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



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   -----------


                                    FORM 8-K


                                 CURRENT REPORT


                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934


                           Date of Report: May 3, 1999
                        (Date of earliest event reported)



                        HILB, ROGAL AND HAMILTON COMPANY
             (Exact Name of Registrant as Specified in its Charter)



          Virginia                      0-15981                 54-1194795
(State or Other Jurisdiction    (Commission File Number)       (IRS Employer
      of Incorporation)                                      Identification No.)

              4235 Innslake Drive
              Glen Allen, Virginia                        23060
    (Address of Principal Executive Offices)           (Zip Code)



               Registrant's telephone number, including area code:
                                 (804) 747-6500



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


<PAGE>

Item 2.      Acquisition or Disposition of Assets.

         On May 3,  1999,  Hilb,  Rogal and  Hamilton  Company  (the  "Company")
acquired all of the issued and  outstanding  capital  stock of American  Phoenix
Corporation ("American Phoenix") (collectively, the "Acquisition") pursuant to a
Stock Purchase Agreement (the "Stock Purchase Agreement"), dated March 29, 1999,
by and among the Company,  PM  Holdings,  Inc.  ("Holdings"),  Phoenix Home Life
Mutual  Insurance  Company  ("Phoenix") and Martin L. Vaughan,  III ("Vaughan").
American Phoenix, which is based in Hartford,  Connecticut,  is the 14th largest
property  and casualty  insurance  brokerage  firm in the United  States and had
revenues of  approximately  $73 million in 1998. As a result of the Acquisition,
American Phoenix became a wholly owned subsidiary of the Company.

         The  purchase  price  paid  by  the  Company  in  connection  with  the
Acquisition  consisted  of (i)  approximately  $49.2  million in cash,  (ii) the
issuance to Holdings of 865,042  shares of the Company's  Common Stock  ("Common
Stock")  and to Vaughan  of  134,958  shares of Common  Stock,  representing  an
aggregate  of  1,000,000  shares of Common  Stock,  and  (iii) the  issuance  to
Holdings  and  Phoenix of an  aggregate  principal  amount of $32 million of the
Company's   5.25%   Convertible   Subordinated   Debentures   (Due   2014)  (the
"Subordinated  Debentures"),  which are  convertible  into  1,406,593  shares of
Common Stock (subject to adjustment as provided in the Indenture relating to the
Subordinated  Debentures).  The various  components  of the purchase  price were
determined by arms-length  negotiations between the parties.  Based upon a value
for the 1,000,000 shares of Common Stock of $16.9 million and an estimated value
for the Subordinated  Debentures of $28.5 million,  the aggregate purchase price
paid by the  Company to  Holdings,  Phoenix  and  Vaughan at the  closing of the
Acquisition was  approximately  $94.6 million.  For information on the estimated
aggregate purchase price to be recorded by the Company for accounting  purposes,
see footnote 3 to the Pro Forma  Condensed  Combined  Financial  Statements  set
forth in "Item 7(b) - Pro Forma Financial Information" below.

         In connection with the consummation of the Acquisition, the Company (i)
has agreed to increase the size of the Board of Directors from 9 to 13 and elect
Vaughan,  who  serves as  President  and Chief  Executive  Officer  of  American
Phoenix, Robert W. Fiondella, Chairman, President and Chief Executive Officer of
Phoenix, David W. Searfoss, Executive Vice President and Chief Financial Officer
of Phoenix,  and Timothy J. Korman, the Company's  Executive Vice President,  as
additional  directors of the Company,  (ii) entered into a Voting and Standstill
Agreement with Holdings and Phoenix to establish  certain rights and obligations
in connection with the relationship of Holdings and Phoenix to the Company,  and
(iii) entered into a Registration  Rights Agreement with Holdings and Phoenix to
provide  certain  demand  and  piggy-back  registration  rights of the shares of
Common Stock  acquired by Holdings  and the shares of Common  Stock  issuable to
Holdings,  Phoenix  or their  affiliates  upon  conversion  of the  Subordinated
Debentures  (subject to adjustment as provided in the Indenture  relating to the
Subordinated  Debentures).   Copies  of  the  forms  of  Voting  and  Standstill
Agreement,  Registration Rights Agreement and Indenture are attached as exhibits
to the Stock  Purchase  Agreement  referenced  in Exhibit  2.1 of this Form 8-K.
Executed  copies of such  documents will be filed on the Company's Form 10-Q for
the quarter ended March 31, 1999.


                                      -2-
<PAGE>

         As of the close of business on May 3, 1999,  the total number of shares
of Common Stock issued and  outstanding  was  13,201,314.  The 865,042 shares of
Common Stock  acquired by Holdings at the closing of the  Acquisition  represent
approximately  6.6% of the issued and  outstanding  shares of Common Stock as of
that date.

         In  addition,  on  May 3,  1999,  the  Company  entered  into a  Credit
Agreement  (the  "Credit  Agreement"),  dated  as of  May  3,  1999,  among  the
Registrant,  as Borrower;  the lenders named therein; First Union National Bank,
as  administrative  agent;  PNC Bank, as  documentation  agent;  and NationsBanc
Montgomery  Securities  LLC,  as  syndication  agent.  Pursuant  to  the  Credit
Agreement,  senior  credit  facilities  (the "Credit  Facility") in an aggregate
principal  amount of up to $110.0 million were made available (i) to finance the
$49.2 million cash payment to Holdings in connection with the Acquisition,  (ii)
to repay  outstanding  bank  borrowings  under  the  Company's  existing  credit
facilities,  (iii) to pay  certain  fees and  expenses  in  connection  with the
Acquisition  and the Credit  Facility,  and (iv) for working capital and general
corporate purposes.

         The Credit Agreement  contains certain covenants that restrict,  or may
have the effect of restricting,  the payment of dividends or distributions,  and
the purchase or redemption by the Company of its capital stock.  Management does
not believe that the restrictions contained in the Credit Agreement will, in the
foreseeable future, adversely affect the Company's ability to pay cash dividends
at the current dividend rate. However, there can be no assurance in this regard.

Item 7.      Financial Statements, Pro Forma Financial Information and Exhibits.

         (a)      Financial Statements of Businesses Acquired.

         The following audited financial  statements of American Phoenix and its
subsidiaries are included in this report:

         Report of Independent Accountants

         Consolidated Balance Sheet at December 31, 1998 and 1997

         Consolidated Statement of Operations for the Three Years Ended December
         31, 1998, 1997 and 1996

         Consolidated   Statement  of   Comprehensive   Income  and  Changes  in
         Stockholders'  Equity for the Three Years Ended December 31, 1998, 1997
         and 1996

         Consolidated Statement of Cash Flows for the Three Years Ended December
         31, 1998, 1997 and 1996

         Notes to Consolidated Financial Statements



                                      -3-
<PAGE>



American Phoenix
Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Financial Statements
December 31, 1998 and 1997





                                      -4-
<PAGE>





                        Report of Independent Accountants
                        ---------------------------------


To the Board of Directors and Stockholders of
 American Phoenix Corporation


In our opinion,  the  accompanying  consolidated  balance  sheet and the related
consolidated  statements of operations,  of comprehensive  income and changes in
stockholders' equity and of cash flows present fairly, in all material respects,
the  financial  position of American  Phoenix  Corporation  (a  subsidiary of PM
Holdings,  Inc.) and its  subsidiaries  at December  31, 1998 and 1997,  and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31,  1998,  in  conformity  with  generally  accepted
accounting principles.  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 of these
statements  in accordance  with  generally  accepted  auditing  standards  which
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,  assessing the  accounting  principles
used and  significant  estimates  made by management  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.


/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut
March 5, 1999,
except as to Note 13 which is as of May 3, 1999



                                      -5-
<PAGE>

<TABLE>
<CAPTION>
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Balance Sheet
-------------------------------------------------------------------------------------------------------------------

                                                                                          December 31,
                                                                                    1998               1997
<S>                                                                            <C>                <C>
Assets
Cash and cash equivalents                                                      $  10,498,658      $  16,178,504
Marketable equity securities, at market value                                        111,226            106,341
Premiums receivable, net of allowance of                                                       
   $241,220 and $267,849 for doubtful accounts                                    35,285,012         32,195,746
Installment finance receivables, net of unearned
   finance charges of $75,465 and $76,553 and
   allowance of $2,000 and $2,000 for doubtful accounts                            3,525,739          3,410,329
Income taxes receivable from parent                                                1,196,746                  -
Prepaid expenses and other current assets                                          2,330,590          2,358,079
                                                                               -------------      -------------

     Total current assets                                                         52,947,971         54,248,999

Property and equipment, net                                                        8,221,207          7,879,861
Deferred income taxes, net                                                         3,080,453          6,152,865
Goodwill and other intangible assets, net                                         42,370,521         43,571,605
                                                                               -------------      -------------
     Total assets                                                              $ 106,620,152      $ 111,853,330
                                                                               =============      =============

Liabilities

Premiums payable to insurers                                                   $  50,155,157      $  46,397,935
Short-term debt                                                                   18,525,504          8,601,628
Income taxes payable to parent                                                             -            182,716
Accounts payable and accrued expenses                                              6,732,474          5,240,195
                                                                               -------------      -------------

     Total current liabilities                                                    75,413,135         60,422,474

Long-term debt                                                                    44,151,930         61,814,402
Other long-term liabilities                                                        1,856,693          2,205,312
                                                                               -------------      -------------

     Total liabilities                                                           121,421,758        124,442,188
                                                                               -------------      -------------

Minority interest                                                                  1,189,506          3,713,411
                                                                               -------------      -------------

Stockholders' deficit
Common stock, Class A, $1 stated value;
   5,000 shares authorized, issued and outstanding                                     5,000              5,000
Common stock, Class B, $1 stated value; 882 shares
   authorized, 882 and 441 shares issued and outstanding                                 882                441
Additional paid-in capital                                                         6,580,418          6,080,859
Accumulated deficit                                                              (22,575,458)       (22,421,874)
Accumulated other comprehensive (loss) income                                         (1,954)            33,305
                                                                               -------------      -------------

     Total stockholders' deficit                                                 (15,991,112)       (16,302,269)
                                                                               -------------      -------------

     Total liabilities, minority interest and stockholders' deficit            $ 106,620,152      $ 111,853,330
                                                                               =============      =============
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       -6-
<PAGE>

<TABLE>
<CAPTION>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Statement of Operations
--------------------------------------------------------------------------------

                                                                                      Year ended December 31,
                                                                               1998            1997              1996
<S>                                                                       <C>              <C>
Income
Commissions and fees                                                      $ 71,635,701     $ 62,469,361      $ 60,410,851
Investment and other income                                                  1,290,228        1,874,425         1,628,207
                                                                          ------------     ------------      ------------

   Total income                                                             72,925,929       64,343,786        62,039,058
                                                                          ------------     ------------      ------------

Expenses
Compensation and employee benefits                                          44,241,870       39,336,216        37,195,821
Amortization and write-off of goodwill and other intangible assets           6,500,503       25,964,093         6,832,956
Depreciation of property and equipment                                       1,814,099        1,770,720         1,580,311
Other operating expenses                                                    14,424,177       14,151,973        14,090,929
Interest                                                                     4,081,890        3,856,213         4,267,405
Management fees                                                                671,622          585,673           563,456
                                                                          ------------     ------------      ------------

   Total expenses                                                           71,734,161       85,664,888        64,530,878
                                                                          ------------     ------------      ------------

Income (loss) before income taxes, minority interest
 and extraordinary item                                                      1,191,768      (21,321,102)       (2,491,820)

Income tax provision (benefit)                                               2,441,387       (1,768,898)          671,984
                                                                          ------------     ------------      ------------

Loss before minority interest and extraordinary item                        (1,249,619)     (19,552,204)       (3,163,804)

Minority interest in net income (loss)                                          98,965         (170,987)          439,151
                                                                          ------------     ------------      ------------

Loss before extraordinary item                                              (1,348,584)     (19,381,217)       (3,602,955)

Extraordinary gain on extinguishment of debt
 (less applicable income taxes of $805,000)                                  1,495,000                -                 -
                                                                          ------------     ------------      ------------

Net income (loss)                                                            $ 146,416     $(19,381,217)     $ (3,602,955)
                                                                          ============     ============      ============
</TABLE>


        The accompanying notes are an integral part of these statements.

                                      -7-
<PAGE>

<TABLE>
<CAPTION>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Statement of Comprehensive Income and
Changes in Stockholders' Equity
--------------------------------------------------------------------------------


                                                                                      Year ended December 31,
                                                                             1998              1997             1996
<S>                                                                      <C>               <C>               <C>         
Net income (loss)                                                        $    146,416      $(19,381,217)     $(3,602,955)
                                                                         ------------      ------------      -----------
Other comprehensive (loss) income, net of income taxes:
   Gain (loss) on marketable equity securities, all unrealized,
   net of income taxes of $1,710, $2,477 and $(31,918)                          3,175             4,600          (59,276)
   Foreign currency translation adjustment, net of income
   taxes of $(20,696), $15,616 and $0                                         (38,434)           29,002                -
                                                                         ------------      ------------      -----------
Other comprehensive (loss) income                                             (35,259)           33,602          (59,276)
                                                                         ------------      ------------      -----------

Total comprehensive income (loss)                                        $    111,157      $(19,347,615)     $(3,662,231)
                                                                         ============      ============      ===========


Stockholders' (deficit) equity, beginning of year                        $(16,302,269)     $  3,045,346      $ 6,707,577
Proceeds from issuance of 441 shares of Class B common stock                  500,000                 -                -
Net income (loss)                                                             146,416       (19,381,217)      (3,602,955)
Dividends paid                                                               (300,000)                -                -
Other comprehensive (loss) income                                             (35,259)           33,602          (59,276)
                                                                         ------------      ------------      -----------

Stockholders' (deficit) equity, end of year                              $(15,991,112)     $(16,302,269)     $ 3,045,346
                                                                         ============      ============      ===========
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       -8-
<PAGE>

<TABLE>
<CAPTION>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Statement of Cash Flows
--------------------------------------------------------------------------------


                                                                                    Year ended December 31,
                                                                            1998             1997              1996
<S>                                                                    <C>              <C>              <C>
Cash flows from operating activities                                  
Net income (loss)                                                      $    146,416     $(19,381,217)    $ (3,602,955)
Adjustments to reconcile net income (loss) to net cash                
   provided by operating activities:                                  
     Extraordinary gain on extinguishment of debt                        (2,300,000)               -                -
     Depreciation of property and equipment                               1,814,099        1,770,720        1,580,311
     Amortization and write-off of goodwill and                       
      other intangible assets                                             6,500,503       25,964,093        6,832,956
     Provision for deferred income taxes                                  3,091,398       (2,746,378)         222,578
     Minority interest in net income (loss)                                  98,965         (170,987)         439,151
   (Increase) decrease in assets:                                     
     Premiums receivable, net                                            (3,234,227)      (1,484,457)       3,542,948
     Income taxes receivable from parent                                 (1,196,746)          23,480          238,148
     Prepaid expenses and other current assets                               27,489         (754,932)        (252,170)
   Increase (decrease) in liabilities:                                
     Premiums payable to insurers                                         3,757,222        5,277,953       (4,461,828)
     Income taxes payable to parent                                        (182,716)         182,716                -
     Accounts payable and accrued expenses                               (2,237,721)       2,290,112       (1,874,954)
     Other long-term liabilities                                           (348,619)          74,659          (64,709)
                                                                       ------------     ------------     ------------
                                                                      
      Net cash provided by operating activities                           5,936,063       11,045,762        2,599,476
                                                                       ------------     ------------     ------------
                                                                      
Cash flows from investing activities                                  
Issuance of installment finance receivables                             (10,238,906)      (6,310,364)      (4,172,734)
Collections of installment finance receivables                           10,123,496        5,749,168        5,828,774
Purchases of equipment, net of normal retirements                        (2,005,445)      (2,426,939)      (1,091,591)
Acquisitions of businesses, net of cash acquired                         (1,171,791)      (2,675,739)      (7,965,791)
                                                                       ------------     ------------     ------------
                                                                      
      Net cash used in investing activities                              (3,292,646)      (5,663,874)      (7,401,342)
                                                                       ------------     ------------     ------------
                                                                      
Cash flows from financing activities                                  
Proceeds from issuance of debt                                           19,458,986       28,845,000       24,500,000
Repayments of debt                                                      (27,096,583)     (31,042,024)     (15,959,670)
Proceeds from issuance of common stock                                      500,000                -                -
Purchases of minority interest                                             (885,666)        (816,551)               -
Dividends paid to shareholders                                             (300,000)               -                -
                                                                       ------------     ------------     ------------
                                                                      
      Net cash (used in) provided by financing activities                (8,323,263)      (3,013,575)       8,540,330
                                                                       ------------     ------------     ------------
                                                                      
Net (decrease) increase in cash and cash equivalents                     (5,679,846)       2,368,313        3,738,464
                                                                      
Cash and cash equivalents, beginning of year                             16,178,504       13,810,191       10,071,727
                                                                       ------------     ------------     ------------
                                                                      
Cash and cash equivalents, end of year                                 $ 10,498,658     $ 16,178,504     $ 13,810,191
                                                                       ============     ============     ============
                                                                      
Supplemental cash flow information:                                   
                                                                      
Interest paid                                                          $  3,884,281     $  3,998,510     $  3,958,532
                                                                      
Income taxes paid                                                      $  1,420,457     $    843,003     $    443,824
</TABLE>


        The accompanying notes are an integral part of these statements.

                                       -9-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.   Organization and Description of Business

     American   Phoenix   Corporation  was   incorporated   under  the  laws  of
     Connecticut. On May 10, 1981, American Phoenix issued 5,000 shares of Class
     A - Common  Stock to  American  Phoenix's  parent,  PM  Holdings,  Inc.,  a
     wholly-owned  subsidiary of Phoenix Home Life Mutual Insurance Company.  On
     April 13, 1993, 441 shares of Class B - Non-voting Common Stock were issued
     to a member of management. On March 31, 1998, another 441 shares of Class B
     - Non-voting Common Stock were issued to that member of management.

     American  Phoenix  is  engaged  in  insurance  agency  operations.   Agency
     subsidiaries distribute commercial and personal  property-casualty and life
     and health insurance.

     American  Phoenix  pays a  management  fee of 1% of  commission  income  to
     Phoenix  Home Life,  the  majority of which is for  internal  legal and tax
     preparation services.

2.   Summary of Significant Accounting Policies

     Use of Estimates

     The accompanying  consolidated  financial  statements have been prepared in
     conformity with generally accepted accounting  principles.  The preparation
     of these  financial  statements  requires  management to make estimates and
     assumptions that affect the reported amounts of assets, liabilities, income
     and  expenses,  and  related  disclosures  in  the  notes  to  consolidated
     financial statements. Actual results could differ from those estimates.

     The following is a summary of significant accounting policies.

     Basis of Presentation

     The  consolidated  financial  statements  include the  accounts of American
     Phoenix  and  all  of  its  subsidiaries.   All  significant   intercompany
     transactions  and balances have been eliminated in  consolidation.  Certain
     amounts from prior years have been  reclassified to conform to current year
     presentation.

     In 1998,  American  Phoenix  adopted the Statement of Financial  Accounting
     Standards No. 130, "Reporting  Comprehensive Income". This standard,  which
     is  effective  for  fiscal  years   beginning   after  December  15,  1997,
     establishes standards for reporting and displaying comprehensive income and
     its components in the financial statements.  Under this standard,  American
     Phoenix is  required  to classify  items of other  comprehensive  income by
     their nature in a financial  statement and display the accumulated  balance
     of other  comprehensive  income  separately  from retained  earnings in the
     stockholders' equity section of the balance sheet.

     Cash and Cash Equivalents

     Cash  equivalents  comprise highly liquid mutual fund  investments and U.S.
     Government  Securities.  The U.S.  Government  Securities  are  carried  at
     amortized cost, which approximates fair value, and have original maturities
     of three months or less.


                                      -10-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     Investments

     Marketable equity securities,  which are classified as  available-for-sale,
     are valued at fair value.  The estimated  fair value of  marketable  equity
     securities  is  based  on  quoted  market  prices  for  those  investments.
     Unrealized gains or losses on marketable  equity securities are included as
     accumulated other  comprehensive  income or loss as a separate component of
     stockholders'  equity, net of deferred income taxes. Realized capital gains
     and  losses  on  the  disposition  of  marketable   equity  securities  are
     determined on the basis of the specific  identification  of the  securities
     sold. Investment income is recognized when earned.

     Premiums Receivable

     Premiums  receivable  represents  outstanding  premiums due from  insureds.
     Typically,  American Phoenix collects  premiums from the insured and, after
     deducting its authorized commission,  remits the premium to the appropriate
     insurance company. In other  circumstances,  the insurance company collects
     the premium directly from the insured and remits the applicable  commission
     to American Phoenix.

     Installment Finance Receivables

     Installment finance receivables  represent  outstanding premiums and unpaid
     finance charges due under financing  agreements,  extending  generally nine
     months.  Installment finance  receivables,  which generally represent 75 to
     80% of the  insurance  premiums  due,  are  collateralized  by the  related
     unearned  insurance  premiums  on  such  policies.  Upon  acceptance  of  a
     financing agreement, the entire installment finance receivable due over the
     term of the agreement is recorded net of unearned finance charges. American
     Phoenix evaluates the collectibility of its installment finance receivables
     based upon its loss experience. Receivables are closely monitored such that
     if a receivable  becomes past due, the  corresponding  insurance  policy is
     canceled and the remaining  premiums are refunded by the insurance  company
     to American Phoenix.

     Property and Equipment

     Property and  equipment is carried at cost less  accumulated  depreciation.
     Depreciation  is  calculated  on a  straight-line  basis over the estimated
     useful lives of such assets (15 to 20 years for buildings and improvements,
     3 to 7 years  for  furniture  and  office  equipment,  and 3 to 5 years for
     computer  equipment).  Upon  retirement,  any gain or loss on property  and
     equipment is included in operations.

     Goodwill and Other Intangible Assets

     Goodwill  represents the excess of the cost of acquiring a company over the
     fair value of its net assets. Goodwill is generally amortized over 10 to 15
     years on a straight-line  basis.  Other intangible  assets represent client
     listings and non-compete  covenants.  These intangible assets are amortized
     on a straight-line basis over the estimated remaining lives of such assets,
     generally 3 to 15 years.


                                      -11-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     Management periodically  reevaluates the propriety of the carrying value of
     goodwill  and other  intangible  assets by  comparing  estimates  of future
     undiscounted  cash flows.  This reevaluation is performed at least annually
     or more  frequently  if  warranted  by  events or  circumstances  affecting
     American  Phoenix's  business.  In 1998 and 1997, certain intangible assets
     were  identified  as being  impaired and a charge to reduce their  carrying
     value was recorded (see Note 6).

     Minority Interest

     Minority  interest  represents  the  ownership  interest of  management  in
     certain agency  subsidiaries.  American Phoenix and these minority interest
     shareholders have contractual  relationships that provide for management to
     put their shares to American Phoenix or for American Phoenix to call or buy
     these shares at values based on prescribed formulas.

     Revenue Recognition

     Commissions  earned on  commercial  policies  which are  agency  billed and
     direct  billed are  recognized  on the later of the  effective  date or the
     billing  date.  Commissions  earned on personal  policies  which are direct
     billed by insurers are recognized when received.

     American Phoenix receives contingent  commissions based on the underwriting
     profitability of business generated.  Contingent commissions are recognized
     when received.

     Finance  charges  on  installment  finance  receivables  are  deferred  and
     recognized  in income  over the term of the  receivable  using  either  the
     sum-of-the-years'-digits  method  or the  actuarial  method,  both of which
     approximate the level yield method. These methods are used as prescribed by
     specific state laws.

     Income Taxes

     Income  taxes  are  provided  based on  income  reported  in the  financial
     statements.  Deferred  federal and state  income  taxes are  provided on an
     asset and liability  approach  which  requires the  recognition of deferred
     income tax assets and liabilities for the expected future tax  consequences
     of timing differences  between the financial statement carrying amounts and
     the tax basis of assets and liabilities.

     American Phoenix is included in the consolidated  federal income tax return
     of Phoenix Home Life.  Current  taxes are  allocated  among all  affiliated
     companies  based on a written tax  sharing  agreement.  It is  management's
     assessment,  based  upon  the  participation  of  American  Phoenix  in the
     consolidated  federal  income  tax return of  Phoenix  Home  Life,  and the
     historical  profits of Phoenix  Home Life that it is more  likely  than not
     that the  deferred  tax  assets at  December  31,  1998  will be  realized.
     American  Phoenix files  separate tax returns for all states where agencies
     are located  except  Connecticut.  American  Phoenix files a combined state
     return  with PM  Holdings,  Inc.  for  Connecticut  based on a written  tax
     sharing  agreement.  For  state  tax  purposes,  under  the tax  allocation
     agreement,  American  Phoenix  is not  reimbursed  for the  benefit  of its
     separate  company losses  provided on a combined basis,  therefore,  a full
     valuation  allowance has been taken  against the deferred  income tax asset
     generated from state net operating losses (see Note 9).


                                      -12-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

3.   Acquisition of Agency Subsidiaries

     In 1998, 1997 and 1996,  American Phoenix  acquired the outstanding  common
     stock  or  net  assets  of  several   agencies  and   accounted  for  these
     transactions  under  the  purchase  method  of  accounting.  The  following
     represents a summary of agency acquisitions:

     o   In 1998,  American Phoenix  purchased  $4,615,666 of minority  interest
         from minority shareholders, of which $3,730,000 is included in accounts
         payable and accrued  expenses at  December  31,  1998.  Included in the
         accounts  payable and accrued expenses balance at December 31, 1998, is
         a December 28, 1998 transaction  whereby American Phoenix  purchased an
         additional   26.2%  of  the  outstanding   stock  of  American  Phoenix
         Corporation  of  Connecticut  for an  aggregate  amount  of  $3,300,000
         increasing American Phoenix's investment to 100.0%.

     o   Effective  November  1,  1998,  Nicholas  &  Cannon  Agency,   Inc.,  a
         subsidiary of American  Phoenix,  purchased  certain assets of Suncoast
         Insurers for an aggregate amount of $2,500,000,  consisting of $750,000
         in cash and $1,750,000 in debt.

     o   Effective November 1, 1998, American Phoenix Corporation of Maryland, a
         subsidiary of American  Phoenix,  purchased  certain  assets of H.W.R.,
         Inc. for an aggregate amount of $200,000 cash.

     o   Effective  September 1, 1997,  American Phoenix  purchased 81.2% of the
         outstanding  stock of McCay  Corporation  for an  aggregate  amount  of
         $10,900,000.

     o   During 1997,  American  Phoenix  purchased an  additional  25.4% of the
         outstanding  stock of Lees  Preston  Fairy for an  aggregate  amount of
         $495,000,  thereby  increasing  American  Phoenix's  investment in Lees
         Preston Fairy to 62.9%.  Effective December 17, 1996,  American Phoenix
         had purchased 37.5% of the outstanding  stock of Lees Preston Fairy for
         an aggregate  amount of $607,000.  Prior to the 1997  acquisition,  the
         investment had been accounted for under the equity method.

     o   During 1997,  American  Phoenix  purchased an  additional  12.2% of the
         outstanding stock of American Phoenix Corporation of Massachusetts from
         members of  management  for an aggregate  amount of  $817,000,  thereby
         increasing   American   Phoenix's   investment   in  American   Phoenix
         Corporation of Massachusetts to 92.2%.

     o   Effective  October 1, 1996,  American Phoenix of New York, a subsidiary
         of  American  Phoenix,  purchased  certain  assets  of  Robert  E. Bill
         Associates, Inc. for an aggregate amount of $1,630,000.

     o   Effective April 1, 1996,  American Phoenix  purchased certain assets of
         Associated Insurance Brokers and the outstanding stock of Giaconia Life
         Associates, Inc. for an aggregate amount of $4,250,000.

     o   Effective  April 1, 1996,  American  Phoenix  purchased the outstanding
         stock  of  Howard  Hall  Agency,   Inc.  for  an  aggregate  amount  of
         $1,790,000.


                                      -13-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     o   Effective March 1, 1996,  American  Phoenix  Corporation of Orlando,  a
         subsidiary   of  American   Phoenix,   purchased   certain   assets  of
         Cass-Knoblock Agency for an aggregate amount of $800,000.

         The pro forma  unaudited  results  of  operations  for the years  ended
         December  31,  1998 and  1997,  assuming  the  1998  and 1997  purchase
         acquisitions had occurred as of January 1, 1997, are as follows:


                                                      1998             1997

         Revenues                                  $75,065,681      $74,164,786
         Loss before extraordinary item             (1,348,584)     (18,995,217)
         Net income (loss)                             146,416      (18,995,217)

4.   Investments

     The cost,  market value and gross unrealized gains and losses of marketable
     equity security investments  classified as  available-for-sale  at December
     31, are as follows:


                                                          1998            1997

     Cost                                               $ 99,721        $ 99,721
     Market value                                        111,226         106,341
     Gross unrealized gains                               31,053           6,620
     Gross unrealized losses                              19,548               -


5.   Property and Equipment

     A summary of property and equipment at December 31, is as follows:


                                      -14-
<PAGE>

<TABLE>
<CAPTION>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                                               1998                                1997
                                                     Gross               Net              Gross               Net
<S>                                               <C>                <C>               <C>                <C>
    Buildings, land and improvements              $ 5,019,138        $ 3,693,366       $ 5,003,958        $ 3,908,300
    Furniture and office equipment                  8,955,543          2,041,534         8,338,473          1,897,524
    Computer equipment                              7,382,808          2,486,307         6,189,082          2,074,037
                                                  -----------        -----------       -----------        ------------

                                                   21,357,489        $ 8,221,207        19,531,513        $ 7,879,861
                                                                     ===========                          ============
    Less accumulated depreciation                 (13,136,282)                         (11,651,652)
                                                  -----------                          -----------                    

                                                  $ 8,221,207                          $ 7,879,861
                                                  ===========                          ===========                    
</TABLE>

6.   Goodwill and Other Intangible Assets

     Certain  declines in premium  volume and other adverse  circumstances  have
     affected the  profitability of four agencies  acquired in 1995 and 1996 and
     the  recoverability of the carrying amounts of intangible assets from these
     agency acquisitions. As a result of these circumstances,  impairment losses
     of $731,000, $18,757,000 and $0 were recognized and charged to amortization
     of goodwill and other  intangible  assets for the years ended  December 31,
     1998,  1997 and 1996,  respectively.  In calculating  the impairment  loss,
     estimated  fair value was based upon the  expected  discounted  future cash
     flows, including, as applicable,  the expected discounted future cash flows
     generated by the original client listings purchased.

