UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2004

OR

For the transition period from                 to                .

000-50641
(Commission File Number)

PROCENTURY CORPORATION

(614) 895-2000
(Registrant’s telephone number, including area code)

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

YES o NO x

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES o NO x

     As of June 4, 2004, the registrant had 13,101,195 outstanding Common Shares, without par value.

PROCENTURY CORPORATION

QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended March 31, 2004

INDEX

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PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

PROCENTURY CORPORATION AND SUBSIDIARIES
(Formerly ProFinance Holdings Corporation)

Consolidated Condensed Balance Sheets

See accompanying notes to the unaudited consolidated condensed financial statements.

3

PROCENTURY CORPORATION AND SUBSIDIARIES
(Formerly ProFinance Holdings Corporation)

Consolidated Condensed Statements of Operations

(Unaudited)

See accompanying notes to the unaudited consolidated condensed financial statements.

4

PROCENTURY CORPORATION AND SUBSIDIARIES
(Formerly ProFinance Holdings Corporation)

Consolidated Condensed Statements of Shareholders’ Equity
and Comprehensive Income

(Unaudited)

See accompanying notes to the unaudited consolidated condensed financial statements.

5

PROCENTURY CORPORATION AND SUBSIDIARIES
(Formerly ProFinance Holdings Corporation)

Consolidated Condensed Statements of Cash Flows
(Unaudited)

See accompanying notes to the unaudited consolidated condensed financial statements.

6

PROCENTURY CORPORATION AND SUBSIDIARIES
(Formerly ProFinance Holdings Corporation)

Notes to Consolidated Condensed Financial Statements

March 31, 2004

(Unaudited)

(1)		Basis of Presentation
		The accompanying interim unaudited consolidated condensed financial statements and notes include the accounts of ProCentury Corporation, formerly ProFinance Holdings Corporation, (“the Company” or “ProCentury”) and its wholly owned and controlled insurance subsidiaries, Century Surety Company (“Century”), Evergreen National Indemnity Company (“Evergreen”), and Continental Heritage Insurance Company (“Continental”). The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair presentation of results for the interim periods have been included. These interim unaudited consolidated condensed financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes in the Company’s audited consolidated financial statements, included in the Company’s final prospectus filed with the Securities and Exchange Commission pursuant to Rule 424 of the Securities Act of 1933, as amended, (the “Prospectus”) (File No. 333-111294). The Company’s results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year.
		In preparing the interim unaudited consolidated condensed financial statements, management was required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the interim unaudited consolidated condensed financial statements, and the reported amounts of revenue and expenses for the reporting period. Actual results could differ significantly from those estimates.
		Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of loss and loss expense reserves, the recoverability of deferred policy acquisition costs and deferred tax assets, the net realizable value of reinsurance recoverables, and the determination of other-than-temporary declines in the fair value of investments. Although considerable variability is inherent in these estimates, management believes that the amounts provided are adequate. These estimates are continually reviewed and adjusted as necessary. Such adjustments are generally reflected in current operations.
		These financial statements should be read in conjunction with the following notes and with the Notes to Consolidated Financial Statements as of and for the year ended December 31, 2003, included in the Company’s Prospectus.
		On April 26, 2004, the Company issued 8,000,000 common shares in an initial public offering (“the IPO”) and received net proceeds (before expenses) of $78.1 million, based on an initial public offering price of $10.50. As this transaction did not occur during the period covered by this Form 10-Q, the accompanying interim unaudited consolidated condensed financial statements are on a historical basis and do not reflect the following transactions that occurred in connection with the IPO:

	•		The spin-off of Evergreen and Continental and related specialty surety lines;
	•		The issuance of common shares and related proceeds from the IPO;
	•		Repayment of the $8.9 million bank indebtedness outstanding at the closing of the IPO; and
	•		Redemption of the $5.0 million Class B common shares and related interest expense of $513,000.

       All significant intercompany balances and transactions have been eliminated.

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(2)		Investments
		The Company invests primarily in investment-grade fixed maturities. The amortized cost, gross unrealized gains and losses and estimated fair value of fixed maturity securities classified as held-to-maturity were as follows:

The amortized cost, gross unrealized gains and losses, and estimated fair value of fixed maturity and equity securities classified as available-for-sale were as follows:

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The Company considers four factors in determining if an other-than-temporary decline in fair value exists: length of time and extent that a security has been in an unrealized loss position; the existence of an event that would impair the issuer’s future earnings potential; the near-term prospects for recovery of the fair value of a security; and the intent and ability of the Company to hold the security until the fair value recovers. Realized losses, including any provision for other-than-temporary declines in value, are included in the consolidated statements of operations. No other-than-temporary declines were realized in the three month periods ended March 31, 2004 or 2003.

The estimated fair value, related gross unrealized losses, and the length of time that the securities have been impaired for held-to-maturity securities that are considered temporarily impaired are as follows: