unrealized investment losses................ -- -- -- -- (8,042) --
----------- ----- --- ---------- ------- ----------
Balance, December 31, 1994...................... 40,755 178 36 78,723 (4,988) (15,868)
Net loss........................................ -- -- -- -- -- (22,811)
Issuance of common stock (NOTES 10 AND 15)...... -- 46 -- 235,847 -- --
Pay-in-kind dividends on preferred stock........ 5,287 -- -- -- -- (5,287)
Redemption of preferred stock (NOTE 15)......... (46,042) -- -- -- -- --
Shares issued under long-term incentive plan.... -- -- -- 44 -- --
Net unrealized investment gains................. -- -- -- -- 8,217 --
----------- ----- --- ---------- ------- ----------
Balance, December 31, 1995...................... $ -- $ 224 $ 36 $ 314,614 $ 3,229 $ (43,966)
----------- ----- --- ---------- ------- ----------
----------- ----- --- ---------- ------- ----------

<S> <C>

TOTAL
----------

<S> <C>
Balance, January 1, 1993........................ $ 47,977
Net loss........................................ (2,795)
Pay-in-kind dividends on preferred stock........ (4,437)
Shares issued under long-term incentive plan.... 94
----------
Balance, December 31, 1993...................... 40,839
Net income...................................... 2,008
Issuance of common stock........................ 25,010
Pay-in-kind dividends on preferred stock........ (5,067)
Shares issued under long-term incentive plan.... 279
Cumulative effect of change in accounting
principle (NOTE 2)............................ 3,054
Net unrealized investment losses................ (8,042)
----------
Balance, December 31, 1994...................... 58,081
Net loss........................................ (22,811)
Issuance of common stock (NOTES 10 AND 15)...... 235,893
Pay-in-kind dividends on preferred stock........ (5,287)
Redemption of preferred stock (NOTE 15)......... --
Shares issued under long-term incentive plan.... 44
Net unrealized investment gains................. 8,217
----------
Balance, December 31, 1995...................... $ 274,137
----------
----------
</TABLE>

See accompanying notes.

F-5
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
<S> <C> <C> <C>
1995 1994 1993
----------- --------- ----------

<CAPTION>
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)............................................................. $ (22,811) $ 2,008 $ (2,795)
Adjustments to reconcile net income (loss) to net cash provided (used) by
operating activities:
Change in:
Accrued investment income................................................. (825) (446) 170
Premiums receivable....................................................... (1,231) (1,046) (97)
Unearned premiums......................................................... 6,387 5,037 1,286
Loss reserves............................................................. 6,830 262 --
Other intangibles and other assets........................................ -- (24) --
Accrued expenses and other liabilities.................................... 180 1,233 (291)
Federal income taxes...................................................... 644 -- --
Policy acquisition costs deferred............................................. (6,812) (4,006) (322)
Policy acquisition costs amortized............................................ 5,267 1,388 65
Amortization.................................................................. 472 472 472
Depreciation.................................................................. 501 264 178
Realized investment gains..................................................... (491) (435) (708)
Non-cash compensation charge resulting from initial public offering........... 35,741 -- --
Other items, net.............................................................. (1,680) 384 (50)
----------- --------- ----------
Net cash provided (used) by operating activities.............................. 22,172 5,091 (2,092)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of:
Fixed maturity securities................................................... (70,842) (38,749) (40,010)
Short-term investments, net................................................. (136,011) (8,988) (40)
Property and equipment...................................................... (1,383) (292) (529)
Sale or maturity of:
Fixed maturity securities................................................... 32,271 18,059 43,164
Property and equipment...................................................... 43 1 7
----------- --------- ----------
Net cash provided (used) by investing activities.............................. (175,922) (29,969) 2,592

CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock...................................................... 200,152 25,010 --
Redemption of preferred stock................................................. (46,042) -- --
----------- --------- ----------
Net cash provided by financing activities..................................... 154,110 25,010 --
----------- --------- ----------
Net increase in cash and cash equivalents..................................... 360 132 500
Cash and cash equivalents at beginning of year................................ 694 562 62
----------- --------- ----------
Cash and cash equivalents at end of year...................................... $ 1,054 $ 694 $ 562
----------- --------- ----------
----------- --------- ----------
</TABLE>

See accompanying notes.

F-6
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS

Amerin Corporation (Company), through its primary insurance subsidiary,
Amerin Guaranty Corporation (Amerin Guaranty), provides mortgage guaranty
insurance through lending institutions on first mortgages secured by residential
property. A second wholly owned insurance subsidiary, Amerin Re Corporation
(Amerin Re) reinsures mortgage guaranty insurance written by Amerin Guaranty.
The Company's three largest customers accounted for 67%, 66% and 89% of net
premiums written in 1995, 1994 and 1993, respectively. Additionally, net
premiums written in 1995 for the Company's three largest customers, each
amounting to more than 10% of total net premiums written in 1995, were $12.7
million, $7.0 million and $3.5 million. Similarly, net premiums written in 1994
for the Company's four largest customers were $2.7 million $2.4 million, $1.6
million and $1.2 million, while in 1993, net premiums written for the Company's
largest customer amounted to $1.2 million. Approximately 31% of the Company's
risk in force at December 31, 1995 was concentrated in California.

On November 28, 1995, the Company completed an initial public offering of
its common stock (see Note 15).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements include the accounts of
the Company and its insurance subsidiaries. All significant intercompany
accounts and transactions have been eliminated. These financial statements have
been prepared in conformity with generally accepted accounting principles (GAAP)
which, for the insurance subsidiaries, differ in certain respects from the
accounting practices prescribed or permitted by state insurance regulatory
authorities (statutory basis) (see Note 3). Significant accounting policies are
as follows:

USE OF ESTIMATES

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

INVESTMENTS

The Company adopted the provisions of Financial Accounting Standards Board
(FASB) Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," as of January 1, 1994. As a result, fixed maturities that are
available for sale are carried at fair value. For 1993, fixed maturities were
carried at amortized cost. Unrealized gains and losses on fixed maturities
available for sale are excluded from operations and are recorded directly to
common stockholders' equity, net of related deferred income taxes. The
cumulative effect of the adoption of Statement No. 115 increased common
stockholders' equity by $3.1 million, net of deferred income taxes, to reflect
the net unrealized gains on fixed maturities previously carried at amortized
cost. In accordance with Statement No. 115, prior-period financial statements
have not been restated to reflect the change in accounting principles.

The amortized cost of fixed maturities is adjusted for amortization of
premiums to the first call date and the accretion of discounts to maturity. Such
adjustments are included in net investment income. Included in fixed maturities
are investments in collateralized mortgage obligations whose amortized cost is

F-7
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
determined using the interest method including anticipated prepayments.
Prepayment assumptions are obtained from dealer surveys.

Short-term investments are carried at cost, which approximates fair value.
Cash equivalents are highly liquid investments. Both short-term investments and
cash equivalents have maturities of three months or less.

Interest on fixed maturities is recognized in earnings as the interest
accrues. Realized gains and losses on investments are computed using specific
amortized costs of the securities sold and are reflected in the statements of
operations.

PREMIUM REVENUE RECOGNITION

Premiums are written on an annual, monthly and single premium basis. Annual
and monthly premiums written with respect to a policy year are earned on a daily
pro rata basis over the policy year. Portions of annual premiums which relate to
risk periods extending beyond the policy year are amortized over the period at
risk in correspondence with the expiration of risk. Single premiums written for
a coverage period of more than one year are amortized over the entire coverage
period, principally in correspondence with the expiration of risk.

POLICY ACQUISITION COSTS

Policy acquisition costs include only those costs that relate directly to,
and vary with, premium production. Such costs include compensation of employees
involved in underwriting, marketing and policy issuance functions, state premium
taxes, and certain other underwriting expenses. Net acquisition costs are
deferred and amortized over the period in which the related premiums are earned.
Anticipated claims and claim adjustment expenses are considered in determining
the recoverability of acquisition costs.

LOSS RESERVES

Reserves are established for reported insurance losses based on when notices
of default of insured mortgage loans are received. Reserves also reflect
estimates for losses incurred on notices of default not yet reported by the
lender. Reserves are established by management using estimated claim rates and
claim amounts in estimating the ultimate loss. Although considerable variability
is inherent in such estimates, management believes that the reserves for losses
are adequate. Adjustments to reserve estimates are reflected in the financial
statements in the periods in which the adjustments are made.

LEASEHOLD IMPROVEMENTS, FURNITURE AND EQUIPMENT

Leasehold improvements, furniture and equipment consist of office
improvements, furniture and fixtures, office equipment, computer hardware and
software, which are recorded at cost and charged against income principally over
their estimated service lives or, in the case of leasehold improvements, over
the term of the lease. Depreciation is computed on the straight-line method over
a period of five to ten years. Maintenance and repairs are charged to expense as
incurred.

F-8
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
GOODWILL AND OTHER INTANGIBLES

Goodwill represents the excess of cost over net assets purchased in
connection with the 1992 acquisition of Amerin Guaranty by the Company and is
amortized on a straight-line basis over 20 years. The Company periodically
evaluates the existence of goodwill impairment based principally on projected
undiscounted net cash flows of Amerin Guaranty.

Other intangibles include organizational and start-up costs incurred in the
first year of operations. These costs are amortized using the straight-line
method over five years.

INCOME TAXES

Deferred income taxes are provided for temporary differences between the
financial reporting and tax bases of assets and liabilities.

Mortgage guaranty insurance companies are permitted to deduct from taxable
income, subject to certain limitations, amounts added to statutory basis
contingency loss reserves. The amounts deducted must be included in taxable
income in the 10th year after being added to the contingency reserves or upon
prior release of such reserves to cover excess losses as permitted by insurance
regulators. The deductions from taxable income are only allowed to the extent
that U.S. government non-interest-bearing tax and loss bonds are purchased and
held in an amount equal to the tax benefit attributable to such deductions. At
December 31, 1995 and 1994, the Company had no investment in U.S. government
non-interest-bearing tax and loss bonds.

NET LOSS PER COMMON SHARE

Net loss per share of common stock is determined by dividing net income or
loss, less dividends on preferred stock, by the weighted-average number of
common stock and common stock equivalents (dilutive stock options) outstanding.
For 1995, the weighted average shares of common stock includes 13,340,000 shares
issued on November 28, 1995, in conjunction with the Company's initial public
offering. Weighted average shares in 1995 also includes 2,250,068 shares as of
November 28, 1995 out of a total of 11,000,000 shares that were previously
excluded from weighted average shares due to the fact that such shares were
subject to contingent recall provisions and the conditions required for the
removal of the recall provisions on the 11,000,000 shares had not been met. The
Company's initial public offering removed the recall provisions on 2,250,068 of
the 11,000,000 shares and resulted in the cancellation of the remaining
8,749,932 shares (see Note 15).

Where the effect of common stock equivalents on net income or loss per share
would be antidilutive, they are excluded from the average shares outstanding.
During 1995, 1994 and 1993, all of the Company's common stock equivalents (stock
options) are antidilutive and are excluded from average shares outstanding.
However, common stock awards and options issued in the 12 months prior to the
Company's initial public offering are treated as common stock equivalents for
1995, 1994 and 1993, even if antidilutive. Fully diluted net loss per share is
equal to primary net loss per share for 1995, 1994 and 1993. Because preferred
stock was not convertible until 2007 at which time it was mandatorily
convertible, conversion is not assumed for purposes of calculating primary or
fully-diluted net loss per share in 1995, 1994 and 1993. The preferred stock was
redeemed in December, 1995.

F-9
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS

Certain amounts in these financial statements have been reclassified from
amounts reported in previously issued financial statements to conform to the
current presentation.

3. STATUTORY ACCOUNTING PRACTICES

The consolidated financial statements are prepared in conformity with GAAP
which, for Amerin Guaranty and Amerin Re, differ in certain respects from
accounting practices prescribed or permitted by state insurance regulatory
authorities (statutory basis). The following are the significant differences
between statutory basis accounting practices and GAAP:

- Investments in bonds are carried at amortized cost on a statutory basis.
GAAP requires that such fixed-maturity securities be classified as
held-to-maturity, trading, or available-for-sale. Held-to-maturity
securities are carried at amortized cost, and securities classified as
trading or available-for-sale are carried at fair value. Unrealized
holding gains and losses are reported in income for those securities
classified as trading and as a separate component of common stockholders'
equity for those securities classified as available-for-sale.

- Policy acquisition costs are charged to current operations on a statutory
basis as incurred rather than deferred and amortized as related premiums
are earned under GAAP.

- A contingency reserve is computed on the basis of statutory requirements
for the security of all policyholders, regardless of whether loss
contingencies actually exist; such reserves are not permitted under GAAP.

- Certain assets designated as "nonadmitted assets" are charged directly
against surplus on a statutory basis but are reflected as assets under
GAAP.

- Federal income taxes on a statutory basis are only provided on taxable
income for which income taxes are currently payable, while under GAAP,
taxes are also provided for temporary differences between the financial
reporting and tax bases of assets and liabilities.

In connection with the Company's November 1995 initial public offering, a
nonrecurring non-cash compensation charge was recorded under GAAP related to
ownership of the Company's common stock by two employees of Amerin Guaranty.
Such non-cash compensation charges, which have no effect on total stockholders'
equity, are not recorded on a statutory basis.

F-10
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. STATUTORY ACCOUNTING PRACTICES (CONTINUED)
The following is a reconciliation of the Company's 1995, 1994 and 1993
consolidated net income (loss) and common stockholders' equity presented on a
GAAP basis to the corresponding amounts reported on a statutory basis for the
insurance subsidiaries:
<TABLE>
<CAPTION>
COMMON
NET INCOME STOCKHOLDERS'
(LOSS) EQUITY
----------- ------------
<S> <C> <C>
(IN THOUSANDS OF DOLLARS)

<CAPTION>
<S> <C> <C>
1995:
Consolidated GAAP basis amounts.................................. $ (22,811) $ 274,137
Company only amounts and eliminations............................ 258 (5,789)
----------- ------------
Insurance subsidiaries GAAP basis amounts........................ (22,553) 268,348
Fixed maturities available-for-sale.............................. -- (4,979)
Deferred policy acquisition costs................................ (1,545) (4,419)
Compensation expense............................................. 35,741 --
Contingency reserves............................................. -- (18,892)
Nonadmitted assets............................................... -- (3,045)
Deferred income taxes............................................ 44 1,787
Contingency reserve tax deduction................................ 607 607
----------- ------------
Statutory basis amounts.......................................... $ 12,294 $ 239,407
----------- ------------
----------- ------------

1994:
Consolidated GAAP basis amounts.................................. $ 2,008 $ 58,081
Company only amounts and eliminations............................ 647 36,856
----------- ------------
Insurance subsidiaries GAAP basis amounts........................ 2,655 94,937
Fixed maturities available-for-sale.............................. -- 4,987
Deferred policy acquisition costs................................ (2,617) (2,874)
Contingency reserves............................................. -- (4,320)
Nonadmitted assets............................................... -- (1,186)
----------- ------------
Statutory basis amounts.......................................... $ 38 $ 91,544
----------- ------------
----------- ------------

1993:
Consolidated GAAP basis amounts.................................. $ (2,795) $ 40,840
Company only amounts and eliminations............................ 577 31,420
----------- ------------
Insurance subsidiary GAAP basis amounts.......................... (2,218) 72,260
Deferred policy acquisition costs................................ (257) (257)
Contingency reserves............................................. -- (427)
Nonadmitted assets............................................... -- (1,196)
----------- ------------
Statutory basis amounts.......................................... $ (2,475) $ 70,380
----------- ------------
----------- ------------
</TABLE>

F-11
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. INVESTMENTS

The amortized cost and fair value of investments in fixed-maturity
securities are summarized as follows:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED
COST GAIN LOSS FAIR VALUE
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)

<CAPTION>
<S> <C> <C> <C> <C>
At December 31, 1995:
U.S. Treasury.................................................. $ 23,847 $ 897 $ 42 $ 24,702
Foreign governments............................................ 1,559 -- 99 1,460
States and political subdivisions.............................. 74,230 3,100 64 77,266
Corporate securities........................................... 27,202 889 7 28,084
Mortgage-backed securities..................................... 19,216 408 115 19,509
---------- ----------- ----------- ----------
Total fixed maturities........................................... $ 146,054 $ 5,294 $ 327 $ 151,021
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
At December 31, 1994:
U.S. Treasury.................................................. $ 26,146 $ 13 $ 1,281 $ 24,878
Foreign governments............................................ 1,561 -- 367 1,194
States and political subdivisions.............................. 23,125 18 741 22,402
Corporate securities........................................... 25,297 -- 1,364 23,933
Mortgage-backed securities..................................... 13,751 -- 1,242 12,509
Other securities............................................... 1,403 -- 23 1,380
---------- ----------- ----------- ----------
Total fixed maturities........................................... $ 91,283 $ 31 $ 5,018 $ 86,296
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
</TABLE>

The fair value of investments is determined by using public market
quotations for such securities. The carrying amount of the Company's
available-for-sale fixed-maturity investments can increase or decrease
significantly in the near term as a result of changes in market interest rates.

A summary of the amortized cost and fair value of investments in
fixed-maturity securities at December 31, 1995, by contractual maturity,
follows:
<TABLE>
<CAPTION>
AMORTIZED COST FAIR VALUE
-------------- ----------
<S> <C> <C>
(IN THOUSANDS OF DOLLARS)

<CAPTION>
<S> <C> <C>
Due in one year or less........................................... $ 6,038 $ 6,021
Due after one year through five years............................. 33,491 34,179
Due after five years through ten years............................ 14,954 15,999
Due after ten years............................................... 72,355 75,312
Mortgage-backed securities........................................ 19,216 19,510
-------------- ----------
$ 146,054 $ 151,021
-------------- ----------
-------------- ----------
</TABLE>

F-12
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. INVESTMENTS (CONTINUED)
Proceeds from sales of fixed-maturity securities were $28.4 million, $17.4
million and $42.4 million in 1995, 1994 and 1993, respectively. Gross gains and
losses realized on those sales are presented below:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)

<CAPTION>
<S> <C> <C> <C>
Realized on sales of fixed-maturity securities:
Gains........................................................... $ 520 $ 442 $ 775
Losses.......................................................... (29) (7) (68)
--------- --------- ---------
Net realized gains................................................ $ 491 $ 435 $ 707
--------- --------- ---------
--------- --------- ---------
</TABLE>

The changes in net unrealized gains (losses) on investments in
fixed-maturity securities were $10.0 million in 1995, ($8.0 million) in 1994 and
$3.2 million in 1993.

At December 31, 1995, investments with a carrying amount of $9.0 million
were on deposit with state insurance departments to satisfy regulatory
requirements.

The composition of net investment income is as follows:

<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Fixed-maturity securities........................................ $ 6,684 $ 4,697 $ 4,309
Short-term investments........................................... 1,087 238 54
--------- --------- ---------
7,771 4,935 4,363
Less: Investment expenses........................................ 159 117 111
--------- --------- ---------
Net investment income............................................ $ 7,612 $ 4,818 $ 4,252
--------- --------- ---------
--------- --------- ---------
</TABLE>

5. LOSS RESERVES

The following table is a reconciliation of the beginning and ending reserve
for losses and loss adjustment expenses for the years shown:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1994
--------- ---------

<CAPTION>
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Balance, January 1................................................... $ 262 $ --
Losses and loss adjustment expenses, principally in respect of
default notices occurring in:
Current year..................................................... 7,037 262
Prior years...................................................... 720 --
--------- ---------
Total losses and loss adjustment expenses........................ 7,757 262
--------- ---------
Loss and loss adjustment expense payments principally in respect of
default notices occurring in:
Current year..................................................... 520 --
Prior years...................................................... 407 --
--------- ---------
Total payments................................................... 927 --
--------- ---------
Balance, December 31................................................. $ 7,092 $ 262
--------- ---------
--------- ---------
</TABLE>

F-13
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES

The Company and its subsidiaries file a consolidated federal income tax
return. The Company increased its valuation allowance by $1.5 million in 1993
offsetting deferred tax assets principally relating to tax loss carryforwards.
In 1994, the valuation allowance increased by $1.4 million, including an
increase of $1.7 million relating to unrealized losses on investments reported
as a component of common stockholders' equity. The 1994 provision for income
taxes includes deferred tax expense of $.4 million related principally to
increases in deferred policy acquisition costs and a decrease of $.4 million in
the valuation allowance. The valuation allowances were provided because the
Company's historical operating losses represented negative evidence that it was
more likely than not that the Company would not be able to utilize the net
operating loss carryforwards.

For 1995, the Company decreased the valuation allowance by $4.5 million,
including a decrease of $1.7 million related to unrealized gains on investments
reported as a component of common stockholders' equity. The remaining decrease
in the valuation allowance is related principally to the utilization of net
operating loss carryforwards. Amerin also has an alternative minimum tax credit
carryforward of $.3 million that has no expiration date.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)

<CAPTION>
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs................................... $ 1,547 $ 1,006
Unrealized gain on investments.................................... 1,738 --
Tax over book depreciation........................................ 229 292
Other............................................................. 133 21
--------- ---------
Total deferred tax liabilities...................................... 3,647 1,319
Deferred tax assets:
Net operating loss carryforwards.................................. -- 3,566
Unearned premium reserves......................................... 890 443
Unrealized loss on investments.................................... -- 1,746
Accrued liabilities............................................... 43 55
Reserve discounting............................................... 234 8
Alternative minimum tax carryforward.............................. 324 --
Other............................................................. 373 --
--------- ---------
Total deferred tax assets........................................... 1,864 5,818
Valuation allowance for deferred tax assets......................... -- (4,499)
--------- ---------
Deferred tax assets net of valuation allowance...................... 1,864 1,319
--------- ---------
Net deferred tax amount............................................. $ 1,783 $ --
--------- ---------
--------- ---------
</TABLE>

The nature of the Company's deferred tax assets and liabilities at December
31, 1995 is such that the general reversal pattern for these temporary
differences is expected to result in the full realization of the Company's
deferred tax assets.

F-14
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. INCOME TAXES (CONTINUED)
The Company has elected to purchase non-interest bearing United States
Mortgage Guaranty Tax and Loss Bonds in lieu of paying federal income taxes to
the extent permissible under Internal Revenue Code Section 832(e). The Company
accounts for these purchases as a payment of current federal income taxes.
Accordingly, at December 31, 1995 the Company was obligated to purchase $.6
million of United States Mortgage Guaranty Tax and Loss Bonds.

The Company paid income taxes of $.8 million and $.02 million in 1995 and
1994, respectively, and no income taxes were paid in 1993.

The Company's income tax provision varied from the statutory federal income
tax rate applied to its net income (loss) before taxes as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)

<CAPTION>
<S> <C> <C> <C>
Statutory federal income tax rate applied to net income (loss)
before taxes................................................... $ (7,487) $ 683 $ (950)
Add (deduct) tax effect of:
Nondeductible compensation..................................... 12,510 -- --
Nondeductible goodwill amortization and other nondeductible
expenses....................................................... 77 75 73
Tax-exempt interest............................................ (533) (399) (597)
Increase (decrease) in valuation allowance..................... (2,753) (369) 1,518
Other (net).................................................... (395) 10 (44)
--------- --------- ---------
Income tax provision............................................. $ 1,419 $ -- $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>

7. REINSURANCE

Amerin Guaranty reinsures portions of its risks through reinsurance
treaties. This process serves to limit Amerin Guaranty's exposure on such risks.
Reinsurance ceded reduced premiums earned by $.4 million in 1995, $4,000 in
1994, and $170 in 1993. Amerin Guaranty would remain liable to its policyholders
to the extent that such reinsurers do not meet their obligations under these
arrangements.

F-15
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. RELATED PARTY TRANSACTIONS

Prior to the Company's initial public offering, the Company utilized a
directors and officers liability insurance program in which an affiliate of a
principal common stockholder insured the first layer. Premiums paid in 1995,
1994 and 1993 for the first layer were $.08 million, $.01 million and $.1
million, respectively.

During 1995 and 1994, both the Company and its subsidiaries maintained cash
accounts at an affiliate of one of the principal stockholders.

The Company also invested short-term funds with an affiliate of a principal
stockholder. As of December 31, 1995 and 1994, the balance of such invested
funds was $.2 million and $.4 million, respectively.

Since 1992, the Company has utilized the services of two travel agencies for
its business travel needs. The spouse of the President of the Company has been
an employee of each such agency. The Company has spent $1.1 million, $.8 million
and $.7 million on travel expenses in 1995, 1994 and 1993, respectively.

9. INCENTIVE COMPENSATION

The Company has a long-term incentive plan (Plan), which provides additional
compensation to officers of Amerin Guaranty. Under the Plan, an aggregate of
8,300,000 shares of common stock may be issued or sold as restricted stock or
sold under incentive stock options, as the result of awards made to Plan
participants. Incentive stock options awarded under the Plan vest over a
five-year schedule. Plan participants are bound by an agreement not to vote any
shares acquired under the Plan, until a future date determined by the Company's
board of directors.

Awards of shares made or approved in 1995, 1994 and 1993, including those
approved pursuant to the Plan, resulted in compensation expense of $.07 million,
$.4 million and $.1 million, respectively. All of such compensation expense
represented the fair value of the shares of common stock awarded, together with
related gross-up payments to certain Plan participants for the tax consequences
of those share grants. Prior to 1993, such grants included an award of 750,000
shares of Voting Common Stock to an officer. Options to acquire 4,375,000 shares
at a price of $.28 per share were also approved prior to 1993. The 750,000 award
shares and the options to acquire 4,375,000 shares of Voting Common Stock were
subject to certain restrictions including transfer limitations and contingent
recall provisions as described in a stock and voting agreement. Prior to 1995,
conditions required for the removal of the recall provisions had not been met.
In 1995, in connection with the Company's initial public offering, the
conditions for the removal of the recall provisions on the 750,000 award shares
and 34 of the options were met and the recall provisions were removed. The
remaining 4,374,966 options were cancelled. (See Note 15).

F-16
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. INCENTIVE COMPENSATION (CONTINUED)
A summary of option activity for 1995 and 1994 is as follows:

<TABLE>
<CAPTION>
1995 1994
--------------------------- -------------------------
<S> <C> <C> <C> <C>
NO. OF NO. OF
SHARES PRICE RANGE SHARES PRICE RANGE
----------- -------------- ---------- -------------
Options outstanding at beginning of year................ 5,053,125 $ .28-$5.26 4,859,500 $ .28-$4.24
Granted............................................... 70,600 $ 5.30-$23.25 220,250 $ 4.24-$5.26
Exercised............................................. -- --
Canceled (Note 15).................................... (4,431,966) $ .28-$5.26 (26,625) $4.24
----------- -------------- ---------- -------------
Options outstanding at end of year...................... 691,759 $ 4.24-$23.25 5,053,125 $ .28-$5.26
----------- -------------- ---------- -------------
----------- -------------- ---------- -------------
Options exercisable at end of year...................... 197,750 $4.24 107,750 $4.24
----------- -------------- ---------- -------------
----------- -------------- ---------- -------------
Shares available for grant at end of year............... 6,679,366 2,320,250
----------- ----------
----------- ----------
</TABLE>

In addition, bonuses are paid to certain officers of Amerin Guaranty
pursuant to terms of employment or as a result of meritorious performance. Such
bonuses amounted to $.5 million in 1995, $.6 million in 1994 and $.3 million in
1993.

In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation," which will be effective for, and reflected in,
financial statements of the Company for all periods commencing on or after
January 1, 1996. Statement No. 123 allows companies to expense the fair value of
employee stock options or to continue the Company's current practice of
recognizing no compensation expense since the amount an employee must pay to
acquire the Company's stock (the option exercise price) is equal to the stock's
market value at the grant date. Companies not expensing the fair value of
employee stock options will be required to disclose the pro forma effects on
operations had the fair value of the options been expensed. The Company
anticipates implementing the disclosure requirements of Statement No. 123 in its
1996 financial statements.

10. REDEEMABLE PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY

REDEEMABLE CUMULATIVE CONVERTIBLE PREFERRED STOCK

Activity for 1995, 1994 and 1993, with respect to shares of 13.5% Redeemable
Cumulative Convertible Preferred Stock, par value $.01, stated value $1,000, is
as follows:

<TABLE>
<CAPTION>
NUMBER
OF SHARES
-----------
<S> <C>
Shares outstanding, January 1, 1993.............................................. 31,250.29
Pay-in-kind dividends............................................................ 4,437.21
-----------
Shares outstanding, December 31, 1993............................................ 35,687.50
Pay-in-kind dividends............................................................ 5,067.24
-----------
Shares outstanding, December 31, 1994............................................ 40,754.74
Pay-in-kind dividends............................................................ 5,287.30
-----------
46,042.04
December 1, 1995 redemption (Note 15)............................................ (46,042.04)
-----------
Shares outstanding, December 31, 1995............................................ --
-----------
-----------
</TABLE>

F-17
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. REDEEMABLE PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY (CONTINUED)
Prior to the redemption on December 1, 1995 of the outstanding shares of
13.5% Redeemable Cumulative Convertible Preferred Stock, each such share was
convertible into Common Stock on June 30, 2007. The Company had the option to
redeem the outstanding preferred shares at a price of $1,000 per share (plus all
accrued and unpaid dividends); provided, however, that between July 1, 1995 and
June 30, 2007, if preferred shares had been transferred under certain
circumstances to a person other than any of the original institutional
stockholders or their affiliates, the per share redemption price of such
preferred shares would have ranged from $1,000 to $1,030 per share. The
preferred shares were redeemable at the option of the holders upon a change of
control of the Company. Pursuant to the restated certificate of incorporation,
conversion was mandatory on June 30, 2007. The mandatory conversion formula
provided for such preferred shares to be converted to the number of common
shares equal to the liquidation value of the preferred shares plus accrued
dividends divided by 70% of the fair market value of the Common Stock. This
conversion formula was subject to certain adjustments as defined in the restated
certificate of incorporation.

Dividends on preferred shares were payable on the last day of each quarter.
Dividends for 1995, 1994 and 1993 totaled $5.3 million, $5.1 million and $4.4
million, respectively, and were paid in additional shares (including fractional
shares) of preferred stock. The preferred shares were nonvoting, unless
dividends were in arrears. Assuming 2,547,170 shares of the common stock and
related proceeds of the Company's November 1995 initial public offering had been
used to redeem the Preferred Stock at the beginning of the year, the 1995 net
loss per share would have been reduced to $(1.58).

COMMON STOCK

Activity for 1995, 1994 and 1993, with respect to Amerin Corporation's
outstanding Common Stock, $.01 par value (see Note 15), is as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES
------------------------
<S> <C> <C>
VOTING NONVOTING
COMMON COMMON
STOCK STOCK
------------ ----------
Outstanding at January 1, 1993..................................... 17,081,375 1,113,750
Shares issued under long-term incentive plan....................... 22,250 --
------------ ----------
Outstanding at December 31, 1993................................... 17,103,625 1,113,750
Shares issued under long-term incentive plan....................... 55,500 --
August 24, 1994 issuance........................................... 630,375 2,495,875
------------ ----------
Outstanding at December 31, 1994................................... 17,789,500 3,609,625
Shares issued under long-term incentive plan....................... 2,250 --
November 28, 1995 issuance......................................... 13,340,000 --
Cancellation of restricted shares (Note 15)........................ (8,749,932) --
------------ ----------
Outstanding at December 31, 1995................................... 22,381,818 3,609,625
------------ ----------
------------ ----------
</TABLE>

Ten shares of formerly authorized common stock were recapitalized on April
15, 1992 into 82,000 shares of Voting Common Stock which in turn were
recapitalized into 10,250,000 shares of Voting Common Stock per the
recapitalization effected on November 2, 1995. Such shares were subject to
certain restrictions including transfer limitations and contingent recall
provisions as described in a stock and voting agreement. Prior to 1995,
conditions required for the removal of the recall provisions had not been met.
In

F-18
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. REDEEMABLE PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY (CONTINUED)
1995, in connection with the Company's initial public offering, the conditions
for the removal of the recall provisions on 2,250,068 of these 10,250,000 shares
and the 750,000 shares held by an officer (see Note 9) were met and the recall
provisions were removed. As a result, 8,749,932 of these shares were cancelled
(see Note 15).

Shares of Voting Common Stock and Nonvoting Common Stock shall rank equally
as regards dividend rights, rights on liquidation, and winding up and
dissolution.

Each holder of shares of Voting Common Stock shall be entitled to one vote
per share on each matter on which the stockholders of the Company shall be
entitled to vote. Except as otherwise required by law, each outstanding share of
Nonvoting Common Stock shall not be entitled to vote on any matter on which the
stockholders of the Company shall be entitled to vote. On any matter on which
the holders of shares of Voting Common Stock and the holders of Nonvoting Common
Stock are entitled to vote, they shall vote together as a single class, and each
holder of shares of Nonvoting Common Stock shall be entitled to one vote for
each share of such stock. Notwithstanding the foregoing, holders of shares of
Nonvoting Common Stock shall be entitled to vote as a separate class on any
amendment, repeal or modification of any provision of the Certificate of
Incorporation that adversely affects the powers, preferences or special rights
of holders of the Nonvoting Common Stock.

The Voting Common Stock is convertible into the same number of shares of
Nonvoting Common Stock by any regulated stockholder, at any time, provided that
the Company will not be required to effect a conversion that would result in a
violation by the Company or its subsidiaries, of any law, rule, regulation, or
requirement of any governmental authority at that time. Additional restrictions
apply to this conversion as defined in the Certificate of Incorporation.

The Nonvoting Common Stock is convertible into the same number of shares of
Voting Common Stock by any stockholder, at any time, subject to restrictions as
defined in the Certificate of Incorporation.

11. COMMITMENTS AND CONTINGENCIES

During 1995, the Company entered into a noncancelable ten year operating
lease for office space. In addition to base rental costs, the lease provides for
rent escalations resulting from increased assessments for real estate taxes,
utilities and maintenance. Aggregate minimum rental commitments under the lease
are $.2 million in 1996, $.2 million in 1997, $.2 million in 1998, $.2 million
in 1999, $.2 million in 2000, and $1.4 million thereafter. Rent expense for 1995
was $.3 million. Previously, the Company and its subsidiaries leased office
space under a noncancelable operating lease that expired in 1995. Rental expense
for this lease was $.2 million and $.1 million in 1994 and 1993, respectively.

The Company has agreed to loan an officer an amount necessary to cover the
potential tax liability, if any, that may be incurred by the officer in the
event that a determination is made that the receipt of shares of Voting Common
Stock constituted a taxable event.

12. DIVIDEND RESTRICTIONS

Under Illinois insurance regulations, Amerin Guaranty and Amerin Re are each
required to maintain statutory basis capital and surplus of $1.5 million. The
statutory basis capital and surplus of Amerin Guaranty was $208.7 million and
$86.2 million at December 31, 1995 and 1994, respectively. The statutory

F-19
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. DIVIDEND RESTRICTIONS (CONTINUED)
basis capital and surplus of Amerin Re was $30.7 million and $5.3 million at
December 31, 1995 and 1994, respectively.

Insurance regulations limit the writing of mortgage guaranty insurance to an
aggregate amount of insured risk no greater than 25 times the total of statutory
capital and surplus and the statutory basis contingency reserve. At December 31,
1995, the Company's insurance subsidiaries' risk-to-capital ratios were below
these limits.

The payment of dividends by the insurance subsidiaries without prior
approval of the Illinois Insurance Department is subject to certain restrictions
principally including those relating to the greater of 10% of the prior year's
statutory basis earned surplus or net income. No dividends were paid in 1995,
and no dividends are allowed in 1996 without prior approval.

In addition, dividend restrictions have been placed on the Company and its
subsidiaries by both Moody's Investors Services, Inc. and Standard & Poor's
Corporation (collectively, Rating Agencies) as embodied in various support
agreements (Agreements). Those restrictions require that no dividend will be
declared or paid if the subsidiaries' net risk in force exceeds the maximum
multiple of capital, as specified in the Agreements, or the subsidiaries' rating
is less than the minimum rating allowed.

13. STANDBY COMMITMENTS

The claims-paying ability of Amerin Guaranty is rated "AA" by Standard &
Poor's Corporation and "Aa3" by Moody's Investor Services, Inc., based on the
respective assessments by each rating service of the creditworthiness of Amerin
Guaranty. Creditworthiness is a function of the level of paid-in and other
capital, as well as other qualitative considerations. Prior to November 28,
1995, additional capital support was provided via standby capital in the form of
standby commitments on the part of certain of the Company's stockholders. Such
standby commitments terminated upon the consummation of the Company's initial
public offering on November 28, 1995. The Company's stockholders had
collateralized their standby commitments in the form of either an eight-year
irrevocable nonrecourse letter of credit or via a market value security
over-collateralization and trust vehicle in which collateral is pledged to a
trustee in order to support the capital commitment. The Company was charged fees
for the standby commitments. Such fees amounted to $.9 million, $.8 million and
$.8 million in 1995, 1994 and 1993, respectively.

F-20
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. QUARTERLY FINANCIAL DATA (UNAUDITED)

A summary of unaudited quarterly results of operations for 1995 and 1994 is
as follows:

<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
1995
Net premiums earned.................................................... $ 3,980 $ 5,538 $ 7,436 $ 10,605
Net investment income and other........................................ 1,671 1,958 1,848 2,626
Net income (loss)...................................................... 1,582 2,491 4,662 (31,546)
Net income (loss) applicable to common stockholders.................... 226 1,074 3,181 (32,578)

1994
Net premiums earned.................................................... $ 307 $ 484 $ 1,503 $ 2,943
Net investment income and other........................................ 1,341 1,152 1,223 1,538
Net income (loss)...................................................... (397) (177) 1,026 1,555
Net income (loss) applicable to common stockholders.................... (1,585) (1,418) (271) 214
</TABLE>

15. RECAPITALIZATION AND INITIAL PUBLIC OFFERING

On November 2, 1995, the Company effected a recapitalization of its common
stock pursuant to which each previously issued and outstanding share of Class A
Voting Common Stock and Voting Common Stock was reclassified into 125 new shares
of Voting Common Stock and each previously issued and outstanding share of Class
A Nonvoting Common Stock was reclassified into 125 new shares of Nonvoting
Common Stock. In addition, the Company's three classes of authorized but
unissued common stock were eliminated and a new class of 10,000,000 shares of
preferred stock, $.01 par value, was authorized. The consolidated financial
statements and the notes thereto have been restated to give retroactive effect
to this recapitalization.

On November 28, 1995, the Company completed an initial public offering of
its common stock (the Initial Public Offering). The net proceeds of the Offering
were $200.2 million and a portion of the proceeds were used to redeem all of the
outstanding shares of the Company's Redeemable Preferred Stock. When the Initial
Public Offering was consummated, the contingent recall provisions on 2,250,068
shares of common stock owned by the Company's Chairman and President were
removed and 8,749,932 shares of common stock owned by such officers, which were
in excess of the number of shares to which they were entitled upon consummation
of the Initial Public Offering pursuant to the terms of a management agreement,
were canceled without cost to the Company. Additionally, options to purchase
4,374,966 shares of common stock owned by the President prior to the Initial
Public Offering were canceled. The removal of the contingent recall provisions
for a portion of the shares owned by the officers resulted in compensation
expense of $35.7 million and a corresponding increase in additional paid-in
capital.

F-21
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
(UNAUDITED)

<CAPTION>
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available-for-sale at fair value................................. $ 286,011 $ 151,021
Short-term investments............................................................ 25,690 145,961
------------- ------------
Total investments................................................................... 311,701 296,982
Cash and cash equivalents........................................................... 737 1,054
Accrued investment income........................................................... 3,764 2,376
Premiums receivable................................................................. 5,374 2,375
Deferred policy acquisition costs................................................... 5,139 4,419
Leasehold improvements, furniture and equipment, at cost, net of accumulated
depreciation...................................................................... 3,953 4,199
Goodwill, net of accumulated amortization........................................... 2,319 2,431
Other intangibles, net of accumulated amortization.................................. 236 478
Deferred income taxes............................................................... 1,555 --
Other assets........................................................................ 2,051 2,014
------------- ------------
Total assets........................................................................ $ 336,829 $ 316,328
------------- ------------
------------- ------------

LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Liabilities:
Unearned premiums................................................................. $ 19,141 $ 12,710
Loss reserves..................................................................... 15,375 7,092
Current income taxes.............................................................. 788 600
Deferred income taxes............................................................. -- 1,783
Payable for securities............................................................ 8,830 15,724
Accrued expenses and other liabilities............................................ 3,669 4,282
------------- ------------
Total liabilities................................................................. 47,803 42,191
Common Stockholders' Equity (NOTE 1):
Voting Common Stock, $.01 par, 50,000,000 shares authorized, 22,453,100 shares and
22,381,818 shares issued and outstanding in 1996 and 1995, respectively......... 224 224
Nonvoting Common Stock, $.01 par, 50,000,000 shares authorized, 3,609,625 issued
and outstanding in 1996 and 1995................................................ 36 36
Additional paid-in capital........................................................ 315,302 314,614
Net unrealized investment gains (losses).......................................... (2,543) 3,229
Retained-earnings deficit......................................................... (23,993) (43,966)
------------- ------------
Total common stockholders' equity................................................... 289,026 274,137
------------- ------------
Total liabilities and common stockholders' equity................................. $ 336,829 $ 316,328
------------- ------------
------------- ------------
</TABLE>

See accompanying notes.

F-22
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
<S> <C> <C>
1996 1995
---------- ----------

<CAPTION>
(UNAUDITED)
(IN THOUSANDS OF
DOLLARS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Revenues:
Net premiums written............................................................... $ 49,988 $ 20,729
Increase in unearned premiums...................................................... (6,431) (3,775)
---------- ----------
Net premiums earned................................................................ 43,557 16,954
Net investment income.............................................................. 12,401 4,984
Realized investment gains (losses)................................................. (133) 493
---------- ----------
Total revenues....................................................................... 55,825 22,431

Expenses:
Losses incurred.................................................................... 13,958 3,819
Policy acquisition costs........................................................... 6,120 4,963
Underwriting and other expenses.................................................... 7,865 4,863
---------- ----------
Total expenses....................................................................... 27,943 13,645
---------- ----------
Net income before income taxes....................................................... 27,882 8,786
Income tax expense................................................................... 7,909 50
---------- ----------
Net income........................................................................... 19,973 8,736

Pay-in-kind dividends on preferred stock............................................. -- 4,255
---------- ----------
Net income applicable to common stockholders......................................... $ 19,973 $ 4,481
---------- ----------
---------- ----------
Net income per common share.......................................................... $ .76 $ .42
---------- ----------
---------- ----------
Average common and common equivalent shares outstanding
(in thousands)..................................................................... 26,349 10,623
</TABLE>

See accompanying notes.

F-23
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
<S> <C> <C>
1996 1995
----------- -----------
(UNAUDITED)
(IN THOUSANDS OF
DOLLARS)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................................................. $ 19,973 $ 8,736
Adjustments to reconcile net income to net cash provided by
operating activities:
Change in:
Accrued investment income and premiums receivable.................................. (4,387 ) (785 )
Loss reserves...................................................................... 8,283 3,399
Unearned premiums.................................................................. 6,431 3,775
Accounts payable and accrued expenses.............................................. 46 143
Federal income taxes............................................................... (43 ) (70 )
Policy acquisition costs deferred...................................................... (6,349 ) (5,004 )
Policy acquisition costs amortized..................................................... 5,629 3,829
Depreciation and other amortization.................................................... 854 670
Realized investment losses (gains)..................................................... 133 (493 )
Other items, net....................................................................... 199 (529 )
----------- -----------
Net cash provided by operating activities.............................................. 30,769 13,671

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of:
Fixed maturity securities............................................................ (178,445 ) (49,024 )
Property and equipment............................................................... (787 ) (516 )
Sale or maturity of:
Fixed maturity securities............................................................ 27,469 30,833
Short-term investments, net.......................................................... 120,269 5,094
Property and equipment............................................................... -- 20
----------- -----------
Net cash used by investing activities.................................................. (31,494 ) (13,593 )

FINANCING ACTIVITIES
Issuance of common stock............................................................... 408 --
----------- -----------
Net increase (decrease) in cash and cash equivalents................................... (317 ) 78
Cash and cash equivalents at beginning of period....................................... 1,054 694
----------- -----------
Cash and cash equivalents at end of period............................................. $ 737 $ 772
----------- -----------
----------- -----------
</TABLE>

See accompanying notes.

F-24
<PAGE>
AMERIN CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 1996
(UNAUDITED)

1. ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine month period
ended September 30, 1996, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1996. For further information,
refer to the audited consolidated financial statements and footnotes thereto
included elsewhere in this Prospectus.

NET INCOME PER COMMON SHARE

Net income per share of common stock is determined by dividing net income,
less dividends on preferred stock, by the weighted-average number of shares of
common stock and common stock equivalents (dilutive stock options) outstanding.
For 1996, the weighted average shares of common stock includes 13,340,000 shares
issued on November 28, 1995, in conjunction with Amerin Corporation's (the
Company's) initial public offering in November 1995 (Initial Public Offering).
Weighted average shares of common stock in 1996 also includes 2,250,068 shares
as of November 28, 1995 out of a total of 11,000,000 shares that were previously
excluded from weighted average shares due to the fact that such shares were
subject to contingent recall provisions and the conditions required for the
removal of the recall provisions on the 11,000,000 shares had not been met. The
Company's Initial Public Offering removed the recall provisions on 2,250,068 of
the 11,000,000 shares and resulted in the cancellation of the remaining
8,749,932 shares.

Where the effect of common stock equivalents on net income per share would
be antidilutive, they are excluded from the weighted average number of shares
outstanding. Common stock awards and options issued in the 12 months prior to
the Company's Initial Public Offering are treated as common stock equivalents
for 1995. Fully diluted net income per share is equal to primary net income per
share for the nine month periods ended September 30, 1996 and 1995.

COMMON STOCKHOLDERS' EQUITY

For the nine months ended September 30, 1996, common stockholders' equity
increased due to net income and the issuance of common stock under the Company's
long-term incentive plan, and decreased due to unrealized investment losses.

2. INCOME TAXES

The provision for income taxes varies from the statutory federal income tax
rate applied to income before income taxes principally due to tax exempt
interest and, in 1995, the effects of net operating loss carryforwards.

F-25
<PAGE>
[LOGO]
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[ALTERNATE INTERNATIONAL COVER PAGE]

PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED JANUARY 24, 1997

4,250,000 SHARES

[LOGO]

COMMON STOCK
------------------

OF THE 4,250,000 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "COMMON
STOCK"), BEING OFFERED HEREBY, 850,000 SHARES ARE BEING OFFERED INITIALLY
OUTSIDE OF THE UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS AND
3,400,000 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND CANADA
BY THE U.S. UNDERWRITERS. SEE "UNDERWRITERS." ALL OF THE SHARES OF COMMON
STOCK BEING OFFERED HEREBY ARE BEING SOLD BY THE SELLING STOCKHOLDERS.
SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL NOT RECEIVE
ANY PROCEEDS FROM THE SALE OF THE COMMON STOCK BY THE SELLING
STOCKHOLDERS. THE COMMON STOCK IS LISTED ON THE NASDAQ NATIONAL
MARKET UNDER THE SYMBOL "AMRN." ON JANUARY 23, 1997, THE REPORTED
LAST SALE PRICE OF THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET
WAS $22 3/4 PER SHARE.

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

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------

PRICE $ A SHARE
---------------------

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

(1) THE COMPANY AND THE SELLING STOCKHOLDERS HAVE AGREED TO INDEMNIFY THE
UNDERWRITERS AGAINST CERTAIN LIABILITIES, INCLUDING LIABILITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.

(2) EXPENSES ESTIMATED AT $ WILL BE PAID BY THE COMPANY.

(3) THE SELLING STOCKHOLDERS HAVE GRANTED THE U.S. UNDERWRITERS AN OPTION,
EXERCISABLE WITHIN 30 DAYS FROM THE DATE HEREOF, TO PURCHASE UP TO 637,500
ADDITIONAL SHARES OF COMMON STOCK AT THE PRICE TO PUBLIC, LESS THE
UNDERWRITING DISCOUNTS AND COMMISSIONS, FOR THE PURPOSE OF COVERING
OVER-ALLOTMENTS, IF ANY. IF THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN
FULL, THE TOTAL PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND
PROCEEDS TO SELLING STOCKHOLDERS WILL BE $ , $ AND
$ , RESPECTIVELY. SEE "UNDERWRITERS."

MORGAN STANLEY & CO.
INTERNATIONAL
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES LTD.

, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the Common Stock
being registered hereby, other than underwriting discounts and commissions. All
the amounts shown are estimates (except for SEC and NASD fees).

<TABLE>
<CAPTION>
Securities and Exchange Commission registration fee............. $ 37,582
<S> <C>
National Association of Securities Dealers, Inc. filing fee..... 12,903
Transfer Agent's and Registrar's fees........................... 7,000
Printing and engraving costs.................................... 200,000
Accounting fees and expenses.................................... 85,000
Legal fees (not including expenses)............................. 125,000
Miscellaneous expenses.......................................... 32,515
---------
Total..................................................... $ 500,000
---------
---------
</TABLE>

The Registrant will pay all expenses of registration, issuance and
distribution (other than underwriting discounts and commissions) with respect to
the shares being sold since the Selling Stockholders have certain contractual
registration rights providing for the payment of such expenses.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's Amended and Restated Certificate of Incorporation (the
"Certificate") provides that, to the fullest extent permitted by the Delaware
General Corporation Law (the "GCL") or any other applicable law currently or
hereafter in effect, no director of the Registrant will be personally liable to
the Registrant or its stockholders for or with respect to any acts or omissions
in the performance of his or her duties as a director of the Registrant. Section
102(b)(7) of the GCL, however, provides that the liability of a director shall
not be eliminated or limited (i) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the GCL or (iv) for any transaction from which
the director derived an improper personal benefit.

In addition, the Registrant's Amended and Restated By-laws provide that any
person who is involved in any investigation, claim, action, suit or proceeding
by reason of the fact that such person is or was or had agreed to become a
director, officer, employee, or agent of the Registrant or is or was serving at
the request of the board of directors or an officer of the Registrant as a
director, officer, employee, or agent of another corporation, shall be
indemnified by the Registrant to the fullest extent permitted by applicable law
as then in effect against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection therewith. Such right of indemnification includes the right
to be paid, in advance, any expenses incurred in connection with a proceeding
(upon receipt of any required undertaking) and shall not be deemed exclusive of
any other rights to which such person seeking indemnification may otherwise be
entitled.

Under the GCL, directors and officers as well as employees and individuals
may be indemnified against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement in connection with specified actions, suits
or proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation as a derivative action) if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe their conduct
was unlawful.

II-1
<PAGE>
Reference is made to the Underwriting Agreement (Exhibit 1.1 to this
Registration Statement) which provides for indemnification of the Company's
officers, directors and controlling persons by the Underwriters against certain
civil liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").

The Company maintains director and officer liability insurance which insures
each director and certain officers of the Company against certain liabilities.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS. The following Exhibits are filed herewith and made a part
hereof:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------------- -------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3.1 to Amendment
No. 1 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-97514) and
incorporated herein by reference).
3.2 Amended and Restated By-laws of the Registrant (filed as Exhibit 3.2 to Amendment No. 1 to the
Registrant's Registration Statement on Form S-1 (Registration No. 33-97514) and incorporated herein
by reference).
4.1 Specimen certificate for the Common Stock, $.01 par value, of the Registrant (filed as Exhibit 4.1 to
Amendment No. 2 to the Registrant's Registration Statement on Form S-1 (Registration No. 33-97514)
and incorporated herein by reference).
4.2* Amended and Restated Shareholders Agreement dated as of November 1, 1995 among the Registrant, Gerald
L. Friedman, Stuart M. Brafman and the Investors party thereto.
4.3 Amended and Restated Management Stock and Voting Agreement dated as of August 26, 1992 among Gerald L.
Friedman, Stuart M. Brafman and USMIC Corporation (filed as Exhibit 4.3 to Amendment No. 2 to the
Registrant's Registration Statement on Form S-1 (Registration No. 33-97514) and incorporated herein
by reference).
4.4* Amendment No. 1 to the Amended and Restated Management Stock and Voting Agreement dated as of November
1, 1995 among the Company, Gerald L. Friedman and Stuart M. Brafman.
4.5* Amended and Restated Employee-Shareholders Agreement dated as of November 1, 1995 among the Company and
the Employee Grantees party thereto.
5.1 Opinion of Jones, Day, Reavis & Pogue.
23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Davis Polk & Wardwell.
23.4 Consent of Patton Boggs, L.L.P.
24.1* Powers of Attorney.
</TABLE>

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

* Previously filed.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d)
of the Securities Exchange Act of 1934) that is incorporated by reference in
this Registration

II-2
<PAGE>
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.

(3) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(4) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide public offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Chicago,
State of Illinois, on January 24, 1997.

AMERIN CORPORATION

By: *
------------------------------------------
Gerald L. Friedman
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ ------------------------------------------ -------------------
<S> <C> <C>

* Director; Chairman of the Board, President January 24, 1997
- -------------------------------------- and Chief Executive Officer (PRINCIPAL
Gerald L. Friedman EXECUTIVE OFFICER)

* Senior Vice President, Chief Financial January 24, 1997
- -------------------------------------- Officer and Treasurer (PRINCIPAL
George G. Freudenstein FINANCIAL OFFICER and PRINCIPAL
ACCOUNTING OFFICER)

* Director January 24, 1997
- --------------------------------------
Peter H. Gleason

* Director January 24, 1997
- --------------------------------------
Alan E. Goldberg

* Director January 24, 1997
- --------------------------------------
Howard I. Hoffen

* Director January 24, 1997
- --------------------------------------
Timothy A. Holt

* Director January 24, 1997
- --------------------------------------
Larry E. Swedroe
</TABLE>

*By: RANDOLPH C. SAILER II
-------------------------
Randolph C. Sailer II
ATTORNEY-IN FACT

II-4
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- ----------- -------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Registrant (filed as Exhibit 3.1 to
Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (Registration No.
33-97514) and incorporated herein by reference).
3.2 Amended and Restated By-laws of the Registrant (filed as Exhibit 3.2 to Amendment No. 1 to
the Registrant's Registration Statement on Form S-1 (Registration No. 33-97514) and
incorporated herein by reference).
4.1* Specimen certificate for the Common Stock, $.01 par value, of the Registrant (filed as
Exhibit 4.1 to Amendment No. 2 to the Registrant's Registration Statement on Form S-1
(Registration No. 33-97514) and incorporated herein by reference).
4.2* Amended and Restated Shareholders Agreement dated as of November 1, 1995 among the
Registrant, Gerald L. Friedman, Stuart M. Brafman and the Investors party thereto.
4.3 Amended and Restated Management Stock and Voting Agreement dated as of August 26, 1992 among
Gerald L. Friedman, Stuart M. Brafman and USMIC Corporation (filed as Exhibit 4.3 to
Amendment No. 2 to the Registrant's Registration Statement on Form S-1 (Registration No.
33-97514) and incorporated herein by reference).
4.4* Amendment No. 1 to the Amended and Restated Management Stock and Voting Agreement dated as
of November 1, 1995 among the Company, Gerald L. Friedman and Stuart M. Brafman.
4.5* Amended and Restated Employee-Shareholders Agreement dated as of November 1, 1995 among the
Company and the Employee Grantees party thereto.
5.1 Opinion of Jones, Day, Reavis & Pogue.
23.1 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Davis Polk & Wardwell.
23.4 Consent of Patton Boggs, L.L.P.
24.1* Powers of Attorney.
</TABLE>

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

* Previously filed.