     A summary of goodwill  and other  intangible  assets at December  31, is as
     follows:
<TABLE>
<CAPTION>
                                                         1998                               1997
                                                Gross             Net             Gross              Net
<S>                                          <C>              <C>              <C>               <C>         
     Goodwill                                $ 55,557,380     $ 24,982,485     $ 53,024,924      $ 26,871,084
     Client listings                           43,138,522       17,034,414       40,478,477        16,145,316
     Non-compete covenants                      4,580,364          353,622        4,570,367           555,205
                                             ------------     ------------     ------------      ------------

                                              103,276,266     $ 42,370,521       98,073,768      $ 43,571,605
                                                              ============                       ============
     Less accumulated amortization            (60,905,745)                      (54,502,163)
                                             ------------                      ------------                   

                                             $ 42,370,521                      $ 43,571,605
                                             ============                      ============                      
</TABLE>

7.   Debt

     A summary of debt at December 31, is as follows:



                                      -15-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                 1998             1997
<S>                                                                         <C>              <C>         
          Short-term debt

          Current maturities of variable line of credit                     $  7,500,000     $          -
          Current maturities of other long-term debt                           7,854,630        4,702,062
          Short-term debt                                                            874          769,566
          Revolving credit lines                                               3,170,000        3,130,000
                                                                            ------------     ------------

           Total short-term debt                                            $ 18,525,504     $  8,601,628
                                                                            ============     ============

          Long-term debt                                                                           

          Variable line of credit due 1999 through 2002                     $ 37,500,000     $ 45,000,000
          5.23% to 9.00% notes payable to former
           shareholders due 1999 through 2004                                  6,651,930       14,632,110
          Variable mortgage note payable due 1999                                      -        2,182,292
                                                                            ------------     ------------

           Total long-term debt                                             $ 44,151,930     $ 61,814,402
                                                                            ============     ============
</TABLE>

     Phoenix  Home Life  guarantees  the payment of  principal  and  interest on
     substantially  all of the above debt for which it receives a .10% guarantee
     fee on the outstanding  balance.  This fee is included in the 1% management
     fee paid to Phoenix Home Life.

     American  Phoenix obtains funding for operations and  acquisitions  through
     two revolving  credit lines from commercial  banks.  American  Phoenix pays
     interest  rates equal to the base rate or  Eurodollar  rate the date of the
     advance,  and commitment  fees on the unused  portions of the credit lines.
     
     Additional  information  on the credit  line  relating to  acquisition  and
     operating  activities of the company at December 31, and for the years then
     ended as follows:

<TABLE>
<CAPTION>
                                                                      1998              1997

<S>                                                                <C>               <C>               <C>
     Credit line borrowings at year-end                            $45,000,000       $45,000,000
     Interest rate at year-end                                             5.9%              6.1%
     Unused credit line at year-end                                $         -       $         -


                                                                      1998              1997               1996

     Average credit line borrowings during year                    $44,192,000       $36,500,000        $28,700,000
     Average interest rate during year                                     5.8%              5.9%               5.7%

     Commitment fees on unused credit lines for year               $       533       $       675        $     6,292
     Interest rates on unused credit line for year                       0.100%            0.100%             0.125%
</TABLE>



                                      -16-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     Additional  information  on the  credit  line  relating  to a  wholly-owned
     premium  financing  subsidiary  of the company at December  31, and for the
     years then ended as follows:
<TABLE>
<CAPTION>

                                                                         1998               1997
<S>                                                                  <C>                <C>               <C>
     Credit line borrowings at year-end                              $ 3,170,000        $ 3,130,000
     Interest rate at year-end                                               5.7%               6.1%
     Unused credit line at year-end                                  $ 6,830,000        $ 6,870,000


                                                                         1998               1997              1996

     Average credit line borrowings during year                      $ 3,688,000        $ 3,036,000       $ 3,500,000
     Average interest rate during year                                       5.8%               5.9%              5.9%

     Commitment fees on unused credit lines for year                 $     9,157        $     8,549       $    10,580
     Interest rates on unused credit line for year                         0.125%             0.125%            0.125%
</TABLE>


                                      -17-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     Principal payments required to be paid by American Phoenix over a five year
     period on the debt existing as of December 31, 1998, are as follows:

               
     1999                                           $ 18,525,504
     2000                                             18,114,082
     2001                                             17,406,116
     2002                                              8,382,350
     2003                                                229,855
     2004 and thereafter                                  19,527
                                                    ------------
 
                                                    $ 62,677,434
                                                    ============

8.   Lease Commitments

     American Phoenix occupies office space under leases which are accounted for
     as  non-cancelable   operating  leases.   These  leases  generally  include
     escalation  clauses for increases in lessors'  operating  expenses and real
     estate taxes.  Total  operating  lease expense was $3,605,236 net of rental
     income of  $826,531,  $3,230,232,  net of rental  income of  $573,635,  and
     $3,247,570,  net of rental income of $287,117, for the years ended December
     31, 1998, 1997 and 1996, respectively. American Phoenix is committed to the
     following future net minimum lease payments under non-cancelable  operating
     leases:

<TABLE>
<CAPTION>
                                                                        Income               Net
                                                       Lease             from               Lease
                                                      Payments         Subleases           Payments
<S>                                                 <C>                <C>                <C>         
     1999                                           $  4,047,011       $    463,893       $  3,583,118
     2000                                              3,596,348            269,162          3,327,186
     2001                                              3,409,418            246,850          3,162,568
     2002                                              3,261,946            246,850          3,015,096
     2003                                              2,494,388            246,850          2,247,538
     2004 and thereafter                               1,771,235             41,454          1,729,781
                                                ----------------   ----------------   ----------------
    
                                                    $ 18,580,346       $  1,515,059       $ 17,065,287
                                                ================   ================   ================
</TABLE>


                                      -18-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

9.   Income Taxes

     The  provisions  for  income  taxes  charged  to net  income  and to  other
     comprehensive income for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
                                                                  1998             1997             1996
<S>                                                         <C>              <C>               <C>
     Applicable to income before extraordinary item:    
     Current income tax provision                       
      Federal                                                   $  (580,857)     $   375,480      $    69,406
      State                                                         735,846          602,000          380,000
                                                            ---------------  ---------------   --------------
                                                        
        Total current                                               154,989          977,480          449,406
                                                            ---------------  ---------------   --------------
                                                        
     Deferred income tax provision (benefit)            
      Federal                                                     2,158,325       (2,535,378)         220,578
      State                                                         128,073         (211,000)           2,000
                                                            ---------------  ---------------   --------------
                                                        
        Total deferred                                            2,286,398       (2,746,378)         222,578
                                                            ---------------  ---------------   --------------
                                                        
      Total income tax provision (benefit)                      $ 2,441,387      $(1,768,898)     $   671,984
                                                            ===============  ===============   ==============
                                                        
     Applicable to extraordinary item:                  
     Deferred income tax provision                              $   805,000      $         -      $         -
                                                            ===============  ===============   ==============
                                                         
     Applicable to other comprehensive income:          
     Deferred income tax provision (benefit)                      $ (18,986)    $     18,093      $   (31,918)
                                                            ===============  ===============   ============== 

</TABLE>


                                      -19-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     The  difference  between the federal  income tax provision at the statutory
     rate of 35% and  American  Phoenix's  actual  federal  income  tax  rate is
     attributable to state income taxes,  goodwill and other intangible  assets,
     the limitation on business meals and  entertainment  and foreign losses for
     which no income tax benefit has been  recognized.  The effective income tax
     rate varied from statutory federal income tax rate as follows:
<TABLE>
<CAPTION>

                                                              1998               1997              1996
<S>                                                         <C>                 <C>                <C>
     Statutory federal income tax rate                            35.0%             -35.0%            -35.0%

     Nondeductible meals and entertainment                         3.4%               0.5%              4.0%
     Nondeductible goodwill                                       35.2%              18.3%             57.6%
     Nondeductible amortization                                    1.0%               7.0%                -
     State income taxes (net of federal benefit)                   7.0%               0.5%             -1.1%
     Nondeductible foreign loss                                   12.4%                 -                 -
     Other                                                        -1.0%               0.4%              1.5%
                                                          ------------       ------------       -----------

     Effective income tax rate                                    93.0%              -8.3%             27.0%
                                                          ============       ============       ===========
</TABLE>

     The  components  of  deferred  income  taxes  provided  for the years ended
     December 31, are as follows:
<TABLE>
<CAPTION>
                                                                1998              1997               1996
   
<S>                                                         <C>                <C>               <C>        
     Deferred compensation                                  $  137,925         $  (64,251)       $  (90,822)
     Severance payment                                          18,222                  -                 -
     Client listing                                          1,178,371         (3,004,990)           96,125
     State income tax                                          (43,009)           133,458            52,743
     Accrued expenses                                            3,638                  -          (235,353)
     Federal net operating loss carryforwards                1,728,857            196,359           153,815
     Accrued rent                                               96,625             87,270            79,451
     Depreciation                                               50,098            (18,538)          212,369
     Non-compete covenants                                     (36,782)           (78,505)          (45,988)
     Allowance for doubtful accounts                              (887)             5,200            (2,676)
     Other                                                     (41,660)            (2,381)            2,914
                                                           -----------        ------------       -----------
   
      Net deferred income tax provision (benefit)          $ 3,091,398        $(2,746,378)       $  222,578
                                                           ===========        ============       ===========
</TABLE>


                                      -20-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     The tax effect of temporary differences as of December 31, are as follows:

<TABLE>
<CAPTION>
                                                                              1998             1997
<S>                                                                      <C>              <C>

     Deferred tax liabilities:
       Depreciation                                                        $ (228,950)     $  (178,852)
       State income tax                                                      (132,073)        (175,082)
                                                                           ----------      -----------

         Gross deferred tax liabilities                                      (361,023)        (353,934)
                                                                           ----------      -----------

     Deferred tax assets:
       Client listings                                                      2,358,610        3,536,981
       Foreign subsidiary net operating loss carryforwards                    371,172          177,450
       Accrued rent                                                           367,835          464,460
       State of Connecticut net operating loss carryforwards                  329,203          449,501
       Deferred compensation                                                  289,652          427,577
       Federal net operating loss carryforwards                               216,579        1,945,436
       Severance payment                                                      103,600          121,822
       Allowance for doubtful accounts                                         60,487           59,600
       Non-compete covenants                                                    7,602          (29,180)
       Foreign currency translation adjustments                                 5,080          (15,616)
       Accrued expenses                                                         3,352            6,990
       Gain on marketable equity securities                                       893            2,603
       Other                                                                   27,786          (13,874)
                                                                           ----------       ----------

         Gross deferred tax assets                                          4,141,851        7,133,750
                                                                           ----------       ----------

     Valuation allowances:
       Foreign subsidiary net operating loss carryforwards                   (371,172)        (177,450)
       State of Connecticut net operating loss carryforwards                 (329,203)        (499,501)
                                                                           -----------      ----------

         Valuation allowances                                                (700,375)        (626,951)

         Net deferred income tax asset                                     $3,080,453       $6,152,865
                                                                           ===========      ==========
</TABLE>

     At December 31, 1998,  American Phoenix had $618,797 of loss  carryforwards
     for federal tax purposes  that begin to expire in the year 2008.  Under the
     provisions of Internal Revenue Code, these net operating loss carryforwards
     will be subject to an annual limitation on utilization, as they have arisen
     from acquisitions of the brokerage subsidiaries.

     American  Phoenix has separate  company State of Connecticut  net operating
     loss  carryovers  totaling  $5,958,424  and  $7,279,368 for the years ended
     December 31, 1998 and 1997,


                                      -21-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     respectively.  These net  operating  losses will start to expire in the tax
     years ending December 31, 2001 and 2000, respectively.

     Lees Preston Fairy, a United Kingdom  majority owned subsidiary of American
     Phoenix,  has net operating  loss  carryforwards  totaling  $1,237,241  and
     $591,499  for the years ended  December  31,  1998 and 1997,  respectively.
     However,  a full  valuation  allowance  has been taken against the deferred
     income tax asset generated from these foreign losses.

10.  Fair Value of Financial Instruments

     American  Phoenix uses various  methods and  assumptions  in estimating the
     fair value of financial  instruments.  The following  valuation methods and
     assumptions  were  utilized  in  estimating  the fair  value  of  financial
     instruments:

     Cash  and  cash  equivalents  - The  carrying  amounts  for  cash  and cash
     equivalents approximate fair value.

     Marketable  equity  securities - The carrying amounts for marketable equity
     securities are based on quoted market prices which approximate fair value.

     Premiums   receivable  -  The  carrying  amounts  for  premiums  receivable
     approximate fair value.

     Installment  finance  receivables  - The carrying  amounts for  installment
     finance receivables approximate fair value.

     Premiums  payable to insurers - The carrying amounts of premiums payable to
     insurers approximate fair value.

     Short-term  debt  -  The  carrying   amounts  of  borrowings  under  credit
     facilities approximate fair value.

     Long-term debt - The carrying  amounts of long-term debt  approximate  fair
     value,  as fair value is  estimated  based on  current  rates that would be
     offered to American Phoenix for debt of the same remaining maturities.

11.  Litigation

     During 1998, American Phoenix received a favorable final arbitration ruling
     regarding  litigation between American Phoenix Insurance Agency of Georgia,
     Inc., a subsidiary of American Phoenix and the former owner of that agency.
     The final arbitration  ruling canceled American Phoenix Insurance Agency of
     Georgia,  Inc.'s  obligation  to  pay a  promissory  note  payable  to  the
     subsidiary's  former owner totaling  $2,300,000.  The extinguishment of the
     debt settlement is recorded as an  extraordinary  item in the  consolidated
     statement of  operations  in the amount of  $1,495,000,  net of  applicable
     income taxes of $805,000.


                                      -22-
<PAGE>

American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     American Phoenix is involved in various legal actions arising in the normal
     course of business.  It is management's opinion that their final resolution
     will not have a  significant  effect  on  American  Phoenix's  consolidated
     financial statements.

12.  Benefit Plans

     American Phoenix sponsors a 401(k) savings plan for all eligible  full-time
     employees.  Employees who make  contributions  into the plan in amounts not
     less than 1% nor more than 15% of their  salaries  will  receive a matching
     contribution  from  American  Phoenix  in an  amount  equal to 50% of their
     contribution  to a maximum not to exceed 3% of their  salary.  Participants
     are  immediately  vested in their  voluntary  contributions  plus  earnings
     thereon.  The  contributions  made by  American  Phoenix  on  behalf of its
     employees  totaled  $517,488,  $592,870  and  $345,529  for the years ended
     December  31, 1998,  1997 and 1996,  respectively.  In  addition,  American
     Phoenix  sponsors  a health and  welfare  plan for all  eligible  full-time
     employees. The qualified plan complies with requirements established by the
     Employee Retirement Income Security Act of 1974.

13.  Subsequent Event

     On March 30, 1999, PM Holdings,  Inc.,  Phoenix Home Life Mutual  Insurance
     Company and a member of American Phoenix  management  executed an agreement
     with  Hilb,  Rogal  and  Hamilton  Company  to sell all of the  issued  and
     outstanding  shares of American Phoenix to Hilb, Rogal and Hamilton Company
     for approximately $49 million in cash, $32 million in convertible notes and
     1,000,000 shares of Hilb, Rogal and Hamilton Company common stock. The sale
     is subject to  satisfaction of certain  conditions to closing,  including a
     provision that requires PM Holdings, Inc. to make a capital contribution of
     approximately  $20 million to American  Phoenix.  The sale was completed on
     May 3, 1999.