<PAGE>

Exhibit 1.1

4,250,000 Shares

AMERIN CORPORATION

COMMON STOCK, PAR VALUE $.01 PER SHARE

UNDERWRITING AGREEMENT

February __, 1997

<PAGE>

February __, 1997

Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette
Securities Corporation
J.P. Morgan Securities Inc.
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036

Morgan Stanley & Co. International Limited
Credit Suisse First Boston (Europe) Limited
Donaldson, Lufkin & Jenrette
Securities Corporation
J.P. Morgan Securities Ltd.
c/o Morgan Stanley & Co. International Limited
25 Cabot Street
Canary Wharf
London E14 4QA
England

Dear Sirs and Mesdames:

Certain shareholders (the "Selling Shareholders") of AMERIN CORPORATION, a
Delaware corporation (the "Company"), as named in Schedule I hereto, severally
propose to sell to the several Underwriters (as defined below) an aggregate of
4,250,000 shares (the "Firm Shares") of the Company's Common Stock, par value
$.01 per share (the "Voting Common Stock") (it being understood that a portion
of the Firm Shares to be sold by the Selling Shareholders may be Voting Common
Stock which will be issued upon conversion of outstanding Nonvoting Common
Stock, par value $.01 per share (the "Nonvoting Common Stock," and together with
the Voting Common Stock, the "Common Stock"), prior to or concurrently with its
delivery to the Underwriters), with each Selling Shareholder selling the number
of shares set forth opposite such Selling Shareholder's name in Schedule I
hereto under the heading "Number of Firm Shares To Be Sold." It is understood
that, subject to the conditions hereinafter stated, 3,400,000 Firm Shares (the
"U.S. Firm Shares") will be sold to the several U.S. Underwriters named in
Schedule II hereto (the "U.S. Underwriters") in connection with the offering and
sale of such U.S. Firm Shares in the United States and

<PAGE>

Canada to United States and Canadian Persons (as such terms are defined in the
Agreement Between U.S. and International Underwriters of even date herewith),
and 850,000 Firm Shares (the "International Shares") will be sold to the several
International Underwriters named in Schedule III hereto (the "International
Underwriters") in connection with the offering and sale of such International
Shares outside the United States and Canada to persons other than United States
and Canadian Persons. Morgan Stanley & Co. Incorporated, Credit Suisse First
Boston Corporation, Donaldson, Lufkin & Jenrette Securities Corporation and J.P.
Morgan Securities Inc. shall act as representatives (the "U.S. Representatives")
of the several U.S. Underwriters, and Morgan Stanley & Co. International
Limited, Credit Suisse First Boston (Europe) Limited, Donaldson, Lufkin &
Jenrette Securities Corporation and J.P. Morgan Securities Ltd. shall act as
representatives (the "International Representatives") of the several
International Underwriters. The U.S. Underwriters and the International
Underwriters are hereinafter collectively referred to as the Underwriters.

The Selling Shareholders also severally propose to sell to the several U.S.
Underwriters not more than an aggregate of 637,500 additional shares of the
Company's Voting Common Stock (the "Additional Shares") (it being understood
that a portion of the Additional Shares may be Voting Common Stock which will be
issued upon conversion of outstanding Nonvoting Common Stock owned by such
Selling Shareholders prior to or concurrently with its delivery to the U.S.
Underwriters), with each Selling Shareholder proposing to sell the number of
Additional Shares set forth opposite such Selling Shareholder's name in Schedule
I hereto under the heading "Number of Additional Shares To Be Sold," if and to
the extent that the U.S. Representatives shall have determined to exercise, on
behalf of the U.S. Underwriters, the right to purchase such shares of Common
Stock granted to the U.S. Underwriters in Section 3 hereof. The Firm Shares and
the Additional Shares are hereinafter collectively referred to as the "Shares."

The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (File No. 333-19757) relating
to the Shares. The registration statement contains two prospectuses to be used
in connection with the offering and sale of the Shares: the U.S. prospectus, to
be used in connection with the offering and sale of Shares in the United States
and Canada to U.S. and Canadian Persons, and the international prospectus, to be
used in connection with the offering and sale of Shares outside the United
States and Canada to persons other than United States and Canadian persons. The
international prospectus is identical to the U.S. prospectus except for the
outside front cover page. The registration statement as amended at the time it
becomes effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement"; the U.S. prospectus and the
international prospectus in the respective forms first used to confirm sales of
Shares are hereinafter collectively referred to as the "Prospectus" (including,
in the case of all references to the Registration Statement or the Prospectus,
unless the context
2
<PAGE>

requires otherwise, documents incorporated by reference therein). The terms
"supplement" and "amendment" or "amend" as used in this Agreement shall include
all documents subsequently filed by the Company with the Commission pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
deemed to be incorporated by reference in the Prospectus. If the Company has
filed an abbreviated registration statement to register additional shares of
Common Stock pursuant to Rule 462(b) under the Securities Act (the "Rule 462
Registration Statement"), then any reference herein to the term "Registration
Statement" shall be deemed to include such Rule 462 Registration Statement.

1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to and agrees with each of the Underwriters that:

(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or to the Company's
knowledge threatened by the Commission.

(b) (i)Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus complied or
will comply when so filed in all material respects with the Exchange Act
and the applicable rules and regulations of the Commission thereunder, (ii)
each part of the Registration Statement, when such part became effective,
did not contain and each such part, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, (iii) the Registration
Statement and the Prospectus comply and, as amended or supplemented, if
applicable, will comply in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder, and
(iv) the Prospectus does not contain and, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in
this paragraph 1.(b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating
to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein.

(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, has
the corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to

3
<PAGE>

be so qualified or be in good standing would not, individually or in the
aggregate have a material adverse effect on the Company and its
subsidiaries, taken as a whole.

(d) Each of Amerin Guaranty Corporation ("Amerin Guaranty") and
Amerin Re Corporation ("Amerin Re") (each a "Subsidiary" and collectively
the "Subsidiaries") has been duly incorporated, is validly existing as an
insurance corporation in good standing under the laws of the State of
Illinois, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified
or otherwise authorized to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification or authorization, except to
the extent that the failure to be so qualified or authorized or be in good
standing would not, individually or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.

(e) This Agreement has been duly authorized, executed and delivered
by the Company.

(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.

(g) The issued and outstanding shares of capital stock of the Company
have been duly authorized and are validly issued, fully paid and
non-assessable.

(h) All of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company, directly or indirectly, free
and clear of any security interest, mortgage, pledge, lien, encumbrance or
claim.

(i) The shares of Voting Common Stock issuable upon conversion of the
outstanding shares of Nonvoting Common Stock have been duly authorized and
reserved for issuance upon such conversion and, when issued and delivered
upon such conversion in accordance with the Company's Amended and Restated
Certificate of Incorporation, will be validly issued, fully paid and
non-assessable, and the issuance of such shares of Voting Common Stock will
not be subject to any preemptive or similar rights.

(j) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
(i) any provision of applicable law, rule or regulation or (ii) the
certificate of incorporation or by-laws of the Company or any Subsidiary or
(iii) any agreement or other instrument binding upon the Company or any of
its subsidiaries, except for such contraventions which, individually or in
the aggregate, would not have a material

4
<PAGE>

adverse effect on the Company and its subsidiaries, taken as a whole, or
(iv) any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any Subsidiary, and all
consents, approvals, authorizations, registrations, filings or
qualifications of or with, any court or governmental body or agency
required for the execution and delivery by the Company of, the performance
by the Company of its obligations under, this Agreement have been obtained
and are in full force and effect, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the
offer and sale of the Shares.

(k) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of the Prospectus).

(l) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in or
affecting (i) the statutory capital or surplus of Amerin Guaranty or (ii)
the statutory capital or surplus of Amerin Re, in each case from that set
forth in its September 30, 1996 statutory quarterly financial statements
filed with applicable insurance regulatory authorities (the "Statutory
Financial Statements").

(m) There are no legal or governmental proceedings pending or to the
Company's knowledge threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or any
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed or incorporated by
reference as exhibits to the Registration Statement that are not described,
filed or incorporated by reference as required.

(n) Each preliminary prospectus filed as part of the registration
statement on Form S-3 (No. 333-19757) relating to the Shares as originally
filed or as part of any amendment thereto, or filed pursuant to Rule 424 or
Rule 462 under the Securities Act, complied when so filed in all material
respects with the Securities Act and the applicable rules and regulations
of the Commission thereunder.

(o) Neither the Company nor any of the Subsidiaries is an "investment
company" or an entity "controlled" by an "investment company" as such terms
are defined in the Investment Company Act of 1940, as amended.

<PAGE>

(p) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not be reasonably
expected to have, individually or in the aggregate, a material adverse
effect on the Company and its subsidiaries, taken as a whole.

(q) Except for the Amended and Restated Shareholders Agreement among
the Company, Gerald L. Friedman, Stuart M. Brafman and each Investor set
forth on the signature pages thereof dated as of November 1, 1995 (the
"Stockholders Agreement"), there are no contracts, agreements or
understandings between the Company and any person granting such person the
right to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company or to require
the Company to include such securities with the Shares registered pursuant
to the Registration Statement.

(r) The Company and each of the Subsidiaries has all necessary
consents, licenses, authorizations, approvals, orders, certificates and
permits (collectively, "Authorizations") of and from, and has made all
declarations, registrations and filings (collectively, "Filings") with, all
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, to rent,
lease, license and use its properties and assets and to conduct its
business in the manner described in the Prospectus except to the extent
that the failure to obtain any such Authorizations or to make any such
Filing has not had, and would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the Company
and its subsidiaries, taken as a whole.

(s) None of the Company or any Subsidiaries is (i) in violation of
its certificate or articles of incorporation or by-laws, or (ii) in
violation of any law, rule or regulation applicable to the Company or any
Subsidiary or any of its or their properties, the violation of which has,
or would be reasonably expected to have, individually or in the aggregate,
a material adverse effect on the Company and its subsidiaries, taken as a
whole, or (iii) in violation of any judgment, injunction, order or decree
of any court, governmental agency or body or arbitrator having jurisdiction
over the Company or any Subsidiary, the violation of which has, or would be
reasonably expected to have, individually or in the aggregate, a material
adverse effect on the Company and its subsidiaries, taken as a whole, or
(iv) in default in the

<PAGE>

performance of any obligation, agreement or condition contained in any
bond, debenture, note or any other evidence of indebtedness or in any
agreement, indenture, lease or other instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary or any of its or their properties
is or may be bound, the default in the performance of which has, or would
have, individually or in the aggregate, a material adverse effect on the
Company and its subsidiaries, taken as a whole, or (v) in violation of or
in default under any Authorization or Filing which violation or default
has, or would be reasonably expected to have, individually or in the
aggregate, a material adverse effect, as a whole.

(t) None of the Company's outstanding securities are rated by any
"nationally recognized statistical rating organization" as such term is
defined for purposes of Rule 436(g)(2) under the Securities Act, and Amerin
Re has not received any rating (or preliminary rating) from Moody's
Investors Service or Standard and Poor's Rating Service.

2. REPRESENTATIONS AND WARRANTIES OF THE SELLING SHAREHOLDERS. Each of
the Selling Shareholders, severally and not jointly with the other Selling
Shareholders, represents and warrants to and agrees with each of the
Underwriters that:

(a) This Agreement has been duly authorized, executed and delivered
by or on behalf of such Selling Shareholder.

(b) Assuming the accuracy of the Company's representations in Section
1.(a) and 1.(b), the execution and delivery by such Selling Shareholder of,
and the performance by such Selling Shareholder of its obligations under,
this Agreement and the Irrevocable Power of Attorney and Custody Agreement
(the "Power of Attorney and Custody Agreement") among such Selling
Shareholder, ___________, as custodian (the "Custodian"), and certain
individuals as attorneys-in-fact, relating to (i) the deposit of the Shares
to be sold by such Selling Shareholder and appointing certain individuals
as such Selling Shareholder's attorneys-in-fact to the extent set forth
therein relating to the transactions contemplated hereby and by the
Registration Statement will not contravene any provision of applicable law
(except that no representation is made with respect to any state securities
law or Blue Sky law or any foreign law), or the certificate of
incorporation or by-laws of such Selling Shareholder (if such Selling
Shareholder is a corporation), or any material agreement or other material
instrument binding upon such Selling Shareholder or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
such Selling Shareholder, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required for
the performance by such Selling Shareholder of its obligations under this
Agreement or the Power of Attorney and Custody Agreement of such Selling
Shareholder, except such as may be

<PAGE>

required by the securities or Blue Sky laws of the various states or
foreign law in connection with the offer and sale of the Shares.

(c) On the date hereof, such Selling Shareholder has valid title to
the Shares to be sold by such Selling Shareholder, or to shares of
Nonvoting Common Stock that are to be converted into such Shares; as of the
Closing Date and the Option Closing Date, if any (each as hereinafter
defined), such Selling Shareholder will have valid title to the Shares to
be sold by such Selling Shareholder hereunder on such date (including any
Shares issued upon conversion of Nonvoting Common Stock) and as of each
such date has, or will have, the legal right and power, and, assuming the
accuracy of the Company's representations in Section 1.(a) and 1.(b), all
authorization and approval required by law, to enter into this Agreement or
the Power of Attorney and Custody Agreement of such Selling Shareholder and
to sell, transfer and deliver the Shares to be sold by such Selling
Shareholder.

(d) The Power of Attorney and Custody Agreement signed by such
Selling Shareholder has been duly authorized, executed and delivered by
such Selling Shareholder and is a valid and binding agreement of such
Selling Shareholder.

(e) Delivery of, and payment for, the Shares to be sold by such
Selling Shareholder pursuant to this Agreement will pass marketable title
the Underwriters with respect to such Shares free and clear of any security
interests, claims, liens, equities and other encumbrances.

(f) All information furnished by or on behalf of such Selling
Shareholder for use in the Registration Statement and Prospectus is, and on
the Closing Date (and the Option Closing Date, if any) will be, true,
correct, and complete, and does not, and on the Closing Date (and the
Option Closing Date, if any) will not, contain any untrue statement of a
material fact or omit to state any material fact necessary to make such
information not misleading.

3. AGREEMENTS TO SELL AND PURCHASE. Each Selling Shareholder, severally
and not jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from such Selling Shareholder at $____ a share (the
"Purchase Price"), the number of Firm Shares (subject to such adjustments to
eliminate fractional shares as you may determine) that bears the same proportion
to the number of Firm Shares to be sold by such Selling Shareholder as the
number of Firm Shares set forth in Schedule II or Schedule III hereto opposite
the name of such Underwriter bears to the total number of Firm Shares.

On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, each Selling Shareholder
agrees, severally and not jointly,

<PAGE>

to sell to the U.S. Underwriters the number of Additional Shares set forth
opposite such Selling Shareholder's name in Schedule I hereto under the heading
"Number of Additional Shares To Be Sold," and the U.S. Underwriters shall have a
one-time right to purchase, severally and not jointly, up to 637,500 Additional
Shares at the Purchase Price. If the U.S. Representatives, on behalf of the
U.S. Underwriters, elect to exercise such option, the U.S. Representatives shall
so notify the Company and the Selling Shareholders in writing not later than 30
days after the date of this Agreement, which notice shall specify the number of
Additional Shares to be purchased by the U.S. Underwriters and the date on which
such shares are to be purchased which date shall be subject to the approval of
the Company, such approval not to be unreasonably withheld. Such date may be
the same as the Closing Date but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 5 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each U.S. Underwriter agrees, severally
and not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule II hereto opposite the name of such
Underwriter bears to the total number of Firm Shares. The Additional Shares to
be purchased by the U.S. Underwriters hereunder and the U.S. Firm Shares are
hereinafter referred to as "U.S. Shares."

The Company covenants and agrees that this Agreement constitutes the notice
required on behalf of each Selling Shareholder by Article Fourth, Section
A(4)(C) of the Amended and Restated Certificate of Incorporation of the Company,
on behalf of such Selling Shareholder, to convert into Voting Common Stock, as
of the Closing Date or the Option Closing Date, that number of shares of
Nonvoting Common Stock equal to the lesser of (i) the number of shares of
Nonvoting Common Stock held by such Selling Shareholder at such time and (ii)
the number of Firm Shares or Additional Shares, as applicable, to be sold by
such Selling Shareholder hereunder on such date, and that such conversion shall
be effective on and as of the Closing Date or the Option Closing Date, as
applicable, and that the Company will deliver such shares of Voting Common Stock
to the Underwriters on and as of the Closing Date or the Option Closing Date, as
the case may be.

The Company hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 90 days after the date of the Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (whether such shares or any such securities are now owned by the
Company or are hereafter acquired) or (ii) enter into any swap or other
agreement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery

<PAGE>

of Common Stock or such other securities, in cash or otherwise. The foregoing
sentence shall not apply to (A) the issuance by the Company of any shares of
Common Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof of which the U.S. Representatives have
been advised in writing or (B) any shares of Common Stock issued or options to
purchase Common Stock granted pursuant to existing employee benefit plans of the
Company, including, without limitation, the Company's Stock Incentive Plan (as
defined in the Prospectus).

4. TERMS OF PUBLIC OFFERING. The Company and the Selling Shareholders
are advised by you that the Underwriters propose to make a public offering of
their respective portions of the Shares as soon after the Registration Statement
and this Agreement have become effective as in your judgment is advisable. The
Company and the Selling Shareholders are further advised by you that the Shares
are to be offered to the public initially at $____ a share (the "Public Offering
Price") and to certain dealers selected by you at a price that represents a
concession not in excess of $___ a share under the Public Offering Price, and
that any Underwriter may allow, and such dealers may reallow, a concession, not
in excess of $____ a share, to any Underwriter or to certain other dealers.

5. PAYMENT AND DELIVERY. Payment for the Firm Shares to be sold by each
Selling Shareholder shall be made to such Selling Shareholder in Federal or
other funds immediately available in New York City against delivery of such Firm
Shares for the respective accounts of the several Underwriters at 10:00 A.M.,
New York City time, on February __, 1997, or at such other time on the same or
such other date, not later than February __, 1997, as shall be designated in
writing by you. The time and date of each such payment are hereinafter referred
to as the "Closing Date."

Payment for any Additional Shares to be sold by each Selling Shareholder
shall be made to such Selling Shareholder in Federal or other funds immediately
available in New York City against delivery of such Additional Shares for the
respective accounts of the several U.S. Underwriters at 10:00 A.M., New York
City time, on the date specified in the notice described in Section 3 or at such
other time on the same or on such other date, in any event not later than March
__, 1997, as shall be designated in writing by the U.S. Representatives in
accordance with Section 3 of this Agreement. The time and date of such payment
are hereinafter referred to as the "Option Closing Date."

Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid by
the applicable Selling Shareholder, against payment of the Purchase Price
therefor.

<PAGE>

6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Selling Shareholders to sell the Shares to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Shares on the
Closing Date are subject to the condition that the Registration Statement shall
have become effective not later than 4:30 p.m. (New York time) on the date
hereof.

The several obligations of the Underwriters are subject to the following
further conditions:

(a) No stop order suspending the effectiveness of the Registration
Statement shall have been issued under the Securities Act and no
proceedings therefor shall have been instituted or threatened by the
Commission.

(b) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:

(i) no downgrading shall have occurred in any rating (or
preliminary rating) of Amerin Guaranty by Moody's Investor Service or
Standard & Poor's Rating Service and no such organization shall have
publicly announced that it has under surveillance or review, with
possible negative implications, any such rating; and

(ii) there shall not have occurred any change, or any development
involving a prospective change, (A) in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of the Prospectus) or (B) in the statutory
capital or surplus of Amerin Guaranty or the statutory capital or
surplus of Amerin Re, in each case from that set forth in the
Statutory Financial Statements, that, in any such case, in your
judgment, is material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.

(c) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of the
Company, to the effect set forth in clauses (a) and (b)(i) of this Section 6 and
to the effect that: (x) the representations and warranties of the Company
contained herein are true and correct as of the Closing Date and that the
Company has complied with all of the agreements and satisfied all of the
conditions on its part to be performed hereunder on or before the Closing Date
and (y) there has not occurred any material adverse change, or any development
involving a prospective material adverse change, (A) in the condition, financial
or otherwise, or in the earnings, business or operations, of the Company and

<PAGE>

its subsidiaries, taken as a whole, from that set forth in the Prospectus
or (B) in the statutory capital or surplus of Amerin Guaranty or the
statutory capital or surplus of Amerin Re, in each case from that set forth
in the Statutory Financial Statements.

The officer signing and delivering such certificate may rely upon his
knowledge as to proceedings threatened.

(d) The Underwriters shall have received on the Closing Date an
opinion of Jones, Day, Reavis & Pogue, counsel for the Company, dated the
Closing Date, to the effect that:

(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the Prospectus;

(ii) the authorized capital stock of the Company is as set forth
under the caption "Capitalization" in the Prospectus, and the Common
Stock of the Company conforms in all material respects as to legal
matters to the description thereof set forth under the caption
"Description of Capital Stock" in the Prospectus;

(iii) the outstanding shares of Common Stock of the Company have
been duly authorized and are validly issued, fully paid and
non-assessable;

(iv) the shares of Voting Common Stock issuable upon conversion
of the outstanding shares of Nonvoting Common Stock have been duly
authorized and reserved for issuance upon such conversion and, when
issued and delivered upon such conversion in accordance with the
Company's Amended and Restated Certificate of Incorporation, will be
validly issued, fully paid and non-assessable, and the issuance of
such shares of Voting Common Stock will not be subject to any
statutory or contractual preemptive or similar rights;

(v) this Agreement has been duly authorized, executed and
delivered by the Company;

(vi) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene (A) any provision of applicable law, rule or
regulation, or (B) the certificate of incorporation or by-laws of the
Company, or (C) any agreement or other instrument binding upon the
Company known to such counsel that is material to the Company and its
subsidiaries, taken as a whole, except for

<PAGE>

such contraventions which, individually or in the aggregate, do not have a
material adverse effect on the Company and its subsidiaries, taken as a
whole or (D) any judgment, order or decree known to such counsel of any
governmental body, agency or court having jurisdiction over the Company;
and all consents, approvals, authorizations, registrations or filings or
qualifications of or with, any court or governmental body or agency
required for the execution and delivery by the Company of, the performance
by the Company of its obligations under, and the consummation of the
transactions contemplated by, this Agreement have been obtained and are in
full force and effect, except such as may be required by the securities or
Blue Sky laws of the various states in connection with the offer and sale
of the Shares;

(vii) the statements in the Prospectus under the captions
"Description of Capital Stock" and "Certain U.S. Federal Income Tax
Consequences," insofar as such statements constitute summaries of the legal
matters or documents referred to therein, are accurate in all material
respects;

(viii) such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or of any
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed or incorporated by
reference as exhibits to the Registration Statement that are not described,
filed or incorporated as required;

(ix) neither the Company nor any Subsidiary is an "investment company"
as such term is defined in the Investment Company Act of 1940, as amended;
and

(x) such counsel (A) is of the opinion that each document, if any,
filed pursuant to the Exchange Act and incorporated by reference in the
Prospectus (except for financial statements, financial schedules and other
financial data included therein as to which such counsel need not express
any opinion) complied when so filed as to form in all material respects
with the Exchange Act and the applicable rules and regulations of the
Commission thereunder, (B) is of the opinion that the Registration
Statement and Prospectus (except for financial statements, financial
schedules and other financial data included or incorporated by reference
therein as to which such counsel need not express any opinion) comply as to
form in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder, (C) has no reason to
believe that (except for the operating statistics, financial statements,
financial schedules and other financial and statistical information
included or incorporated by reference therein, as to which such counsel
need not express any belief) the Registration Statement and the prospectus
included therein at the time the Registration Statement became effective
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading and (D) has no reason to believe that
(except for the

<PAGE>

operating statistics, financial statements, financial schedules and other
financial and statistical information included or incorporated by reference
therein, as to which such counsel need not express any belief) the
Prospectus contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.

(e) The Underwriters shall have received on the Closing Date an opinion of
Randolph C. Sailer II, General Counsel for the Company, dated the Closing Date,
to the effect that:

(i) the Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would
not, individually or in the aggregate, have a material adverse effect on
the Company and its subsidiaries, taken as a whole;

(ii) each Subsidiary has been duly incorporated, is validly existing
as an insurance corporation in good standing under the laws of the State of
Illinois, has the corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is duly qualified
or otherwise authorized to transact business and is in good standing in
each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification or authorization, except to
the extent that the failure to be so qualified or authorized or be in good
standing would not, individually or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole; and
all of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued, are fully paid and
nonassessable, and, to such counsel's knowledge, are owned of record by the
Company, directly or indirectly, free and clear of any security interest,
mortgage, pledge, lien, encumbrance or claim;

(iii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will
not

<PAGE>

contravene (A) any provision of applicable law, rule or regulation, or (B)
the certificate of incorporation or by-laws of the Company or any
Subsidiary or (C) any agreement or other instrument binding upon the
Company or any Subsidiary known to such counsel that is material to the
Company and its subsidiaries, taken as a whole, except for such
contraventions which, individually or in the aggregate, do not have a
material adverse effect on the Company and its subsidiaries taken as a
whole or (D) any judgment, order or decree known to such counsel of any
governmental body, agency or court having jurisdiction over the Company or
any Subsidiary; and all consents, approvals, authorizations, registrations
or filings or qualifications of or with, any court or governmental body or
agency required for the execution and delivery by the Company of, the
performance by the Company of its obligations under, and the consummation
of the transactions contemplated by, this Agreement have been obtained and
are in full force and effect, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the
offer and sale of the Shares;

(iv) such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described;

(v) the Company and each of the Subsidiaries has all necessary
Authorizations of and from, and has made all Filings with, all federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals to own, lease, license and
use its properties and assets and to conduct its business in the manner
described in the Prospectus, except to the extent that the failure to
obtain such Authorizations or to make any such Filing does not have, and
would not reasonably be expected to have, individually or in the aggregate,
a material adverse effect on the Company and its subsidiaries, taken as a
whole;

(vi) no record owner, or to such counsel's knowledge, beneficial
owner, of any security of the Company has any right, not effectively
satisfied or waived, to require inclusion of shares of Common Stock or any
other security of the Company in the Registration Statement or to require
the Company to file a registration statement under the Securities Act as a
result of the filing of the Registration Statement; and

(vii) such counsel (A) has no reason to believe that (except for
the operating statistics, financial statements, financial schedules and
other financial and statistical information included or incorporated by
reference therein, as to

<PAGE>

which such counsel need not express any belief) the Registration Statement
and the prospectus included therein at the time the Registration Statement
became effective contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (B) has no reason to
believe that (except for the operating statistics, financial statements,
financial schedules and other financial and statistical information
included or incorporated by reference therein, as to which such counsel
need not express any belief) the Prospectus contains any untrue statement
of a material fact or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were made, not misleading.

(f) The Underwriters shall have received on the Closing Date an opinion of
Lord, Bissell & Brook, special insurance counsel to the Company, dated the
Closing Date to the effect that:

(i) the Company and each of the Subsidiaries have all necessary
Authorizations of and from, and have made all Filings with, insurance
regulatory agencies and authorities to own, lease, license and use its
properties and assets and to conduct their business in the manner described
in the Prospectus, except to the extent that the failure to obtain such
Authorizations or to make any such Filing do not have, and would not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on the Company and its subsidiaries, taken as a
whole;

(ii) the execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
any provision of insurance law, rule or regulation applicable to the
Company or the Subsidiaries, except for such contraventions which,
individually or in the aggregate, do not have a material adverse effect on
the Company and its subsidiaries, taken as a whole, and all consents,
approvals, authorizations, registrations, filings or qualifications of or
with any insurance regulatory agency or body required for the execution and
delivery by the Company of, the performance by the Company of its
obligations under, and the consummation of the transactions contemplated
by, this Agreement have been obtained and are in full force and effect; and

(iii) the statements in the Prospectus under the captions
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Statutory Capital and Dividend Capacity of Amerin
Guaranty--Dividend Limitations" and "Business--Regulation" insofar as such
statements constitute summaries of the legal matters referred to therein
are

<PAGE>

accurate in all material respects and fairly summarize in all material
respects the matters referred to therein.