                                      -23-
<PAGE>


         (b)      Pro Forma Financial Information.


             HILB, ROGAL AND HAMILTON COMPANY, INC. AND SUBSIDIARIES
                PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
                                   (Unaudited)

         The following  unaudited Pro Forma Condensed  Combined Balance Sheet as
of December 31, 1998 and the unaudited Pro Forma Condensed Combined Statement of
Operations  for the year  ended  December  31,  1998 (the "Pro  Forma  Financial
Statements") are based upon the respective  consolidated financial statements of
the Company and of American Phoenix.  The consolidated  financial  statements of
the Company  were filed with the  Company's  Annual  Report on Form 10-K for the
fiscal  year  ended  December  31,  1998 on March  30,  1999.  The  consolidated
financial  statements of American  Phoenix are included in this current  report.
See "Item 7(a) - Financial Statements of Businesses Acquired."

         The Pro Forma Condensed  Combined Balance Sheet as of December 31, 1998
is presented as if the  Acquisition  had occurred on December 31, 1998.  The Pro
Forma Condensed Combined Statement of Operations for the year ended December 31,
1998 is presented as if the Acquisition had occurred on January 1, 1998. The Pro
Forma Financial  Statements  give effect to the  Acquisition  under the purchase
method of accounting in accordance with  Accounting  Standards Board Opinion No.
16.

         The Pro  Forma  Financial  Statements  are  presented  for  comparative
purposes only and are not  necessarily  indicative of what the actual  financial
position of the Company would have been at December 31, 1998 had the Acquisition
occurred at that date or of what the actual  results of the  Company  would have
been if the  Acquisition  had occurred on January 1, 1998 nor  indicative of the
results of  operations in future  periods.  The Pro Forma  Financial  Statements
should be read in  conjunction  with, and are qualified in their entirety by the
respective  historical financial statements and notes thereto of the Company and
of American Phoenix for the year ended December 31, 1998.

         The Pro Forma  Financial  Statements  presented  do not reflect  future
events that may occur after the  Acquisition has been  consummated.  The Company
believes  that  operating  expense  synergies of the combined  operations of the
Company and American Phoenix will be realized post-Acquisition. However, for the
purposes of the Pro Forma Financial Statements presented herein, these synergies
have not been reflected because their realization cannot be assured.



                                      -24-
<PAGE>


HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED BALANCE SHEET
December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
                                              Hilb, Rogal      
                                                  and          American
                                                Hamilton        Phoenix
                                                Company       Corporation      Pro Forma
                                               Historical      Historical     Adjustments            Pro Forma
<S>                                          <C>             <C>             <C>                   <C>
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                    $19,394,958   $ 10,498,658    $  4,805,898   (1)    $ 35,377,526
                                                                                1,500,000   (2)
                                                                                 (821,988) (3c)
  Investments                                    3,383,742        111,226                             3,494,968
  Receivables, net                              51,570,990     38,810,751       1,439,877   (3)      91,821,618
  Prepaid expenses and other current assets      3,852,095      3,527,336                             7,379,431
                                             -------------------------------------------------------------------
    TOTAL CURRENT ASSETS                        78,201,785     52,947,971       6,923,787           138,073,543

INVESTMENTS                                      3,068,140                                            3,068,140

PROPERTY & EQUIPMENT, NET                       12,387,194      8,221,207      (1,500,000)  (2)      14,387,194
                                                                               (4,721,207)  (3)
INTANGIBLE ASSETS, NET                          87,470,633     42,370,521      53,710,729   (3)     183,551,883

OTHER ASSETS                                     6,938,074      3,080,453      (3,080,453)  (3)       6,938,074
                                             ===================================================================
                                              $188,065,826   $106,620,152    $ 51,332,856          $346,018,834
                                             ===================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Premiums payable to insurance companies     $ 65,436,784   $ 50,155,157                          $115,591,941
  Accounts payable and accrued expenses         13,025,426      9,903,348    $  1,000,000  (3e)      26,428,774
                                                                                2,500,000  (3f)
  Premiums deposits and credits due              
    customers                                    7,765,575              0                             7,765,575
  Current portion of long-term debt              2,277,479     15,354,630     (15,000,000)  (1)       2,632,109
                                             -------------------------------------------------------------------
    TOTAL CURRENT LIABILITIES                   88,505,264     75,413,135     (11,500,000)          152,418,399

LONG-TERM DEBT                                  43,658,306     44,151,930      28,500,000  (3b)     116,310,236

OTHER LONG-TERM LIABILITIES                     10,191,881      1,856,693                            12,048,574

MINORITY INTEREST                                               1,189,506       1,410,494   (3)       2,600,000
SHAREHOLDERS' EQUITY
  Common Stock                                   3,831,208          5,882      16,931,250  (3a)      20,762,458
                                                                                   (5,882)  (3)
  Additional paid in capital                                    6,580,418      19,805,898   (1)               0
                                                                              (26,386,316)  (3)
  Retained earnings                             41,879,167    (22,577,412)     22,577,412   (3)      41,879,167
                                             -------------------------------------------------------------------
                                                45,710,375    (15,991,112)     32,922,362            62,641,625
                                             ===================================================================
                                              $188,065,826   $106,620,152    $ 51,332,856          $346,018,834
                                             ===================================================================
</TABLE>

See notes to the proforma  condensed combined  financial  statements.  Bracketed
numbers to the right of the "Pro Forma Adjustments" column refer to such notes.


                                      -25-
<PAGE>

HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
                                                     Hilb, Rogal and      American
                                                         Hamilton          Phoenix
                                                         Company         Corporation      Pro Forma
                                                        Historical       Historical      Adjustments            Pro Forma
<S>                                                  <C>                <C>               <C>                 <C>
REVENUES
  Commissions and fees                                 $175,886,766      $71,635,701                          $247,522,467
  Investment income                                       1,578,782          839,383                             2,418,165
  Other                                                   3,582,345          450,845                             4,033,190
                                                    ----------------------------------------------------------------------
                                                        181,047,893       72,925,929                           253,973,822
                                                                                                   -

OPERATING EXPENSES
  Compensation and employee benefits                     98,478,098       44,241,870                           142,719,968
  Other operating expenses                               46,969,711       16,238,276    $  (1,116,013)(5)       62,091,974
  Amortization of intangibles                             7,919,355        6,500,503       (2,657,253)(4)       11,762,605
  Interest expense                                        2,317,195        4,081,890          781,558 (7)        7,180,643
  Management fees                                                 0          671,622         (671,622)(8)                0
                                                    ----------------------------------------------------------------------
                                                        155,684,359       71,734,161       (3,663,330)         223,755,190
                                                    ----------------------------------------------------------------------

INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST                                        25,363,534        1,191,768        3,663,330           30,218,632

Income Taxes                                             10,418,469        2,441,387          660,932 (6)       13,520,788

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

INCOME BEFORE MINORITY INTEREST                          14,945,065       (1,249,619)       3,002,398           16,697,844

Minority interest                                                 0           98,965                0               98,965
                                                    ----------------------------------------------------------------------

NET INCOME                                             $ 14,945,065    $  (1,348,584)    $  3,002,398         $ 16,598,879
                                                    ======================================================================

NET INCOME PER COMMON SHARE:

  BASIC                                                       $1.20                                                 $1.23
                                                    ======================================================================
  DILUTED                                                     $1.18                                                 $1.17
                                                    ======================================================================

WEIGHTED AVERAGE SHARES OUTSTANDING:

  BASIC                                                  12,496,752                                            13,496,752
                                                    ======================================================================
  DILUTED                                                12,708,744                                            15,115,337
                                                    ======================================================================
</TABLE>

See notes to the proforma  condensed combined  financial  statements.  Bracketed
numbers to the right of the "Pro Forma Adjustments" column refer to such notes.



                                      -26-
<PAGE>


HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
December 31, 1998
Notes to Pro Forma Financial Statements
<TABLE>
<CAPTION>
<S>                                                                                  <C>
1.   This  pro  forma   adjustment   reflects  the  pre   acquisition,   capital
     contribution  of $19,805,898 by Holdings and the partial use of these funds
     to reduce bank debt by $15,000,000.

2.   This pro forma  adjustment  reflects  the pre  acquisition  sale of certain
     American Phoenix real estate to Holdings for approximately $1,500,000.

3.   This pro forma  adjustment  reflects  the  issuance of Common Stock and the
     Convertible Subordinated Indentures,  the assumption of liabilities and the
     incurrence  of bank debt in  connection  with the  acquisition  of American
     Phoenix Corporation by the Company resulting in:

                                                                                               Value    
     a.   The  issuance  of  1,000,000  shares  of  Common  Stock  at a price of                        
          $16.93125 per share. In accordance with EITF 95-19, the assumed Common                        
          Stock  issuance  price of $16.93125 per share  represents  the average                        
          closing  Common  Stock  price on the NYSE for the five  business  days                        
          prior through the five business days following the Company's execution            
          of the Stock Purchase Agreement on March 29, 1999.                               $ 16,931,250 
                                                                                                        
     b.   The issuance of $32,000,000 (par value) of the Company's  Subordinated             
          Debentures  with  a  fair  value  of  $28,500,000.   The  Subordinated                        
          Debentures  mature on May 3, 2014, are  immediately  convertible  into                        
          shares of the  Company's  Common Stock at a price of $22.75 per share,                        
          are callable  beginning on May 3, 2009,  and are  subordinated  to all                        
          existing and future senior indebtedness of the Company. The fair value                        
          of the  Subordinated  Debentures  was  determined  by the  independent                        
          valuation  of the  investment  banking firm of Davenport & Company LLC                        
          ("Davenport").   Key  assumptions   utilized  by  Davenport  in  their                        
          appraisal  were as  follows:  (i)  underlying  Common  Stock  price of                        
          $16.93125 per share; (ii) expected volatility of the underlying Common                        
          Stock  of  30%;  (iii)  expected  dividend  growth  rate  of 6%;  (iv)                        
          risk-free  interest rates equal to those for U.S.  Treasury  issues on                        
          March 30,  1999  (the  announcement  date) and (v) an  option-adjusted                        
          interest cost for the Subordinated  Debentures of approximately 9%. In               
          addition  to  performing  the  valuation,   Davenport  served  as  the                        
          Company's financial advisor in connection with the Acquisition.                    28,500,000 
                                                                                                        
     c.   The cash payment of the purchase price to Vaughan and Phoenix.                        821,988 
                                                                                                        
     d.   The  assumption of tangible net worth  deficit of American  Phoenix of
          $48,328,012.  This was  primarily  in the  form of bank  debt of which
          $45,000,000   was  paid  at  closing   with  the  proceeds  of  a  new
          $110,000,000  bank  facility.  This credit  facility  was also used to
          refinance existing bank debt of the Company of $40,000,000.                        48,328,012
                                                                                           
     e.   Assumed transaction costs.                                                          1,000,000
                                                                                                       
     f.   Estimated  lease  termination,  employee  termination  and  relocation           
          costs.                                                                              2,500,000
                                                                                           ============
                                                                                           $ 98,081,250
                                                                                           ============
</TABLE>


                                      -27-
<PAGE>


HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
December 31, 1998
Notes to Pro Forma Financial Statements


     The value assigned to goodwill is calculated as follows:
<TABLE>
<CAPTION>
<S>                                                                                                         <C>
              Total Purchase Price                                                                             $ 98,081,250

              Book value deficit of American Phoenix at December 31, 1998                                        15,991,112
              Pre acquisition capital infusion                                                                 (19,805,898)
              Tangible net worth deficit assumed by the Company and included in purchase price                 (48,328,012)
                                                                                                            ---------------
                  Adjusted book value of American Phoenix                                                      (52,142,798)
              Adjustments:
                Reduce property, plant & equipment to fair values                                                 4,721,207
                Eliminate deferred tax asset due to Section 338 election                                          3,080,453
                Adjust minority interest to contractual buy-out liability as it is the Company's intent
                   to buy these shares at values based on prescribed formulas.                                    1,410,494
                Miscellaneous purchase accounting adjustment                                                    (1,439,877)
                                                                                                            ---------------
                   Total Adjustments                                                                              7,772,277
                                                                                                            ---------------
              Goodwill                                                                                         $ 53,710,729
                                                                                                            ===============

4.   This  pro  forma   adjustment   reflects  the   elimination  of  historical
     amortization  of  American   Phoenix   Corporation   ($6,500,503)  and  the
     amortization  of goodwill  acquired at the time of the  Acquisition  over a
     period of 25 years ($3,843,250).

5.   This  pro  forma   adjustment   reflects  the   elimination  of  historical
     depreciation  expense of American  Phoenix  ($1,814,099)  and  recording of
     depreciation  expense  based upon the fair  values of  property,  plant and
     equipment  acquired  in  the  Acquisition  ($444,444).  In  addition,  this
     adjustment  reflects the rental  expense  related to  buildings  previously
     owned by American Phoenix sold prior to the Acquisition ($253,642).

6.   This  proforma  adjustment  reflects  the income tax effect of the proforma
     adjustments at an expected future  effective tax rate of 40%  ($1,465,332),
     reduced  for the tax impact of decrease in  nondeductible  amortization  of
     $2,011,000 per year ($804,400).

7.      This pro forma  adjustment  eliminates  historical  interest of American
        Phoenix  ($4,081,890)  and records  interest  expense under the new debt
        structure as follows:
            Interest on Subordinated Debentures, including amortization of discount                            $  1,900,932
            Interest on debt assumed or incurred in the acquisition, at an assumed interest rate
              of 6.0275%, the London Interbank Offered Rate ("LIBOR") at April 30, 1999 plus 1.125%.
              A change of  .125% in the assumed interest rate would increase or decrease interest
              expense by approximately $61,000.                                                                   2,962,516
                                                                                                            ---------------
                                                                                                               $  4,863,448
                                                                                                            ===============
                                                                                                            
</TABLE>


                                      -28-
<PAGE>


         (c)      Exhibits.

                  Exhibit No.      Description

                  2.1              Stock  Purchase  Agreement,  dated  March 29,
                                   1999,  by  and  among  the   Registrant,   PM
                                   Holdings,  Inc.,  Phoenix  Home  Life  Mutual
                                   Insurance Company and Martin L. Vaughan,  III
                                   (incorporated  by  reference  to Exhibit 2 to
                                   the  Company's  Form 10-K for the year  ended
                                   December 31, 1998, File No. 0-15981).

                  23.1             Consent of PricewaterhouseCoopers LLP.

                  99.1             Credit  Agreement  dated  as of  May  3,1999,
                                   among  the  Registrant,   as  Borrower;   the
                                   lenders named  therein;  First Union National
                                   Bank, as  administrative  agent; PNC Bank, as
                                   documentation    agent;    and    NationsBanc
                                   Montgomery  Securities  LLC,  as  syndication
                                   agent.