(g) The Underwriters shall have received on the Closing Date an opinion of
counsel for each of the Selling Shareholders, which counsel or counsels shall be
reasonably acceptable to counsel for the U.S. Underwriters, dated the Closing
Date, to the effect that:

(i) this Agreement has been duly authorized, executed and delivered
by or on behalf of such Selling Shareholder;

(ii) the execution and delivery by such Selling Shareholder of, and
the performance by such Selling Shareholder of its obligations under, this
Agreement and the Power of Attorney and Custody Agreement of such Selling
Shareholder will not contravene any provision of applicable law, or the
certificate of incorporation or by-laws of such Selling Shareholder (if
such Selling Shareholder is a corporation), or, to the best of such
counsel's knowledge, any agreement or other instrument binding upon such
Selling Shareholder or, to such counsel's knowledge, any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
such Selling Shareholder, and no consent, approval, authorization or order
of, or qualification with, any governmental body or agency is required for
the performance by such Selling Shareholder of its obligations under this
Agreement or the Power of Attorney and Custody Agreement of such Selling
Shareholder, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of the
Shares;

(iii) such Selling Shareholder has the legal right and power, and
all authorization and approval required by law, to enter into this
Agreement and the Power of Attorney and Custody Agreement of such Selling
Shareholder and to sell, transfer and deliver the Shares to be sold by such
Selling Shareholder;

(iv) the Power of Attorney and Custody Agreement of such Selling
Shareholder has been duly authorized, executed and delivered by such
Selling Shareholder and is a valid and binding agreement of such Selling
Shareholder; and

(v) such Selling Shareholder has record ownership and, to such
counsel's knowledge, beneficial ownership of the Shares to be sold by such
Selling Shareholder to the Underwriters pursuant to this Agreement, and,
assuming that the Underwriters are "bona fide purchasers" (as defined under
Section 8-302 of the New York Uniform Commercial Code), upon delivery

<PAGE>

of the certificates for any Shares to be sold against payment
therefor, the Underwriters will acquire valid marketable title to such
Shares, free and clear of any security interest or "adverse claims"
within the meaning of Section 8-302 of the New York Uniform Commercial
Code.

(h) The Underwriters shall have received on the Closing Date an
opinion of Davis Polk & Wardwell, counsel for the Underwriters, dated the
Closing Date, covering the matters referred to in subparagraph (v) and
clauses (B), (C) and (D) of subparagraph (x) of paragraph (d) above and to
the further effect that the statements in the Prospectus under the caption
"Underwriters" insofar as such statements constitute a summary of the
documents referred to therein fairly present the information called for
with respect to such documents and fairly summarize the matters referred to
therein.

With respect to subparagraph (x) of paragraph (d) above, Jones, Day, Reavis
& Pogue and Davis Polk & Wardwell may state that their opinion and belief are
based upon their participation in the preparation of the Registration Statement
and Prospectus and any amendments or supplements thereto (in the case of Davis
Polk & Wardwell, other than documents incorporated by reference therein) and
review and discussion of the contents thereof (including the documents
incorporated by reference therein), but are without independent check or
verification, except as specified. In rendering the opinions set forth in
subparagraph (vi) of paragraph (d) above, Jones, Day, Reavis & Pogue may state,
and in rendering the opinions set forth in subparagraphs (iii) and (v) of
paragraph (e) above, Randolph C. Sailer II may state, that no opinion is
expressed with respect to insurance laws, rules and regulations to the extent
that the opinion required by such subparagraphs are covered by the opinion
delivered pursuant to paragraph (f) above. In rendering the opinions set forth
in paragraph (f) above, Lord, Bissell & Brook may state that it has not
independently verified and is not passing upon, and does not assume any
responsibility for the accuracy, completeness, or fairness of the information
contained in the Registration Statement and the Prospectus except as set forth
in subparagraph (iii) of paragraph (f) above.

The opinions of Jones, Day, Reavis & Pogue, Randolph C. Sailer II, Lord,
Bissell & Brook and each of the counsel to the Selling Shareholders described in
paragraphs (d), (e), (f) and (g) above shall be rendered to the Underwriters at
the request of the Company or the Selling Shareholder or Selling Shareholders on
whose behalf the respective opinion is being given, as the case may be, and
shall so state therein.

(i) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters,
from Ernst & Young LLP, independent public accountants, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the financial statements
and certain financial information contained in the Registration

<PAGE>

Statement and the Prospectus; PROVIDED that the letter delivered on the
Closing Date shall use a "cut-off date" not earlier than the date hereof.

(j) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between the Underwriters, the Selling Shareholders and
each of the executive officers and directors of the Company relating to
sales and certain other dispositions of shares of Common Stock or certain
other securities, delivered to you on or before the date hereof, shall be
in full force and effect on the Closing Date.

(k) The Shares have been approved for quotation on the Nasdaq
National Market.

The several obligations of the U.S. Underwriters to purchase Additional
Shares hereunder are subject to satisfaction on and as of the Option Closing
Date of the conditions set forth in paragraphs (a)-(k) above, except that the
opinions called for in paragraphs (d), (e), (f) and (g), and the letter called
for in paragraph (i) and the certificate called for by paragraph (c) shall be
revised to reflect the sale of the Additional Shares and dated the Option
Closing Date.

7. COVENANTS OF THE COMPANY. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:

(a) To furnish to the U.S. Representatives and International
Representatives, without charge, four signed copies of the Registration
Statement (including exhibits and documents incorporated by reference) and
for delivery to each other Underwriter a conformed copy of the Registration
Statement (without exhibits but including documents incorporated by
reference) and to furnish to you in New York City, without charge, prior to
10:00 A.M. local time on the business day next succeeding the date of this
Agreement and during the period mentioned in paragraph (c) below, as many
copies of the Prospectus and any supplements and amendments thereto or to
the Registration Statement as you may reasonably request.

(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to
which you reasonably object, and to file with the Commission within the
applicable period specified in Rule 424(b) under the Securities Act any
prospectus required to be filed pursuant to such Rule.

(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters
the Prospectus is required by law to be delivered in connection with sales
by an Underwriter or dealer, any event

<PAGE>

shall occur or condition exist as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the Commission
and furnish, at its own expense, to the Underwriters and to the dealers
(whose names and addresses you will furnish to the Company) to which Shares
may have been sold by you on behalf of the Underwriters and to any other
dealers upon request, either amendments or supplements to the Prospectus so
that the statements in the Prospectus as so amended or supplemented will
not, in the light of the circumstances when the Prospectus is delivered to
a purchaser, be misleading or so that the Prospectus, as amended or
supplemented, will comply with law.

(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request; provided that the Company shall not be required to consent to
general service of process in any jurisdiction in which the Company may not
already be so subject.

(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the
twelve-month period ending March 31, 1998 that satisfies the provisions of
Section 11(a) of the Securities Act and the rules and regulations of the
Commission thereunder.

(f) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Securities Act and all
other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing
costs associated therewith, and the mailing and delivering of copies
thereof to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and delivery
of the Shares to the Underwriters, excluding any transfer or other taxes
payable thereon, (iii) the cost of printing or producing any Blue Sky
memorandum in connection with the offer and sale of the Shares under state
securities laws and all expenses in connection with the qualification of
the Shares for offer and sale under state securities laws as provided in
Section 7.(d) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky memorandum, (iv) all
filing fees and disbursements of counsel to the Underwriters incurred in
connection with the review and qualification of the Offering by the
National Association of Securities Dealers, Inc., (v) all costs and
expenses

<PAGE>

incident to listing the Shares on The Nasdaq National Market, (vi) the cost
of printing certificates representing the Shares, (vii) the costs and
charges of any transfer agent, registrar or depositary, (viii) the costs
and expenses of the Company relating to investor presentations on any "road
show" undertaken in connection with the marketing of the Offering, which
for this purpose shall include expenses associated with the production of
road show slides and graphics, travel, lodging and meal expense of the
representatives and officers of the Company (but not of the Underwriters),
expenses for room rental and food and beverages for investor presentations,
and, if the Company shall agree in advance, for a portion of the cost
associated with the chartering of aircraft in connection with the road show
based on the number of officers and representatives of the Company
utilizing such aircraft compared to the total number of passengers using
such aircraft, (ix) the filing of trade reports in the provinces of Canada,
if any, including filing fees and disbursements of Canadian counsel to the
underwriters in connection therewith, (x) reasonable fees and expenses of
one counsel (who shall be reasonably acceptable to the Company) for the
Selling Shareholders selected by Selling Shareholders holding the majority
of the Shares (including shares of Nonvoting Common Stock to be converted
into Shares), and (xi) all other costs and expenses incident to the
performance of the obligations of the Company hereunder for which provision
is not otherwise made in this Section. It is understood, however, that
except as provided in this Section, Section 9 entitled "Indemnity and
Contribution," and the last paragraph of Section 11 below, the Underwriters
will pay all of their costs and expenses, including fees and disbursements
of their counsel, stock transfer taxes payable on resale of any of the
Shares by them, and any advertising expenses connected with any offers they
may make. The Company shall have no obligation to pay any underwriting
fees, discounts or commissions attributable to the sale of the Shares, any
taxes on the transfer and sale of the Shares, or any out-of-pocket expenses
of the Selling Shareholders (or the agents who manage their accounts).

8. COVENANTS OF SELLING SHAREHOLDERS. Each Selling Shareholder agrees,
severally and not jointly, to pay or cause to be paid (i) all taxes, if any, on
the transfer and sale of the Shares being sold by such Selling Shareholder
hereunder and in connection with the conversion of shares of Nonvoting Common
Stock into Shares by such Selling Shareholder, (ii) all out-of-pocket expenses,
if any, of such Selling Shareholder or any agent of such Selling Shareholder and
(iii) except as provided in Section 7.(f) and the Stockholders Agreement, all
fees of counsel to such Selling Shareholder.

9. INDEMNITY AND CONTRIBUTION. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), from and against any and all losses, claims, damages and liabilities
(including, without limitation, any legal or other expenses reasonably incurred
by any Underwriter or any such controlling person in connection with defending
or

<PAGE>

investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the Prospectus
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto), or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein; PROVIDED, HOWEVER, that the foregoing indemnity
agreement with respect to any preliminary prospectus shall not inure to the
benefit of any Underwriter from whom the person asserting any such losses,
claims, damages or liabilities purchased Shares, or any person controlling such
Underwriter, if a copy of the Prospectus (as then amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) was not sent
or given by or on behalf of such Underwriter to such person, if required by law
so to have been delivered, at or prior to the written confirmation of the sale
of the Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such losses, claims,
damages or liabilities.

(b) Each Selling Shareholder agrees, severally and not jointly, to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred by any Underwriter or any such
controlling person in connection with defending or investigating any such action
or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or any amendment thereof,
any preliminary prospectus or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, to
the extent and only to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any preliminary prospectus or the Prospectus in reliance upon, and in
conformity with, information relating to such Selling Shareholder furnished to
the Company in writing by or on behalf of such Selling Shareholder expressly for
use in the Registration Statement, any preliminary prospectus or the Prospectus;
PROVIDED, HOWEVER, that the foregoing indemnity agreement with respect to any
preliminary prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages or liabilities
purchased Shares, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) was not sent or given by or on behalf of
such Underwriter to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the Shares to such
person, and if the Prospectus (as so

<PAGE>

amended or supplemented) would have cured the defect giving rise to such losses,
claims, damages or liabilities. Notwithstanding any other provision of this
Section 9, the liability of each Selling Shareholder to the Underwriters shall
not exceed the net amount received by each such Selling Shareholder (after
deducting any underwriting discount) from the sale of the Shares pursuant to
this Agreement.

(c) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, the Selling Shareholders, the directors of the
Company, the officers of the Company who sign the Registration Statement and
each person, if any, who controls the Company or any Selling Shareholder within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.

(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to any of paragraphs (a) through (c) of this Section 9, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party shall assume the defense thereof and shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding,
it being understood that any delay or failure by the indemnified party to
provide such written notification shall only relieve the indemnifying party from
its indemnification obligations hereunder to the extent it is prejudiced by such
delay or failure. In any such proceeding, any indemnified party shall have the
right to retain its own counsel and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel, (ii) the indemnifying party
shall have failed to assume the defense or employ counsel reasonably
satisfactory to the indemnified party or (iii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them (in which case the indemnifying party shall not have the right to assume
the defense of such action or proceeding on behalf of the indemnified party).
It is understood that the indemnifying party shall not, in respect of the legal
expenses of any indemnified party in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for (a) the fees and expenses of
more than one separate firm (in addition to any local counsel) for all
Underwriters and all persons, if any, who control any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, (b) the fees and expenses of more than one separate firm (in addition to
any local counsel) for the Company,

<PAGE>

its directors, its officers who sign the Registration Statement and each person,
if any, who controls the Company (other than The Morgan Stanley Leveraged Equity
Fund II, L.P. ("MSLEF II"), Morgan Stanley Leveraged Equity Fund II, Inc. and
Morgan Stanley Group Inc.) within the meaning of either such Section, (c) the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Selling Shareholders (other than MSLEF II) and all persons, if
any, who control any Selling Shareholder (other than MSLEF II) within the
meaning of either such Section and (d) the fees and expenses of more than one
separate firm (in addition to any local counsel) for MSLEF II and all persons,
if any, who control MSLEF II within the meaning of either such Section, and that
all such fees and expenses shall be reimbursed as they are incurred. In the
case of any such separate firm for the Underwriters and such control persons of
Underwriters, such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated. In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be
designated in writing by the Company. In the case of any such separate firm for
the Selling Shareholders (other than MSLEF II) and such controlling persons of
Selling Shareholders (other than MSLEF II), such firm shall be designated in
writing by the Selling Shareholders (other than MSLEF II) selling the majority
of the amount of shares sold by the Selling Shareholders (other than MSLEF II)
under this Agreement. In the case of any such separate firm for MSLEF II and
any controlling person of MSLEF II, such firm shall be designated in writing by
Morgan Stanley Leveraged Equity Fund II, Inc.

The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party in accordance with such request (or, if within 30 days of the
receipt by the indemnifying party of the aforesaid request, the indemnifying
party shall have made a good faith written challenge to the reasonableness of
the amount or nature of the reimbursement requested (which challenge shall
specifically set forth the amount or nature of the requested reimbursement which
the indemnifying party in good faith believes to be unreasonable, including as a
result of the reimbursement being in good faith believed to be insufficiently
documented), then such indemnifying party shall not have reimbursed the
indemnified party the amount which is not being so challenged) prior to the date
of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release

<PAGE>

of such indemnified party from all liability on claims that are the subject
matter of such proceeding.