                  99.2             Press release dated May 3, 1999.




                                      -29-
<PAGE>

                                   SIGNATURES

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


                              HILB, ROGAL AND HAMILTON COMPANY
                                      (Registrant)



Date: May 14, 1999            By: /s/ Carolyn Jones                         
                                  ------------------------------------------
                                  Carolyn Jones
                                  Senior Vice President, Chief Financial Officer
                                  and Treasurer




<PAGE>

                                  Exhibit Index



     Exhibit No.           Description


        2.1           Stock  Purchase  Agreement,  dated March 29, 1999,  by and
                      among the Registrant, PM Holdings, Inc., Phoenix Home Life
                      Mutual  Insurance  Company  and  Martin  L.  Vaughan,  III
                      (incorporated  by reference to Exhibit 2 to the  Company's
                      Form 10-K for the year ended  December 31, 1998,  File No.
                      0-15981).

        23.1          Consent of PricewaterhouseCoopers LLP

        99.1          Credit  Agreement  dated  as of May  3,  1999,  among  the
                      Registrant,  as Borrower; the lenders named therein; First
                      Union National Bank, as administrative agent; PNC Bank, as
                      documentation agent; and NationsBanc Montgomery Securities
                      LLC, as syndication agent.

        99.2          Press release dated May 3, 1999.
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================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   -----------

                                    FORM 8-K

                                 CURRENT REPORT

                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                           Date of Report: May 3, 1999
                        (Date of earliest event reported)

                        HILB, ROGAL AND HAMILTON COMPANY
             (Exact Name of Registrant as Specified in its Charter)

          Virginia                      0-15981                 54-1194795
(State or Other Jurisdiction    (Commission File Number)       (IRS Employer
      of Incorporation)                                      Identification No.)

              4235 Innslake Drive
              Glen Allen, Virginia                        23060
    (Address of Principal Executive Offices)           (Zip Code)

               Registrant's telephone number, including area code:
                                 (804) 747-6500

================================================================================
Item 2.      Acquisition or Disposition of Assets.

         On May 3,  1999,  Hilb,  Rogal and  Hamilton  Company  (the  "Company")
acquired all of the issued and  outstanding  capital  stock of American  Phoenix
Corporation ("American Phoenix") (collectively, the "Acquisition") pursuant to a
Stock Purchase Agreement (the "Stock Purchase Agreement"), dated March 29, 1999,
by and among the Company,  PM  Holdings,  Inc.  ("Holdings"),  Phoenix Home Life
Mutual  Insurance  Company  ("Phoenix") and Martin L. Vaughan,  III ("Vaughan").
American Phoenix, which is based in Hartford,  Connecticut,  is the 14th largest
property  and casualty  insurance  brokerage  firm in the United  States and had
revenues of  approximately  $73 million in 1998. As a result of the Acquisition,
American Phoenix became a wholly owned subsidiary of the Company.

         The  purchase  price  paid  by  the  Company  in  connection  with  the
Acquisition  consisted  of (i)  approximately  $49.2  million in cash,  (ii) the
issuance to Holdings of 865,042  shares of the Company's  Common Stock  ("Common
Stock")  and to Vaughan  of  134,958  shares of Common  Stock,  representing  an
aggregate  of  1,000,000  shares of Common  Stock,  and  (iii) the  issuance  to
Holdings  and  Phoenix of an  aggregate  principal  amount of $32 million of the
Company's   5.25%   Convertible   Subordinated   Debentures   (Due   2014)  (the
"Subordinated  Debentures"),  which are  convertible  into  1,406,593  shares of
Common Stock (subject to adjustment as provided in the Indenture relating to the
Subordinated  Debentures).  The various  components  of the purchase  price were
determined by arms-length  negotiations between the parties.  Based upon a value
for the 1,000,000 shares of Common Stock of $16.9 million and an estimated value
for the Subordinated  Debentures of $28.5 million,  the aggregate purchase price
paid by the  Company to  Holdings,  Phoenix  and  Vaughan at the  closing of the
Acquisition was  approximately  $94.6 million.  For information on the estimated
aggregate purchase price to be recorded by the Company for accounting  purposes,
see footnote 3 to the Pro Forma  Condensed  Combined  Financial  Statements  set
forth in "Item 7(b) - Pro Forma Financial Information" below.

         In connection with the consummation of the Acquisition, the Company (i)
has agreed to increase the size of the Board of Directors from 9 to 13 and elect
Vaughan,  who  serves as  President  and Chief  Executive  Officer  of  American
Phoenix, Robert W. Fiondella, Chairman, President and Chief Executive Officer of
Phoenix, David W. Searfoss, Executive Vice President and Chief Financial Officer
of Phoenix,  and Timothy J. Korman, the Company's  Executive Vice President,  as
additional  directors of the Company,  (ii) entered into a Voting and Standstill
Agreement with Holdings and Phoenix to establish  certain rights and obligations
in connection with the relationship of Holdings and Phoenix to the Company,  and
(iii) entered into a Registration  Rights Agreement with Holdings and Phoenix to
provide  certain  demand  and  piggy-back  registration  rights of the shares of
Common Stock  acquired by Holdings  and the shares of Common  Stock  issuable to
Holdings,  Phoenix  or their  affiliates  upon  conversion  of the  Subordinated
Debentures  (subject to adjustment as provided in the Indenture  relating to the
Subordinated  Debentures).   Copies  of  the  forms  of  Voting  and  Standstill
Agreement,  Registration Rights Agreement and Indenture are attached as exhibits
to the Stock  Purchase  Agreement  referenced  in Exhibit  2.1 of this Form 8-K.
Executed  copies of such  documents will be filed on the Company's Form 10-Q for
the quarter ended March 31, 1999.

                                      -2-
As of the close of business on May 3, 1999,  the total number of shares
of Common Stock issued and  outstanding  was  13,201,314.  The 865,042 shares of
Common Stock  acquired by Holdings at the closing of the  Acquisition  represent
approximately  6.6% of the issued and  outstanding  shares of Common Stock as of
that date.

         In  addition,  on  May 3,  1999,  the  Company  entered  into a  Credit
Agreement  (the  "Credit  Agreement"),  dated  as of  May  3,  1999,  among  the
Registrant,  as Borrower;  the lenders named therein; First Union National Bank,
as  administrative  agent;  PNC Bank, as  documentation  agent;  and NationsBanc
Montgomery  Securities  LLC,  as  syndication  agent.  Pursuant  to  the  Credit
Agreement,  senior  credit  facilities  (the "Credit  Facility") in an aggregate
principal  amount of up to $110.0 million were made available (i) to finance the
$49.2 million cash payment to Holdings in connection with the Acquisition,  (ii)
to repay  outstanding  bank  borrowings  under  the  Company's  existing  credit
facilities,  (iii) to pay  certain  fees and  expenses  in  connection  with the
Acquisition  and the Credit  Facility,  and (iv) for working capital and general
corporate purposes.

         The Credit Agreement  contains certain covenants that restrict,  or may
have the effect of restricting,  the payment of dividends or distributions,  and
the purchase or redemption by the Company of its capital stock.  Management does
not believe that the restrictions contained in the Credit Agreement will, in the
foreseeable future, adversely affect the Company's ability to pay cash dividends
at the current dividend rate. However, there can be no assurance in this regard.

Item 7.      Financial Statements, Pro Forma Financial Information and Exhibits.

         (a)      Financial Statements of Businesses Acquired.

         The following audited financial  statements of American Phoenix and its
subsidiaries are included in this report:

         Report of Independent Accountants

         Consolidated Balance Sheet at December 31, 1998 and 1997

         Consolidated Statement of Operations for the Three Years Ended December
         31, 1998, 1997 and 1996

         Consolidated   Statement  of   Comprehensive   Income  and  Changes  in
         Stockholders'  Equity for the Three Years Ended December 31, 1998, 1997
         and 1996

         Consolidated Statement of Cash Flows for the Three Years Ended December
         31, 1998, 1997 and 1996

         Notes to Consolidated Financial Statements

                                      -3-
American Phoenix
Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Financial Statements
December 31, 1998 and 1997

                                      -4-
Report of Independent Accountants
                        ---------------------------------

To the Board of Directors and Stockholders of
 American Phoenix Corporation

In our opinion,  the  accompanying  consolidated  balance  sheet and the related
consolidated  statements of operations,  of comprehensive  income and changes in
stockholders' equity and of cash flows present fairly, in all material respects,
the  financial  position of American  Phoenix  Corporation  (a  subsidiary of PM
Holdings,  Inc.) and its  subsidiaries  at December  31, 1998 and 1997,  and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31,  1998,  in  conformity  with  generally  accepted
accounting principles.  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 of these
statements  in accordance  with  generally  accepted  auditing  standards  which
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,  assessing the  accounting  principles
used and  significant  estimates  made by management  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

Hartford, Connecticut
March 5, 1999,
except as to Note 13 which is as of May 3, 1999

                                      -5-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Balance Sheet
-------------------------------------------------------------------------------------------------------------------

                                                                                          December 31,
                                                                                    1998               1997
Assets
Cash and cash equivalents                                                      $  10,498,658      $  16,178,504
Marketable equity securities, at market value                                        111,226            106,341
Premiums receivable, net of allowance of                                                       
   $241,220 and $267,849 for doubtful accounts                                    35,285,012         32,195,746
Installment finance receivables, net of unearned
   finance charges of $75,465 and $76,553 and
   allowance of $2,000 and $2,000 for doubtful accounts                            3,525,739          3,410,329
Income taxes receivable from parent                                                1,196,746                  -
Prepaid expenses and other current assets                                          2,330,590          2,358,079
                                                                               -------------      -------------

     Total current assets                                                         52,947,971         54,248,999

Property and equipment, net                                                        8,221,207          7,879,861
Deferred income taxes, net                                                         3,080,453          6,152,865
Goodwill and other intangible assets, net                                         42,370,521         43,571,605
                                                                               -------------      -------------
     Total assets                                                              $ 106,620,152      $ 111,853,330
                                                                               =============      =============

Liabilities

Premiums payable to insurers                                                   $  50,155,157      $  46,397,935
Short-term debt                                                                   18,525,504          8,601,628
Income taxes payable to parent                                                             -            182,716
Accounts payable and accrued expenses                                              6,732,474          5,240,195
                                                                               -------------      -------------

     Total current liabilities                                                    75,413,135         60,422,474

Long-term debt                                                                    44,151,930         61,814,402
Other long-term liabilities                                                        1,856,693          2,205,312
                                                                               -------------      -------------

     Total liabilities                                                           121,421,758        124,442,188
                                                                               -------------      -------------

Minority interest                                                                  1,189,506          3,713,411
                                                                               -------------      -------------

Stockholders' deficit
Common stock, Class A, $1 stated value;
   5,000 shares authorized, issued and outstanding                                     5,000              5,000
Common stock, Class B, $1 stated value; 882 shares
   authorized, 882 and 441 shares issued and outstanding                                 882                441
Additional paid-in capital                                                         6,580,418          6,080,859
Accumulated deficit                                                              (22,575,458)       (22,421,874)
Accumulated other comprehensive (loss) income                                         (1,954)            33,305
                                                                               -------------      -------------

     Total stockholders' deficit                                                 (15,991,112)       (16,302,269)
                                                                               -------------      -------------

     Total liabilities, minority interest and stockholders' deficit            $ 106,620,152      $ 111,853,330
                                                                               =============      =============
The accompanying notes are an integral part of these statements.

                                       -6-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Statement of Operations
--------------------------------------------------------------------------------

                                                                                      Year ended December 31,
                                                                               1998            1997              1996
Income
Commissions and fees                                                      $ 71,635,701     $ 62,469,361      $ 60,410,851
Investment and other income                                                  1,290,228        1,874,425         1,628,207
                                                                          ------------     ------------      ------------

   Total income                                                             72,925,929       64,343,786        62,039,058
                                                                          ------------     ------------      ------------

Expenses
Compensation and employee benefits                                          44,241,870       39,336,216        37,195,821
Amortization and write-off of goodwill and other intangible assets           6,500,503       25,964,093         6,832,956
Depreciation of property and equipment                                       1,814,099        1,770,720         1,580,311
Other operating expenses                                                    14,424,177       14,151,973        14,090,929
Interest                                                                     4,081,890        3,856,213         4,267,405
Management fees                                                                671,622          585,673           563,456
                                                                          ------------     ------------      ------------

   Total expenses                                                           71,734,161       85,664,888        64,530,878
                                                                          ------------     ------------      ------------

Income (loss) before income taxes, minority interest
 and extraordinary item                                                      1,191,768      (21,321,102)       (2,491,820)

Income tax provision (benefit)                                               2,441,387       (1,768,898)          671,984
                                                                          ------------     ------------      ------------

Loss before minority interest and extraordinary item                        (1,249,619)     (19,552,204)       (3,163,804)

Minority interest in net income (loss)                                          98,965         (170,987)          439,151
                                                                          ------------     ------------      ------------

Loss before extraordinary item                                              (1,348,584)     (19,381,217)       (3,602,955)

Extraordinary gain on extinguishment of debt
 (less applicable income taxes of $805,000)                                  1,495,000                -                 -
                                                                          ------------     ------------      ------------

Net income (loss)                                                            $ 146,416     $(19,381,217)     $ (3,602,955)
                                                                          ============     ============      ============
The accompanying notes are an integral part of these statements.

                                      -7-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Statement of Comprehensive Income and
Changes in Stockholders' Equity
--------------------------------------------------------------------------------

                                                                                      Year ended December 31,
                                                                             1998              1997             1996
Net income (loss)                                                        $    146,416      $(19,381,217)     $(3,602,955)
                                                                         ------------      ------------      -----------
Other comprehensive (loss) income, net of income taxes:
   Gain (loss) on marketable equity securities, all unrealized,
   net of income taxes of $1,710, $2,477 and $(31,918)                          3,175             4,600          (59,276)
   Foreign currency translation adjustment, net of income
   taxes of $(20,696), $15,616 and $0                                         (38,434)           29,002                -
                                                                         ------------      ------------      -----------
Other comprehensive (loss) income                                             (35,259)           33,602          (59,276)
                                                                         ------------      ------------      -----------

Total comprehensive income (loss)                                        $    111,157      $(19,347,615)     $(3,662,231)
                                                                         ============      ============      ===========

Stockholders' (deficit) equity, beginning of year                        $(16,302,269)     $  3,045,346      $ 6,707,577
Proceeds from issuance of 441 shares of Class B common stock                  500,000                 -                -
Net income (loss)                                                             146,416       (19,381,217)      (3,602,955)
Dividends paid                                                               (300,000)                -                -
Other comprehensive (loss) income                                             (35,259)           33,602          (59,276)
                                                                         ------------      ------------      -----------

Stockholders' (deficit) equity, end of year                              $(15,991,112)     $(16,302,269)     $ 3,045,346
                                                                         ============      ============      ===========
The accompanying notes are an integral part of these statements.