(e) To the extent the indemnification provided for in any of paragraphs
(a) through (c) of this Section 9 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party or parties on the one hand
and the indemnified party or parties on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by each
Selling Shareholder and the Company, on the one hand, and the Underwriters on
the other hand, in connection with the offering of the Shares shall be deemed to
be in the same respective proportions as the total net proceeds from the
offering of the Shares received by the Selling Shareholders (after deducting any
underwriting discounts but before deducting expenses) and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Shares; PROVIDED that for the purpose of this sentence,
the Company's benefit shall be deemed to be the net amount received (after
deducting any underwriting discounts but before deducting expenses) by the
Selling Shareholders. The relative fault of the Company, each Selling
Shareholder and the Underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company, each Selling Shareholder or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Underwriters' respective obligations to contribute pursuant to this Section 9
are several in proportion to the respective number of Shares they have purchased
hereunder, and not joint.

(f) The Company, the Selling Shareholders and the Underwriters agree that
it would not be just or equitable if contribution pursuant to this Section 9
were determined by PRO RATA allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in paragraph (e) of
this Section 9. The amount paid or payable by an indemnified party as a result
of the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, (i)

<PAGE>

no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission and (ii)
no Selling Shareholder shall be required to contribute any amount in excess of
the amount by which the net amount received by such Selling Shareholder (after
deducting any underwriting discount) from the sale of the Shares pursuant to
this Agreement exceeds the amount of any damages that such Selling Shareholder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 9 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.

(g) The indemnity and contribution provisions contained in this Section 9
and the representations, warranties and other statements of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter, by
or on behalf of any Selling Shareholder or any person controlling any Selling
Shareholder or by or on behalf of the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Shares..

(h) The provisions of Sections 5.6 through 5.9 of the Stockholders
Agreement shall govern, as among the Company and the Selling Shareholders,
rights to indemnification and contribution.

10. TERMINATION. This Agreement shall be subject to termination, in your
absolute discretion, by notice given by you to the Company, if (a) after the
execution and delivery of this Agreement and prior to the Closing Date (i)
trading generally shall have been suspended or materially limited on or by, as
the case may be, any of the New York Stock Exchange, the American Stock
Exchange, the National Association of Securities Dealers, Inc., the Chicago
Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board
of Trade, (ii) trading of any securities of the Company shall have been
suspended on any exchange or in any over-the-counter market, (iii) a general
moratorium on commercial banking activities in New York shall have been declared
by either federal or New York State authorities or (iv) there shall have
occurred any outbreak or escalation of hostilities or any change in financial
markets or any calamity or crisis that, in your judgment, is material and
adverse and (b) in the case of any of the events specified in clauses (a)(i)
through (iv), such event, singly or together with any other such event, makes
it, in your judgment, impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.

<PAGE>

11. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.

If, on the Closing Date or the Option Closing Date, as the case may be, any
one or more of the Underwriters shall fail or refuse to purchase Shares that it
has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule II or Schedule III bears to the
aggregate number of Firm Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; PROVIDED that in no event shall the
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 11 by an amount in excess of
one-ninth of such number of Shares without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Firm Shares to be purchased, and arrangements satisfactory
to you, the Company and the Selling Shareholders for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter, the
Company or the Selling Shareholders. In any such case either you or the
relevant Selling Shareholders shall have the right to postpone the Closing Date,
but in no event for longer than seven days, in order that the required changes,
if any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. If, on the Option Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Additional Shares
and the aggregate number of Additional Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option to (i)
terminate their obligation hereunder to purchase Additional Shares or (ii)
purchase not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase in the absence of such
default. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.

If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of the Company or any Selling
Shareholder to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason the Company or any Selling Shareholder shall be
unable to perform its obligations under this Agreement, the Company will
reimburse the Underwriters or such Underwriters as have so terminated this
Agreement with respect to themselves, severally, for all out-of-pocket expenses
(including the fees and disbursements of their counsel) reasonably incurred by
such Underwriters in connection with this Agreement or the offering contemplated
hereunder.

<PAGE>

12. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

13. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.

14. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.

Very truly yours,
AMERIN CORPORATION

By _____________________________
Name:
Title:

The Selling Shareholders
named in Schedule I attached
hereto, acting severally

By _____________________________
Name:
Attorney-in-Fact

28
<PAGE>

Accepted as of the date hereof:
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.

Acting severally on behalf
of themselves and the
several U.S. Underwriters named
in Schedule II attached hereto.

By Morgan Stanley & Co.
Incorporated

By ________________________________
Name:
Title:

<PAGE>

MORGAN STANLEY & CO. INTERNATIONAL
LIMITED
CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES LTD.

Acting severally on behalf
of themselves and the several
International Underwriters named
in Schedule III attached hereto.

By Morgan Stanley & Co.
International Limited

By____________________________
Name:
Title:

<PAGE>

SCHEDULE I

Number of
Number of Firm Additional
Shares Shares To Be
Selling Shareholder To Be Sold Sold
------------------- --------------- ------------

Morgan Stanley Leveraged Equity Fund II,
Inc., as General Partner of The Morgan
Stanley Leveraged Equity Fund II, L.P. 1,639,278 245,892

J.P. Morgan Capital Corporation 526,425 78,964

Mellon Bank, N.A., as Trustee for First
Plaza Group Trust 565,649 84,847

Aetna Life Insurance Company 537,387 80,608

Leeway & Co. 287,425 43,114

Gerald L. Friedman 147,515 78,452

Friedman Family Foundation 45,000 0

Gerald L. Friedman Charitable
Remainder Unitrust of 1997 160,000 0

Sheree A. Friedman Charitable
Remainder Unitrust of 1997 160,000 0

Sarah Beth Friedman 1989 Trust 3,500 0

Rachael L. Friedman 3,500 0

Daniel B. Rand 3,500 0

Stuart M. Brafman 125,821 25,623

The Stuart Brafman Charitable
Remainder Annuity Trust 45,000 0
--------- --------
Total 4,250,000 637,500
--------- --------
--------- --------

<PAGE>
SCHEDULE II

Number of
Firm Shares
To Be
U.S. Underwriter Purchased
- ---------------- -----------

Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
J.P. Morgan Securities Inc.
-----------
Total 3,400,000
-----------
-----------

<PAGE>
SCHEDULE III

Number of
Firm Shares
To Be
International Underwriter Purchased
- ------------------------- ------------
Morgan Stanley & Co. International Limited
Credit Suisse First Boston (Europe) Limited
Donaldson, Lufkin & Jenrette Securities Corporation
J.P. Morgan Securities Ltd.

-----------
Total 350,000
-----------
-----------

<PAGE>

Exhibit A

[Form of Lock-Up Contract]

Morgan Stanley & Co. Incorporated
Credit Suisse First Boston Corporation
Donaldson, Lufkin & Jenrette
Securities Corporation
J.P. Morgan Securities Inc.
as representatives of the several
U.S. Underwriters named in the
Underwriting Agreement referred
to below
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036

Morgan Stanley & Co. International Limited
Credit Suisse First Boston (Europe) Limited
Donaldson, Lufkin & Jenrette
Securities Corporation
J.P. Morgan Securities Ltd.
as representatives of the several
International Underwriters named in
the Underwriting Agreement referred
to below
c/o Morgan Stanley & Co. International Limited
25 Cabot Street
Canary Wharf
London E14 4OA
England

Dear Sirs:

The undersigned understands that Amerin Corporation, a Delaware
corporation (the "Company"), proposes to enter into an Underwriting Agreement
with certain

A-1

<PAGE>

stockholders of the Company [including the undersigned] 1, providing for the
public offering (the "Public Offering") by the several Underwriters named
therein, including yourselves, of 4,250,000 shares (the "Shares") of the Common
Stock (par value $.01 per share) of the Company (the "Common Stock"). Unless
otherwise defined herein, capitalized terms used herein have the meaning set
forth in the Underwriting Agreement.

In consideration of the Underwriters' agreement to purchase and make
the Public Offering of the Shares, and for other good and valuable consideration
receipt of which is hereby acknowledged, the undersigned hereby agrees that,
without the prior written consent of each of the U.S. Representatives, in the
case of The Morgan Stanley Leveraged Equity Fund II, L.P., or of Morgan Stanley
& Co. Incorporated in all other cases on behalf of the Underwriters, it will
not, during the period ending 90 days after the date of the Prospectus (as
defined in the Underwriting Agreement), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
(whether such shares or any such securities are now owned by the undersigned or
are hereafter acquired), or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in clause
(1) or (2) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. In addition, the undersigned agrees that,
without the prior written consent of the U.S. Representatives, in the case of
The Morgan Stanley Leveraged Equity Fund II, L.P., or of Morgan Stanley & Co.
Incorporated in all other cases on behalf of the Underwriters, it will not,
during the period ending 90 days after the date of the Prospectus, make any
demand for or exercise any right with respect to, the registration of any shares
of Common Stock or any security convertible into or exercisable or exchangeable
for Common Stock.

Very truly yours,

[NAME]

By:_______________________________
Name:
Title:

_______________________

1 Delete if undersigned is not a Selling Shareholder.

A-2

<PAGE>

Accepted as of the date
first set forth above:

MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES INC.

As Representatives of the several
U.S. Underwriters

By: Morgan Stanley & Co. Incorporated

By:__________________________________
Name:
Title:

MORGAN STANLEY & CO. INTERNATIONAL
LIMITED
CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
J.P. MORGAN SECURITIES LTD.

As Representatives of the several
International Underwriters

By: Morgan Stanley & Co. International
Limited

By:___________________________________
Name:
Title:

A-3

<PAGE>

Exhibit 5.1

[JONES, DAY, REAVIS & POGUE LETTERHEAD]

January 24, 1997

Amerin Corporation
200 East Randolph Drive, 49th Floor
Chicago, Illinois 60601-71225

Re: 4,887,000 Shares of Common Stock,
Par Value $.01 Per Share,
to Be Offered Through Underwriters
----------------------------------

Gentlemen:

We are acting as counsel for Amerin Corporation, a Delaware
corporation (the "Company"), in connection with the sale by certain
stockholders of the Company of up to 4,887,000 shares of common stock, par
value $.01 per share, of the Company (the "Shares"), in accordance with the
Underwriting Agreement (the "Underwriting Agreement") to be entered into
among the Company and Morgan Stanley & Co. Incorporated, Credit Suisse First
Boston Corporation, Donaldson, Lufkin & Jenrette Securities Corporation and
J.P. Morgan Securities, Inc., as representatives of the several U.S.
underwriters to be named in Schedule II thereto, and Morgan Stanley & Co.
International Limited, Credit Suisse First Boston (Europe) Limited, Donaldson,
Lufkin & Jenrette Securities Corporation and J.P. Morgan Securities, Ltd., as
representatives of the several international underwriters to be named in
Schedule III thereto.

We have examined such documents, records, and matters of law as
we have deemed necessary for purposes of this opinion, and based thereupon we
are of the opinion that the Shares are duly authorized, validly issued, fully
paid and nonassessable.

We hereby consent to the filing of this opinion as Exhibit 5.1
to the Registration Statement on Form S-3, as amended (Registration No.
333-19757), filed by the Company to effect registration of the Shares under
the Securities Act of 1933, as amended, and to the reference to us under the
caption "Validity of Securities" in the Prospectus constituting a part of such
Registration Statement.

Very truly yours,

/s/ Jones, Day, Reavis & Pogue

Jones, Day, Reavis & Pogue

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 21, 1996 in Amendment No. 1 to the
Registration Statement (Form S-3 No. 333-19757) and related Prospectus of Amerin
Corporation for the registration of 4,250,000 shares of its common stock.

We also consent to the incorporation by reference therein of our report
dated February 21, 1996, with respect to the consolidated financial statements
and financial statement schedules of Amerin Corporation included in its Annual
Report (Form 10-K) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.

ERNST & YOUNG LLP

Chicago, Illinois
January 22, 1997

<PAGE>
EXHIBIT 23.3

DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, N.Y. 10017

January 23, 1997

Amerin Corporation
200 E. Randolph Drive
Chicago, Illinois 60601

Gentlemen:

We hereby consent to the reference to our firm under the caption "Risk
Factors--Certain Matters Relating to Lender Paid Mortgage Insurance" in the
prospectus forming a part of the Registration Statement on Form S-3 of Amerin
Corporation, Registration Statement No. 333-19757, filed with the U.S.
Securities and Exchange Commission. We also consent to the inclusion of this
letter with Amendment No. 1 to that registration statement, which amendment is
to be filed on or about January 24, 1997.

In giving such consent, we do not thereby admit that we are within the
category of persons whose consent is required by Section 7 of the Securities Act
of 1933.

Very truly yours,
/s/ DAVIS POLK & WARDWELL

Davis Polk & Wardwell

<PAGE>
EXHIBIT 23.4

PATTON BOGGS, L.L.P.
2550 M STREET, N.W.
WASHINGTON D.C. 20037-1350
(202) 457-6000
-------

FACSIMILE (202) 457-0215

WRITER'S DIRECT DIAL

(202) 457-6074

January 23, 1997

Amerin Corporation
200 East Randolph Drive
Chicago, IL 60601

Gentlemen:

We hereby consent to the reference to our firm under the caption "Risk
Factors--Certain Legal Matters Relating to Captive Mortgage Reinsurance
Arrangements" in the prospectus forming a part of the Registration Statement on
Form S-3 of Amerin Corporation, Registration Statement No. 333-19757, filed with
the U.S. Securities and Exchange Commission. We also consent to the inclusion of
this letter with Amendment No. 1 to that registration statement, which amendment
is to be filed on or about January 24, 1997.

In giving such consent, we do not thereby admit that we are within the
category of persons whose consent is required by Section 7 of the Securities Act
of 1933.

Sincerely,
PATTON BOGGS, L.L.P.

By: /S/ TIMOTHY A. VANDERVER, JR.
--------------------------------------
Timothy A. Vanderver, Jr.