                                       -8-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Consolidated Statement of Cash Flows
--------------------------------------------------------------------------------

                                                                                    Year ended December 31,
                                                                            1998             1997              1996
Cash flows from operating activities                                  
Net income (loss)                                                      $    146,416     $(19,381,217)    $ (3,602,955)
Adjustments to reconcile net income (loss) to net cash                
   provided by operating activities:                                  
     Extraordinary gain on extinguishment of debt                        (2,300,000)               -                -
     Depreciation of property and equipment                               1,814,099        1,770,720        1,580,311
     Amortization and write-off of goodwill and                       
      other intangible assets                                             6,500,503       25,964,093        6,832,956
     Provision for deferred income taxes                                  3,091,398       (2,746,378)         222,578
     Minority interest in net income (loss)                                  98,965         (170,987)         439,151
   (Increase) decrease in assets:                                     
     Premiums receivable, net                                            (3,234,227)      (1,484,457)       3,542,948
     Income taxes receivable from parent                                 (1,196,746)          23,480          238,148
     Prepaid expenses and other current assets                               27,489         (754,932)        (252,170)
   Increase (decrease) in liabilities:                                
     Premiums payable to insurers                                         3,757,222        5,277,953       (4,461,828)
     Income taxes payable to parent                                        (182,716)         182,716                -
     Accounts payable and accrued expenses                               (2,237,721)       2,290,112       (1,874,954)
     Other long-term liabilities                                           (348,619)          74,659          (64,709)
                                                                       ------------     ------------     ------------
                                                                      
      Net cash provided by operating activities                           5,936,063       11,045,762        2,599,476
                                                                       ------------     ------------     ------------
                                                                      
Cash flows from investing activities                                  
Issuance of installment finance receivables                             (10,238,906)      (6,310,364)      (4,172,734)
Collections of installment finance receivables                           10,123,496        5,749,168        5,828,774
Purchases of equipment, net of normal retirements                        (2,005,445)      (2,426,939)      (1,091,591)
Acquisitions of businesses, net of cash acquired                         (1,171,791)      (2,675,739)      (7,965,791)
                                                                       ------------     ------------     ------------
                                                                      
      Net cash used in investing activities                              (3,292,646)      (5,663,874)      (7,401,342)
                                                                       ------------     ------------     ------------
                                                                      
Cash flows from financing activities                                  
Proceeds from issuance of debt                                           19,458,986       28,845,000       24,500,000
Repayments of debt                                                      (27,096,583)     (31,042,024)     (15,959,670)
Proceeds from issuance of common stock                                      500,000                -                -
Purchases of minority interest                                             (885,666)        (816,551)               -
Dividends paid to shareholders                                             (300,000)               -                -
                                                                       ------------     ------------     ------------
                                                                      
      Net cash (used in) provided by financing activities                (8,323,263)      (3,013,575)       8,540,330
                                                                       ------------     ------------     ------------
                                                                      
Net (decrease) increase in cash and cash equivalents                     (5,679,846)       2,368,313        3,738,464
                                                                      
Cash and cash equivalents, beginning of year                             16,178,504       13,810,191       10,071,727
                                                                       ------------     ------------     ------------
                                                                      
Cash and cash equivalents, end of year                                 $ 10,498,658     $ 16,178,504     $ 13,810,191
                                                                       ============     ============     ============
                                                                      
Supplemental cash flow information:                                   
                                                                      
Interest paid                                                          $  3,884,281     $  3,998,510     $  3,958,532
                                                                      
Income taxes paid                                                      $  1,420,457     $    843,003     $    443,824
The accompanying notes are an integral part of these statements.

                                       -9-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

1.   Organization and Description of Business

     American   Phoenix   Corporation  was   incorporated   under  the  laws  of
     Connecticut. On May 10, 1981, American Phoenix issued 5,000 shares of Class
     A - Common  Stock to  American  Phoenix's  parent,  PM  Holdings,  Inc.,  a
     wholly-owned  subsidiary of Phoenix Home Life Mutual Insurance Company.  On
     April 13, 1993, 441 shares of Class B - Non-voting Common Stock were issued
     to a member of management. On March 31, 1998, another 441 shares of Class B
     - Non-voting Common Stock were issued to that member of management.

     American  Phoenix  is  engaged  in  insurance  agency  operations.   Agency
     subsidiaries distribute commercial and personal  property-casualty and life
     and health insurance.

     American  Phoenix  pays a  management  fee of 1% of  commission  income  to
     Phoenix  Home Life,  the  majority of which is for  internal  legal and tax
     preparation services.

2.   Summary of Significant Accounting Policies

     Use of Estimates

     The accompanying  consolidated  financial  statements have been prepared in
     conformity with generally accepted accounting  principles.  The preparation
     of these  financial  statements  requires  management to make estimates and
     assumptions that affect the reported amounts of assets, liabilities, income
     and  expenses,  and  related  disclosures  in  the  notes  to  consolidated
     financial statements. Actual results could differ from those estimates.

     The following is a summary of significant accounting policies.

     Basis of Presentation

     The  consolidated  financial  statements  include the  accounts of American
     Phoenix  and  all  of  its  subsidiaries.   All  significant   intercompany
     transactions  and balances have been eliminated in  consolidation.  Certain
     amounts from prior years have been  reclassified to conform to current year
     presentation.

     In 1998,  American  Phoenix  adopted the Statement of Financial  Accounting
     Standards No. 130, "Reporting  Comprehensive Income". This standard,  which
     is  effective  for  fiscal  years   beginning   after  December  15,  1997,
     establishes standards for reporting and displaying comprehensive income and
     its components in the financial statements.  Under this standard,  American
     Phoenix is  required  to classify  items of other  comprehensive  income by
     their nature in a financial  statement and display the accumulated  balance
     of other  comprehensive  income  separately  from retained  earnings in the
     stockholders' equity section of the balance sheet.

     Cash and Cash Equivalents

     Cash  equivalents  comprise highly liquid mutual fund  investments and U.S.
     Government  Securities.  The U.S.  Government  Securities  are  carried  at
     amortized cost, which approximates fair value, and have original maturities
     of three months or less.

                                      -10-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     Investments

     Marketable equity securities,  which are classified as  available-for-sale,
     are valued at fair value.  The estimated  fair value of  marketable  equity
     securities  is  based  on  quoted  market  prices  for  those  investments.
     Unrealized gains or losses on marketable  equity securities are included as
     accumulated other  comprehensive  income or loss as a separate component of
     stockholders'  equity, net of deferred income taxes. Realized capital gains
     and  losses  on  the  disposition  of  marketable   equity  securities  are
     determined on the basis of the specific  identification  of the  securities
     sold. Investment income is recognized when earned.

     Premiums Receivable

     Premiums  receivable  represents  outstanding  premiums due from  insureds.
     Typically,  American Phoenix collects  premiums from the insured and, after
     deducting its authorized commission,  remits the premium to the appropriate
     insurance company. In other  circumstances,  the insurance company collects
     the premium directly from the insured and remits the applicable  commission
     to American Phoenix.

     Installment Finance Receivables

     Installment finance receivables  represent  outstanding premiums and unpaid
     finance charges due under financing  agreements,  extending  generally nine
     months.  Installment finance  receivables,  which generally represent 75 to
     80% of the  insurance  premiums  due,  are  collateralized  by the  related
     unearned  insurance  premiums  on  such  policies.  Upon  acceptance  of  a
     financing agreement, the entire installment finance receivable due over the
     term of the agreement is recorded net of unearned finance charges. American
     Phoenix evaluates the collectibility of its installment finance receivables
     based upon its loss experience. Receivables are closely monitored such that
     if a receivable  becomes past due, the  corresponding  insurance  policy is
     canceled and the remaining  premiums are refunded by the insurance  company
     to American Phoenix.

     Property and Equipment

     Property and  equipment is carried at cost less  accumulated  depreciation.
     Depreciation  is  calculated  on a  straight-line  basis over the estimated
     useful lives of such assets (15 to 20 years for buildings and improvements,
     3 to 7 years  for  furniture  and  office  equipment,  and 3 to 5 years for
     computer  equipment).  Upon  retirement,  any gain or loss on property  and
     equipment is included in operations.

     Goodwill and Other Intangible Assets

     Goodwill  represents the excess of the cost of acquiring a company over the
     fair value of its net assets. Goodwill is generally amortized over 10 to 15
     years on a straight-line  basis.  Other intangible  assets represent client
     listings and non-compete  covenants.  These intangible assets are amortized
     on a straight-line basis over the estimated remaining lives of such assets,
     generally 3 to 15 years.

                                      -11-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     Management periodically  reevaluates the propriety of the carrying value of
     goodwill  and other  intangible  assets by  comparing  estimates  of future
     undiscounted  cash flows.  This reevaluation is performed at least annually
     or more  frequently  if  warranted  by  events or  circumstances  affecting
     American  Phoenix's  business.  In 1998 and 1997, certain intangible assets
     were  identified  as being  impaired and a charge to reduce their  carrying
     value was recorded (see Note 6).

     Minority Interest

     Minority  interest  represents  the  ownership  interest of  management  in
     certain agency  subsidiaries.  American Phoenix and these minority interest
     shareholders have contractual  relationships that provide for management to
     put their shares to American Phoenix or for American Phoenix to call or buy
     these shares at values based on prescribed formulas.

     Revenue Recognition

     Commissions  earned on  commercial  policies  which are  agency  billed and
     direct  billed are  recognized  on the later of the  effective  date or the
     billing  date.  Commissions  earned on personal  policies  which are direct
     billed by insurers are recognized when received.

     American Phoenix receives contingent  commissions based on the underwriting
     profitability of business generated.  Contingent commissions are recognized
     when received.

     Finance  charges  on  installment  finance  receivables  are  deferred  and
     recognized  in income  over the term of the  receivable  using  either  the
     sum-of-the-years'-digits  method  or the  actuarial  method,  both of which
     approximate the level yield method. These methods are used as prescribed by
     specific state laws.

     Income Taxes

     Income  taxes  are  provided  based on  income  reported  in the  financial
     statements.  Deferred  federal and state  income  taxes are  provided on an
     asset and liability  approach  which  requires the  recognition of deferred
     income tax assets and liabilities for the expected future tax  consequences
     of timing differences  between the financial statement carrying amounts and
     the tax basis of assets and liabilities.

     American Phoenix is included in the consolidated  federal income tax return
     of Phoenix Home Life.  Current  taxes are  allocated  among all  affiliated
     companies  based on a written tax  sharing  agreement.  It is  management's
     assessment,  based  upon  the  participation  of  American  Phoenix  in the
     consolidated  federal  income  tax return of  Phoenix  Home  Life,  and the
     historical  profits of Phoenix  Home Life that it is more  likely  than not
     that the  deferred  tax  assets at  December  31,  1998  will be  realized.
     American  Phoenix files  separate tax returns for all states where agencies
     are located  except  Connecticut.  American  Phoenix files a combined state
     return  with PM  Holdings,  Inc.  for  Connecticut  based on a written  tax
     sharing  agreement.  For  state  tax  purposes,  under  the tax  allocation
     agreement,  American  Phoenix  is not  reimbursed  for the  benefit  of its
     separate  company losses  provided on a combined basis,  therefore,  a full
     valuation  allowance has been taken  against the deferred  income tax asset
     generated from state net operating losses (see Note 9).

                                      -12-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

3.   Acquisition of Agency Subsidiaries

     In 1998, 1997 and 1996,  American Phoenix  acquired the outstanding  common
     stock  or  net  assets  of  several   agencies  and   accounted  for  these
     transactions  under  the  purchase  method  of  accounting.  The  following
     represents a summary of agency acquisitions:

     o   In 1998,  American Phoenix  purchased  $4,615,666 of minority  interest
         from minority shareholders, of which $3,730,000 is included in accounts
         payable and accrued  expenses at  December  31,  1998.  Included in the
         accounts  payable and accrued expenses balance at December 31, 1998, is
         a December 28, 1998 transaction  whereby American Phoenix  purchased an
         additional   26.2%  of  the  outstanding   stock  of  American  Phoenix
         Corporation  of  Connecticut  for an  aggregate  amount  of  $3,300,000
         increasing American Phoenix's investment to 100.0%.

     o   Effective  November  1,  1998,  Nicholas  &  Cannon  Agency,   Inc.,  a
         subsidiary of American  Phoenix,  purchased  certain assets of Suncoast
         Insurers for an aggregate amount of $2,500,000,  consisting of $750,000
         in cash and $1,750,000 in debt.

     o   Effective November 1, 1998, American Phoenix Corporation of Maryland, a
         subsidiary of American  Phoenix,  purchased  certain  assets of H.W.R.,
         Inc. for an aggregate amount of $200,000 cash.

     o   Effective  September 1, 1997,  American Phoenix  purchased 81.2% of the
         outstanding  stock of McCay  Corporation  for an  aggregate  amount  of
         $10,900,000.

     o   During 1997,  American  Phoenix  purchased an  additional  25.4% of the
         outstanding  stock of Lees  Preston  Fairy for an  aggregate  amount of
         $495,000,  thereby  increasing  American  Phoenix's  investment in Lees
         Preston Fairy to 62.9%.  Effective December 17, 1996,  American Phoenix
         had purchased 37.5% of the outstanding  stock of Lees Preston Fairy for
         an aggregate  amount of $607,000.  Prior to the 1997  acquisition,  the
         investment had been accounted for under the equity method.

     o   During 1997,  American  Phoenix  purchased an  additional  12.2% of the
         outstanding stock of American Phoenix Corporation of Massachusetts from
         members of  management  for an aggregate  amount of  $817,000,  thereby
         increasing   American   Phoenix's   investment   in  American   Phoenix
         Corporation of Massachusetts to 92.2%.

     o   Effective  October 1, 1996,  American Phoenix of New York, a subsidiary
         of  American  Phoenix,  purchased  certain  assets  of  Robert  E. Bill
         Associates, Inc. for an aggregate amount of $1,630,000.

     o   Effective April 1, 1996,  American Phoenix  purchased certain assets of
         Associated Insurance Brokers and the outstanding stock of Giaconia Life
         Associates, Inc. for an aggregate amount of $4,250,000.

     o   Effective  April 1, 1996,  American  Phoenix  purchased the outstanding
         stock  of  Howard  Hall  Agency,   Inc.  for  an  aggregate  amount  of
         $1,790,000.

                                      -13-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     o   Effective March 1, 1996,  American  Phoenix  Corporation of Orlando,  a
         subsidiary   of  American   Phoenix,   purchased   certain   assets  of
         Cass-Knoblock Agency for an aggregate amount of $800,000.

         The pro forma  unaudited  results  of  operations  for the years  ended
         December  31,  1998 and  1997,  assuming  the  1998  and 1997  purchase
         acquisitions had occurred as of January 1, 1997, are as follows:

                                                      1998             1997

         Revenues                                  $75,065,681      $74,164,786
         Loss before extraordinary item             (1,348,584)     (18,995,217)
         Net income (loss)                             146,416      (18,995,217)

4.   Investments

     The cost,  market value and gross unrealized gains and losses of marketable
     equity security investments  classified as  available-for-sale  at December
     31, are as follows:

                                                          1998            1997

     Cost                                               $ 99,721        $ 99,721
     Market value                                        111,226         106,341
     Gross unrealized gains                               31,053           6,620
     Gross unrealized losses                              19,548               -

5.   Property and Equipment

     A summary of property and equipment at December 31, is as follows:

                                      -14-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

                                                               1998                                1997
                                                     Gross               Net              Gross               Net
Buildings, land and improvements              $ 5,019,138        $ 3,693,366       $ 5,003,958        $ 3,908,300
    Furniture and office equipment                  8,955,543          2,041,534         8,338,473          1,897,524
    Computer equipment                              7,382,808          2,486,307         6,189,082          2,074,037
                                                  -----------        -----------       -----------        ------------

                                                   21,357,489        $ 8,221,207        19,531,513        $ 7,879,861
                                                                     ===========                          ============
    Less accumulated depreciation                 (13,136,282)                         (11,651,652)
                                                  -----------                          -----------                    

                                                  $ 8,221,207                          $ 7,879,861
                                                  ===========                          ===========
6.   Goodwill and Other Intangible Assets

     Certain  declines in premium  volume and other adverse  circumstances  have
     affected the  profitability of four agencies  acquired in 1995 and 1996 and
     the  recoverability of the carrying amounts of intangible assets from these
     agency acquisitions. As a result of these circumstances,  impairment losses
     of $731,000, $18,757,000 and $0 were recognized and charged to amortization
     of goodwill and other  intangible  assets for the years ended  December 31,
     1998,  1997 and 1996,  respectively.  In calculating  the impairment  loss,
     estimated  fair value was based upon the  expected  discounted  future cash
     flows, including, as applicable,  the expected discounted future cash flows
     generated by the original client listings purchased.

     A summary of goodwill  and other  intangible  assets at December  31, is as
     follows:
1998                               1997
                                                Gross             Net             Gross              Net
Goodwill                                $ 55,557,380     $ 24,982,485     $ 53,024,924      $ 26,871,084
     Client listings                           43,138,522       17,034,414       40,478,477        16,145,316
     Non-compete covenants                      4,580,364          353,622        4,570,367           555,205
                                             ------------     ------------     ------------      ------------

                                              103,276,266     $ 42,370,521       98,073,768      $ 43,571,605
                                                              ============                       ============
     Less accumulated amortization            (60,905,745)                      (54,502,163)
                                             ------------                      ------------                   

                                             $ 42,370,521                      $ 43,571,605
                                             ============                      ============
7.   Debt

     A summary of debt at December 31, is as follows:

                                      -15-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------
1998             1997
Short-term debt

          Current maturities of variable line of credit                     $  7,500,000     $          -
          Current maturities of other long-term debt                           7,854,630        4,702,062
          Short-term debt                                                            874          769,566
          Revolving credit lines                                               3,170,000        3,130,000
                                                                            ------------     ------------

           Total short-term debt                                            $ 18,525,504     $  8,601,628
                                                                            ============     ============

          Long-term debt                                                                           

          Variable line of credit due 1999 through 2002                     $ 37,500,000     $ 45,000,000
          5.23% to 9.00% notes payable to former
           shareholders due 1999 through 2004                                  6,651,930       14,632,110
          Variable mortgage note payable due 1999                                      -        2,182,292
                                                                            ------------     ------------

           Total long-term debt                                             $ 44,151,930     $ 61,814,402
                                                                            ============     ============
Phoenix  Home Life  guarantees  the payment of  principal  and  interest on
     substantially  all of the above debt for which it receives a .10% guarantee
     fee on the outstanding  balance.  This fee is included in the 1% management
     fee paid to Phoenix Home Life.

     American  Phoenix obtains funding for operations and  acquisitions  through
     two revolving  credit lines from commercial  banks.  American  Phoenix pays
     interest  rates equal to the base rate or  Eurodollar  rate the date of the
     advance,  and commitment  fees on the unused  portions of the credit lines.
     
     Additional  information  on the credit  line  relating to  acquisition  and
     operating  activities of the company at December 31, and for the years then
     ended as follows:
1998              1997
Credit line borrowings at year-end                            $45,000,000       $45,000,000
     Interest rate at year-end                                             5.9%              6.1%
     Unused credit line at year-end                                $         -       $         -

                                                                      1998              1997               1996

     Average credit line borrowings during year                    $44,192,000       $36,500,000        $28,700,000
     Average interest rate during year                                     5.8%              5.9%               5.7%

     Commitment fees on unused credit lines for year               $       533       $       675        $     6,292
     Interest rates on unused credit line for year                       0.100%            0.100%             0.125%
-16-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     Additional  information  on the  credit  line  relating  to a  wholly-owned
     premium  financing  subsidiary  of the company at December  31, and for the
     years then ended as follows:
1998               1997
Credit line borrowings at year-end                              $ 3,170,000        $ 3,130,000
     Interest rate at year-end                                               5.7%               6.1%
     Unused credit line at year-end                                  $ 6,830,000        $ 6,870,000

                                                                         1998               1997              1996

     Average credit line borrowings during year                      $ 3,688,000        $ 3,036,000       $ 3,500,000
     Average interest rate during year                                       5.8%               5.9%              5.9%

     Commitment fees on unused credit lines for year                 $     9,157        $     8,549       $    10,580
     Interest rates on unused credit line for year                         0.125%             0.125%            0.125%
-17-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     Principal payments required to be paid by American Phoenix over a five year
     period on the debt existing as of December 31, 1998, are as follows:

               
     1999                                           $ 18,525,504
     2000                                             18,114,082
     2001                                             17,406,116
     2002                                              8,382,350
     2003                                                229,855
     2004 and thereafter                                  19,527
                                                    ------------
 
                                                    $ 62,677,434
                                                    ============

8.   Lease Commitments

     American Phoenix occupies office space under leases which are accounted for
     as  non-cancelable   operating  leases.   These  leases  generally  include
     escalation  clauses for increases in lessors'  operating  expenses and real
     estate taxes.  Total  operating  lease expense was $3,605,236 net of rental
     income of  $826,531,  $3,230,232,  net of rental  income of  $573,635,  and
     $3,247,570,  net of rental income of $287,117, for the years ended December
     31, 1998, 1997 and 1996, respectively. American Phoenix is committed to the
     following future net minimum lease payments under non-cancelable  operating
     leases:
Income               Net
                                                       Lease             from               Lease
                                                      Payments         Subleases           Payments
1999                                           $  4,047,011       $    463,893       $  3,583,118
     2000                                              3,596,348            269,162          3,327,186
     2001                                              3,409,418            246,850          3,162,568
     2002                                              3,261,946            246,850          3,015,096
     2003                                              2,494,388            246,850          2,247,538
     2004 and thereafter                               1,771,235             41,454          1,729,781
                                                ----------------   ----------------   ----------------
    
                                                    $ 18,580,346       $  1,515,059       $ 17,065,287
                                                ================   ================   ================
-18-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

9.   Income Taxes

     The  provisions  for  income  taxes  charged  to net  income  and to  other
     comprehensive income for the years ended December 31, are as follows:
1998             1997             1996
Applicable to income before extraordinary item:    
     Current income tax provision                       
      Federal                                                   $  (580,857)     $   375,480      $    69,406
      State                                                         735,846          602,000          380,000
                                                            ---------------  ---------------   --------------
                                                        
        Total current                                               154,989          977,480          449,406
                                                            ---------------  ---------------   --------------
                                                        
     Deferred income tax provision (benefit)            
      Federal                                                     2,158,325       (2,535,378)         220,578
      State                                                         128,073         (211,000)           2,000
                                                            ---------------  ---------------   --------------
                                                        
        Total deferred                                            2,286,398       (2,746,378)         222,578
                                                            ---------------  ---------------   --------------
                                                        
      Total income tax provision (benefit)                      $ 2,441,387      $(1,768,898)     $   671,984
                                                            ===============  ===============   ==============
                                                        
     Applicable to extraordinary item:                  
     Deferred income tax provision                              $   805,000      $         -      $         -
                                                            ===============  ===============   ==============
                                                         
     Applicable to other comprehensive income:          
     Deferred income tax provision (benefit)                      $ (18,986)    $     18,093      $   (31,918)
                                                            ===============  ===============   ==============
-19-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     The  difference  between the federal  income tax provision at the statutory
     rate of 35% and  American  Phoenix's  actual  federal  income  tax  rate is
     attributable to state income taxes,  goodwill and other intangible  assets,
     the limitation on business meals and  entertainment  and foreign losses for
     which no income tax benefit has been  recognized.  The effective income tax
     rate varied from statutory federal income tax rate as follows:
1998               1997              1996
Statutory federal income tax rate                            35.0%             -35.0%            -35.0%

     Nondeductible meals and entertainment                         3.4%               0.5%              4.0%
     Nondeductible goodwill                                       35.2%              18.3%             57.6%
     Nondeductible amortization                                    1.0%               7.0%                -
     State income taxes (net of federal benefit)                   7.0%               0.5%             -1.1%
     Nondeductible foreign loss                                   12.4%                 -                 -
     Other                                                        -1.0%               0.4%              1.5%
                                                          ------------       ------------       -----------

     Effective income tax rate                                    93.0%              -8.3%             27.0%
                                                          ============       ============       ===========
The  components  of  deferred  income  taxes  provided  for the years ended
     December 31, are as follows:
1998              1997               1996
Deferred compensation                                  $  137,925         $  (64,251)       $  (90,822)
     Severance payment                                          18,222                  -                 -
     Client listing                                          1,178,371         (3,004,990)           96,125
     State income tax                                          (43,009)           133,458            52,743
     Accrued expenses                                            3,638                  -          (235,353)
     Federal net operating loss carryforwards                1,728,857            196,359           153,815
     Accrued rent                                               96,625             87,270            79,451
     Depreciation                                               50,098            (18,538)          212,369
     Non-compete covenants                                     (36,782)           (78,505)          (45,988)
     Allowance for doubtful accounts                              (887)             5,200            (2,676)
     Other                                                     (41,660)            (2,381)            2,914
                                                           -----------        ------------       -----------
   
      Net deferred income tax provision (benefit)          $ 3,091,398        $(2,746,378)       $  222,578
                                                           ===========        ============       ===========
-20-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     The tax effect of temporary differences as of December 31, are as follows:
1998             1997
Deferred tax liabilities:
       Depreciation                                                        $ (228,950)     $  (178,852)
       State income tax                                                      (132,073)        (175,082)
                                                                           ----------      -----------

         Gross deferred tax liabilities                                      (361,023)        (353,934)
                                                                           ----------      -----------

     Deferred tax assets:
       Client listings                                                      2,358,610        3,536,981
       Foreign subsidiary net operating loss carryforwards                    371,172          177,450
       Accrued rent                                                           367,835          464,460
       State of Connecticut net operating loss carryforwards                  329,203          449,501
       Deferred compensation                                                  289,652          427,577
       Federal net operating loss carryforwards                               216,579        1,945,436
       Severance payment                                                      103,600          121,822
       Allowance for doubtful accounts                                         60,487           59,600
       Non-compete covenants                                                    7,602          (29,180)
       Foreign currency translation adjustments                                 5,080          (15,616)
       Accrued expenses                                                         3,352            6,990
       Gain on marketable equity securities                                       893            2,603
       Other                                                                   27,786          (13,874)
                                                                           ----------       ----------

         Gross deferred tax assets                                          4,141,851        7,133,750
                                                                           ----------       ----------

     Valuation allowances:
       Foreign subsidiary net operating loss carryforwards                   (371,172)        (177,450)
       State of Connecticut net operating loss carryforwards                 (329,203)        (499,501)
                                                                           -----------      ----------

         Valuation allowances                                                (700,375)        (626,951)

         Net deferred income tax asset                                     $3,080,453       $6,152,865
                                                                           ===========      ==========
At December 31, 1998,  American Phoenix had $618,797 of loss  carryforwards
     for federal tax purposes  that begin to expire in the year 2008.  Under the
     provisions of Internal Revenue Code, these net operating loss carryforwards
     will be subject to an annual limitation on utilization, as they have arisen
     from acquisitions of the brokerage subsidiaries.

     American  Phoenix has separate  company State of Connecticut  net operating
     loss  carryovers  totaling  $5,958,424  and  $7,279,368 for the years ended
     December 31, 1998 and 1997,

                                      -21-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     respectively.  These net  operating  losses will start to expire in the tax
     years ending December 31, 2001 and 2000, respectively.

     Lees Preston Fairy, a United Kingdom  majority owned subsidiary of American
     Phoenix,  has net operating  loss  carryforwards  totaling  $1,237,241  and
     $591,499  for the years ended  December  31,  1998 and 1997,  respectively.
     However,  a full  valuation  allowance  has been taken against the deferred
     income tax asset generated from these foreign losses.

10.  Fair Value of Financial Instruments

     American  Phoenix uses various  methods and  assumptions  in estimating the
     fair value of financial  instruments.  The following  valuation methods and
     assumptions  were  utilized  in  estimating  the fair  value  of  financial
     instruments:

     Cash  and  cash  equivalents  - The  carrying  amounts  for  cash  and cash
     equivalents approximate fair value.

     Marketable  equity  securities - The carrying amounts for marketable equity
     securities are based on quoted market prices which approximate fair value.

     Premiums   receivable  -  The  carrying  amounts  for  premiums  receivable
     approximate fair value.

     Installment  finance  receivables  - The carrying  amounts for  installment
     finance receivables approximate fair value.

     Premiums  payable to insurers - The carrying amounts of premiums payable to
     insurers approximate fair value.

     Short-term  debt  -  The  carrying   amounts  of  borrowings  under  credit
     facilities approximate fair value.

     Long-term debt - The carrying  amounts of long-term debt  approximate  fair
     value,  as fair value is  estimated  based on  current  rates that would be
     offered to American Phoenix for debt of the same remaining maturities.

11.  Litigation

     During 1998, American Phoenix received a favorable final arbitration ruling
     regarding  litigation between American Phoenix Insurance Agency of Georgia,
     Inc., a subsidiary of American Phoenix and the former owner of that agency.
     The final arbitration  ruling canceled American Phoenix Insurance Agency of
     Georgia,  Inc.'s  obligation  to  pay a  promissory  note  payable  to  the
     subsidiary's  former owner totaling  $2,300,000.  The extinguishment of the
     debt settlement is recorded as an  extraordinary  item in the  consolidated
     statement of  operations  in the amount of  $1,495,000,  net of  applicable
     income taxes of $805,000.

                                      -22-
American Phoenix Corporation
(a subsidiary of PM Holdings, Inc.)
Notes to Consolidated Financial Statements
--------------------------------------------------------------------------------

     American Phoenix is involved in various legal actions arising in the normal
     course of business.  It is management's opinion that their final resolution
     will not have a  significant  effect  on  American  Phoenix's  consolidated
     financial statements.

12.  Benefit Plans

     American Phoenix sponsors a 401(k) savings plan for all eligible  full-time
     employees.  Employees who make  contributions  into the plan in amounts not
     less than 1% nor more than 15% of their  salaries  will  receive a matching
     contribution  from  American  Phoenix  in an  amount  equal to 50% of their
     contribution  to a maximum not to exceed 3% of their  salary.  Participants
     are  immediately  vested in their  voluntary  contributions  plus  earnings
     thereon.  The  contributions  made by  American  Phoenix  on  behalf of its
     employees  totaled  $517,488,  $592,870  and  $345,529  for the years ended
     December  31, 1998,  1997 and 1996,  respectively.  In  addition,  American
     Phoenix  sponsors  a health and  welfare  plan for all  eligible  full-time
     employees. The qualified plan complies with requirements established by the
     Employee Retirement Income Security Act of 1974.

13.  Subsequent Event

     On March 30, 1999, PM Holdings,  Inc.,  Phoenix Home Life Mutual  Insurance
     Company and a member of American Phoenix  management  executed an agreement
     with  Hilb,  Rogal  and  Hamilton  Company  to sell all of the  issued  and
     outstanding  shares of American Phoenix to Hilb, Rogal and Hamilton Company
     for approximately $49 million in cash, $32 million in convertible notes and
     1,000,000 shares of Hilb, Rogal and Hamilton Company common stock. The sale
     is subject to  satisfaction of certain  conditions to closing,  including a
     provision that requires PM Holdings, Inc. to make a capital contribution of
     approximately  $20 million to American  Phoenix.  The sale was completed on
     May 3, 1999.

                                      -23-
(b)      Pro Forma Financial Information.

             HILB, ROGAL AND HAMILTON COMPANY, INC. AND SUBSIDIARIES
                PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
                                   (Unaudited)

         The following  unaudited Pro Forma Condensed  Combined Balance Sheet as
of December 31, 1998 and the unaudited Pro Forma Condensed Combined Statement of
Operations  for the year  ended  December  31,  1998 (the "Pro  Forma  Financial
Statements") are based upon the respective  consolidated financial statements of
the Company and of American Phoenix.  The consolidated  financial  statements of
the Company  were filed with the  Company's  Annual  Report on Form 10-K for the
fiscal  year  ended  December  31,  1998 on March  30,  1999.  The  consolidated
financial  statements of American  Phoenix are included in this current  report.
See "Item 7(a) - Financial Statements of Businesses Acquired."

         The Pro Forma Condensed  Combined Balance Sheet as of December 31, 1998
is presented as if the  Acquisition  had occurred on December 31, 1998.  The Pro
Forma Condensed Combined Statement of Operations for the year ended December 31,
1998 is presented as if the Acquisition had occurred on January 1, 1998. The Pro
Forma Financial  Statements  give effect to the  Acquisition  under the purchase
method of accounting in accordance with  Accounting  Standards Board Opinion No.
16.

         The Pro  Forma  Financial  Statements  are  presented  for  comparative
purposes only and are not  necessarily  indicative of what the actual  financial
position of the Company would have been at December 31, 1998 had the Acquisition
occurred at that date or of what the actual  results of the  Company  would have
been if the  Acquisition  had occurred on January 1, 1998 nor  indicative of the
results of  operations in future  periods.  The Pro Forma  Financial  Statements
should be read in  conjunction  with, and are qualified in their entirety by the
respective  historical financial statements and notes thereto of the Company and
of American Phoenix for the year ended December 31, 1998.

         The Pro Forma  Financial  Statements  presented  do not reflect  future
events that may occur after the  Acquisition has been  consummated.  The Company
believes  that  operating  expense  synergies of the combined  operations of the
Company and American Phoenix will be realized post-Acquisition. However, for the
purposes of the Pro Forma Financial Statements presented herein, these synergies
have not been reflected because their realization cannot be assured.

                                      -24-
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED BALANCE SHEET
December 31, 1998
(Unaudited)
Hilb, Rogal      
                                                  and          American
                                                Hamilton        Phoenix
                                                Company       Corporation      Pro Forma
                                               Historical      Historical     Adjustments            Pro Forma
ASSETS
CURRENT ASSETS
  Cash and cash equivalents                    $19,394,958   $ 10,498,658    $  4,805,898   (1)    $ 35,377,526
                                                                                1,500,000   (2)
                                                                                 (821,988) (3c)
  Investments                                    3,383,742        111,226                             3,494,968
  Receivables, net                              51,570,990     38,810,751       1,439,877   (3)      91,821,618
  Prepaid expenses and other current assets      3,852,095      3,527,336                             7,379,431
                                             -------------------------------------------------------------------
    TOTAL CURRENT ASSETS                        78,201,785     52,947,971       6,923,787           138,073,543

INVESTMENTS                                      3,068,140                                            3,068,140

PROPERTY & EQUIPMENT, NET                       12,387,194      8,221,207      (1,500,000)  (2)      14,387,194
                                                                               (4,721,207)  (3)
INTANGIBLE ASSETS, NET                          87,470,633     42,370,521      53,710,729   (3)     183,551,883

OTHER ASSETS                                     6,938,074      3,080,453      (3,080,453)  (3)       6,938,074
                                             ===================================================================
                                              $188,065,826   $106,620,152    $ 51,332,856          $346,018,834
                                             ===================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Premiums payable to insurance companies     $ 65,436,784   $ 50,155,157                          $115,591,941
  Accounts payable and accrued expenses         13,025,426      9,903,348    $  1,000,000  (3e)      26,428,774
                                                                                2,500,000  (3f)
  Premiums deposits and credits due              
    customers                                    7,765,575              0                             7,765,575
  Current portion of long-term debt              2,277,479     15,354,630     (15,000,000)  (1)       2,632,109
                                             -------------------------------------------------------------------
    TOTAL CURRENT LIABILITIES                   88,505,264     75,413,135     (11,500,000)          152,418,399

LONG-TERM DEBT                                  43,658,306     44,151,930      28,500,000  (3b)     116,310,236

OTHER LONG-TERM LIABILITIES                     10,191,881      1,856,693                            12,048,574

MINORITY INTEREST                                               1,189,506       1,410,494   (3)       2,600,000
SHAREHOLDERS' EQUITY
  Common Stock                                   3,831,208          5,882      16,931,250  (3a)      20,762,458
                                                                                   (5,882)  (3)
  Additional paid in capital                                    6,580,418      19,805,898   (1)               0
                                                                              (26,386,316)  (3)
  Retained earnings                             41,879,167    (22,577,412)     22,577,412   (3)      41,879,167
                                             -------------------------------------------------------------------
                                                45,710,375    (15,991,112)     32,922,362            62,641,625
                                             ===================================================================
                                              $188,065,826   $106,620,152    $ 51,332,856          $346,018,834
                                             ===================================================================
See notes to the proforma  condensed combined  financial  statements.  Bracketed
numbers to the right of the "Pro Forma Adjustments" column refer to such notes.

                                      -25-
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(Unaudited)
Hilb, Rogal and      American
                                                         Hamilton          Phoenix
                                                         Company         Corporation      Pro Forma
                                                        Historical       Historical      Adjustments            Pro Forma
REVENUES
  Commissions and fees                                 $175,886,766      $71,635,701                          $247,522,467
  Investment income                                       1,578,782          839,383                             2,418,165
  Other                                                   3,582,345          450,845                             4,033,190
                                                    ----------------------------------------------------------------------
                                                        181,047,893       72,925,929                           253,973,822
                                                                                                   -

OPERATING EXPENSES
  Compensation and employee benefits                     98,478,098       44,241,870                           142,719,968
  Other operating expenses                               46,969,711       16,238,276    $  (1,116,013)(5)       62,091,974
  Amortization of intangibles                             7,919,355        6,500,503       (2,657,253)(4)       11,762,605
  Interest expense                                        2,317,195        4,081,890          781,558 (7)        7,180,643
  Management fees                                                 0          671,622         (671,622)(8)                0
                                                    ----------------------------------------------------------------------
                                                        155,684,359       71,734,161       (3,663,330)         223,755,190
                                                    ----------------------------------------------------------------------

INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST                                        25,363,534        1,191,768        3,663,330           30,218,632

Income Taxes                                             10,418,469        2,441,387          660,932 (6)       13,520,788

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

INCOME BEFORE MINORITY INTEREST                          14,945,065       (1,249,619)       3,002,398           16,697,844

Minority interest                                                 0           98,965                0               98,965
                                                    ----------------------------------------------------------------------

NET INCOME                                             $ 14,945,065    $  (1,348,584)    $  3,002,398         $ 16,598,879
                                                    ======================================================================

NET INCOME PER COMMON SHARE:

  BASIC                                                       $1.20                                                 $1.23
                                                    ======================================================================
  DILUTED                                                     $1.18                                                 $1.17
                                                    ======================================================================

WEIGHTED AVERAGE SHARES OUTSTANDING:

  BASIC                                                  12,496,752                                            13,496,752
                                                    ======================================================================
  DILUTED                                                12,708,744                                            15,115,337
                                                    ======================================================================
See notes to the proforma  condensed combined  financial  statements.  Bracketed
numbers to the right of the "Pro Forma Adjustments" column refer to such notes.

                                      -26-
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
December 31, 1998
Notes to Pro Forma Financial Statements
1.   This  pro  forma   adjustment   reflects  the  pre   acquisition,   capital
     contribution  of $19,805,898 by Holdings and the partial use of these funds
     to reduce bank debt by $15,000,000.

2.   This pro forma  adjustment  reflects  the pre  acquisition  sale of certain
     American Phoenix real estate to Holdings for approximately $1,500,000.

3.   This pro forma  adjustment  reflects  the  issuance of Common Stock and the
     Convertible Subordinated Indentures,  the assumption of liabilities and the
     incurrence  of bank debt in  connection  with the  acquisition  of American
     Phoenix Corporation by the Company resulting in:

                                                                                               Value    
     a.   The  issuance  of  1,000,000  shares  of  Common  Stock  at a price of                        
          $16.93125 per share. In accordance with EITF 95-19, the assumed Common                        
          Stock  issuance  price of $16.93125 per share  represents  the average                        
          closing  Common  Stock  price on the NYSE for the five  business  days                        
          prior through the five business days following the Company's execution            
          of the Stock Purchase Agreement on March 29, 1999.                               $ 16,931,250 
                                                                                                        
     b.   The issuance of $32,000,000 (par value) of the Company's  Subordinated             
          Debentures  with  a  fair  value  of  $28,500,000.   The  Subordinated                        
          Debentures  mature on May 3, 2014, are  immediately  convertible  into                        
          shares of the  Company's  Common Stock at a price of $22.75 per share,                        
          are callable  beginning on May 3, 2009,  and are  subordinated  to all                        
          existing and future senior indebtedness of the Company. The fair value                        
          of the  Subordinated  Debentures  was  determined  by the  independent                        
          valuation  of the  investment  banking firm of Davenport & Company LLC                        
          ("Davenport").   Key  assumptions   utilized  by  Davenport  in  their                        
          appraisal  were as  follows:  (i)  underlying  Common  Stock  price of                        
          $16.93125 per share; (ii) expected volatility of the underlying Common                        
          Stock  of  30%;  (iii)  expected  dividend  growth  rate  of 6%;  (iv)                        
          risk-free  interest rates equal to those for U.S.  Treasury  issues on                        
          March 30,  1999  (the  announcement  date) and (v) an  option-adjusted                        
          interest cost for the Subordinated  Debentures of approximately 9%. In               
          addition  to  performing  the  valuation,   Davenport  served  as  the                        
          Company's financial advisor in connection with the Acquisition.                    28,500,000 
                                                                                                        
     c.   The cash payment of the purchase price to Vaughan and Phoenix.                        821,988 
                                                                                                        
     d.   The  assumption of tangible net worth  deficit of American  Phoenix of
          $48,328,012.  This was  primarily  in the  form of bank  debt of which
          $45,000,000   was  paid  at  closing   with  the  proceeds  of  a  new
          $110,000,000  bank  facility.  This credit  facility  was also used to
          refinance existing bank debt of the Company of $40,000,000.                        48,328,012
                                                                                           
     e.   Assumed transaction costs.                                                          1,000,000
                                                                                                       
     f.   Estimated  lease  termination,  employee  termination  and  relocation           
          costs.                                                                              2,500,000
                                                                                           ============
                                                                                           $ 98,081,250
                                                                                           ============
-27-
HILB, ROGAL AND HAMILTON COMPANY AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
December 31, 1998
Notes to Pro Forma Financial Statements

     The value assigned to goodwill is calculated as follows:
Total Purchase Price                                                                             $ 98,081,250

              Book value deficit of American Phoenix at December 31, 1998                                        15,991,112
              Pre acquisition capital infusion                                                                 (19,805,898)
              Tangible net worth deficit assumed by the Company and included in purchase price                 (48,328,012)
                                                                                                            ---------------
                  Adjusted book value of American Phoenix                                                      (52,142,798)
              Adjustments:
                Reduce property, plant & equipment to fair values                                                 4,721,207
                Eliminate deferred tax asset due to Section 338 election                                          3,080,453
                Adjust minority interest to contractual buy-out liability as it is the Company's intent
                   to buy these shares at values based on prescribed formulas.                                    1,410,494
                Miscellaneous purchase accounting adjustment                                                    (1,439,877)
                                                                                                            ---------------
                   Total Adjustments                                                                              7,772,277
                                                                                                            ---------------
              Goodwill                                                                                         $ 53,710,729
                                                                                                            ===============

4.   This  pro  forma   adjustment   reflects  the   elimination  of  historical
     amortization  of  American   Phoenix   Corporation   ($6,500,503)  and  the
     amortization  of goodwill  acquired at the time of the  Acquisition  over a
     period of 25 years ($3,843,250).

5.   This  pro  forma   adjustment   reflects  the   elimination  of  historical
     depreciation  expense of American  Phoenix  ($1,814,099)  and  recording of
     depreciation  expense  based upon the fair  values of  property,  plant and
     equipment  acquired  in  the  Acquisition  ($444,444).  In  addition,  this
     adjustment  reflects the rental  expense  related to  buildings  previously
     owned by American Phoenix sold prior to the Acquisition ($253,642).

6.   This  proforma  adjustment  reflects  the income tax effect of the proforma
     adjustments at an expected future  effective tax rate of 40%  ($1,465,332),
     reduced  for the tax impact of decrease in  nondeductible  amortization  of
     $2,011,000 per year ($804,400).

7.      This pro forma  adjustment  eliminates  historical  interest of American
        Phoenix  ($4,081,890)  and records  interest  expense under the new debt
        structure as follows:
            Interest on Subordinated Debentures, including amortization of discount                            $  1,900,932
            Interest on debt assumed or incurred in the acquisition, at an assumed interest rate
              of 6.0275%, the London Interbank Offered Rate ("LIBOR") at April 30, 1999 plus 1.125%.
              A change of  .125% in the assumed interest rate would increase or decrease interest
              expense by approximately $61,000.                                                                   2,962,516
                                                                                                            ---------------
                                                                                                               $  4,863,448
                                                                                                            ===============
-28-
(c)      Exhibits.

                  Exhibit No.      Description

                  2.1              Stock  Purchase  Agreement,  dated  March 29,
                                   1999,  by  and  among  the   Registrant,   PM
                                   Holdings,  Inc.,  Phoenix  Home  Life  Mutual
                                   Insurance Company and Martin L. Vaughan,  III
                                   (incorporated  by  reference  to Exhibit 2 to
                                   the  Company's  Form 10-K for the year  ended
                                   December 31, 1998, File No. 0-15981).

                  23.1             Consent of PricewaterhouseCoopers LLP.

                  99.1             Credit  Agreement  dated  as of  May  3,1999,
                                   among  the  Registrant,   as  Borrower;   the
                                   lenders named  therein;  First Union National
                                   Bank, as  administrative  agent; PNC Bank, as
                                   documentation    agent;    and    NationsBanc
                                   Montgomery  Securities  LLC,  as  syndication
                                   agent.

                  99.2             Press release dated May 3, 1999.

                                      -29-
SIGNATURES

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

                              HILB, ROGAL AND HAMILTON COMPANY
                                      (Registrant)

Date: May 14, 1999            By: /s/ Carolyn Jones                         
                                  ------------------------------------------
                                  Carolyn Jones
                                  Senior Vice President, Chief Financial Officer
                                  and Treasurer
Exhibit Index

     Exhibit No.           Description

        2.1           Stock  Purchase  Agreement,  dated March 29, 1999,  by and
                      among the Registrant, PM Holdings, Inc., Phoenix Home Life
                      Mutual  Insurance  Company  and  Martin  L.  Vaughan,  III
                      (incorporated  by reference to Exhibit 2 to the  Company's
                      Form 10-K for the year ended  December 31, 1998,  File No.
                      0-15981).

        23.1          Consent of PricewaterhouseCoopers LLP

        99.1          Credit  Agreement  dated  as of May  3,  1999,  among  the
                      Registrant,  as Borrower; the lenders named therein; First
                      Union National Bank, as administrative agent; PNC Bank, as
                      documentation agent; and NationsBanc Montgomery Securities
                      LLC, as syndication agent.

        99.2          Press release dated May 3, 1999.