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

                                  UNITED STATES
                        SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, D.C. 20549
                           ----------------------------

                                    FORM 10-K

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

                 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                         COMMISSION FILE NUMBER:  0-15286

                         CHANDLER INSURANCE COMPANY, LTD.
             (Exact name of registrant as specified in its charter)

             CAYMAN ISLANDS                               NONE
    (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)                Identification No.)

       5th FLOOR ANDERSON SQUARE
             P.O. BOX 1854
  GRAND CAYMAN, CAYMAN ISLANDS B.W.I.                      N/A
(Address of principal executive offices)               (Zip Code)

        Registrant's telephone number, including area code:  345-949-8177

           Securities registered pursuant to Section 12(b) of the Act:

                                       NONE

           Securities registered pursuant to Section 12(g) of the Act:

                          COMMON SHARES, $1.67 PAR VALUE

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

                                 YES  X    NO
                                    -----    -----

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  X
                            -----
     The aggregate market value of the voting stock held by non-affiliates of
the registrant on February 29, 2000 was $29,855,638 (all currency is expressed
in U.S. dollars).  See "Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT" regarding registrant's assumptions about affiliates
and possible changes in control.

     The number of common shares, $1.67 par value, of the registrant
outstanding on February 29, 2000 was 4,428,033, which includes 1,142,625 common
shares which were rescinded through litigation and are held by a court.  See
"Item 3.  LEGAL PROCEEDINGS."

                         DOCUMENTS INCORPORATED BY REFERENCE

     Registrant does not incorporate by reference in this report any annual
report, proxy statement, or Rule 424 prospectus.

================================================================================
<PAGE>
                                                                         PAGE 1

                                     PART I

FORWARD-LOOKING STATEMENTS

     Some of the statements made in this Form 10-K report, as well as statements
made by Chandler Insurance Company, Ltd. (the "Company") in periodic press
releases, oral statements made by the Company's officials to analysts and
shareholders in the course of presentations about the Company and conference
calls following earnings releases, constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements.  Such
factors include, among other things, (i) general economic and business
conditions; (ii) interest rate changes; (iii) competition and regulatory
environment in which the Company operates; (iv) claims frequency; (v) claims
severity; (vi) the number of new and renewal policy applications submitted by
the Company's agents; (vii) the ability of the Company to obtain adequate
reinsurance in amounts and at rates that will not adversely affect its
competitive position; (viii) the ability of National  American Insurance
Company ("NAICO") to maintain favorable insurance company ratings; (ix) the
ability of the Company and its third party providers, agents and reinsurers
to adequately address year 2000 issues; and (x) other factors including the
ongoing litigation matters involving a significant concentration of ownership
of the Company's common stock.

ITEM 1.  BUSINESS

GENERAL

     The Company is an insurance company organized and domiciled in the Cayman
Islands.  Through its wholly owned subsidiaries, the Company operates in two
lines of business:  property and casualty insurance and insurance agency
operations.

     NAICO is one of the leading commercial business insurance writers in
Oklahoma, providing property and casualty coverage for businesses in various
industries.  NAICO has a network of independent agents, totaling approximately
230 at December 31, 1999, that market NAICO's insurance products.  Independent
agents originate substantially all of NAICO's business.  NAICO is licensed to
write property and casualty coverage in 45 states and the District of Columbia
and is authorized by the United States Department of the Treasury to write
surety bonds for contractors on federal projects.  Currently, NAICO is rated as
"A- (Excellent)" by A.M. Best Company, an insurance rating agency.  NAICO is
also rated "A (Strong)" by Standard & Poor's rating agency.  These ratings are
independent opinions of a company's financial strength, operating performance
and ability to meet its obligations to policyholders.

     Chandler Insurance (Barbados), Ltd. ("Chandler Barbados") is a Barbados
company and a wholly owned subsidiary of the Company that principally
reinsures risks underwritten by NAICO.  NAICO retains a portion of each risk,
then transfers the balance to other reinsurance companies including Chandler
Barbados.  The Company reinsures Chandler Barbados for a portion of the risk
that it assumes from NAICO.

     LaGere & Walkingstick Insurance Agency, Inc. ("L&W") is an independent
insurance agency that represents various insurance companies providing a variety
of property and casualty, individual and group life, medical and disability
income coverages.  L&W also acts as a surplus lines broker specializing in risk
management and brokering insurance primarily for commercial enterprises.

     Chandler (U.S.A.), Inc. ("Chandler USA") is an Oklahoma corporation which
is wholly owned by Chandler Barbados.  Chandler USA is headquartered in
Chandler, Oklahoma, in facilities also occupied by its wholly owned
subsidiaries NAICO and L&W.  Chandler USA provides administrative services for
NAICO and L&W.

     The Company conducts its business from the Cayman Islands in the British
West Indies and is not subject to regulation as an insurance company in any
jurisdiction within the United States of America.  The Company is, however,
subject to certain regulations of the Cayman Islands Monetary Authority (the
"Monetary Authority").  Chandler Barbados is subject to similar Barbados
regulations.  See "Regulation."  Although Chandler Barbados is not subject to
the minimum capital, audit, reporting and other requirements imposed by
regulation upon United States reinsurance companies, as a foreign reinsurer it
is required by the United States companies it reinsures to secure its
reinsurance obligations by depositing acceptable securities in a trust for the
benefit of the company ceding such obligations or by letters of credit in favor
of the ceding company.  See "Trust Arrangements and Special Deposits."  NAICO
is subject to minimum capital, audit, reporting, dividend and other
requirements imposed by regulation upon United States insurance companies.
See "Regulation."

<PAGE>
                                                                         PAGE 2

INSURANCE PROGRAMS

     NAICO writes various property and casualty insurance products through four
primary marketing programs.  The programs are standard property and casualty,
political subdivisions, surety bonds and group accident and health.

STANDARD PROPERTY AND CASUALTY PROGRAM

     NAICO offers workers compensation, automobile liability and physical
damage, general and umbrella liability and property coverages under its standard
property and casualty program.  In marketing these products, NAICO targets
companies in the  construction, manufacturing, wholesale, service, oil and gas,
and retail industries.  NAICO writes this business principally in Oklahoma and
Texas.

POLITICAL SUBDIVISIONS PROGRAM

     Under the political subdivisions program, NAICO writes insurance policies
for school districts, counties and municipalities.  As of December 31, 1999,
NAICO insured 526 school districts in Oklahoma and 153 school districts in
Texas.  The coverages offered include workers compensation, automobile
liability, automobile physical damage, general liability, property and school
board legal liability.

     NAICO also writes property and casualty insurance for municipalities and
counties in Oklahoma, Texas and Missouri.  The coverages offered include
workers compensation, automobile and general liability, automobile physical
damage, property and public officials liability insurance.  As of December 31,
1999, NAICO insured 270 municipalities and counties in Oklahoma, Texas and
Missouri.

SURETY BOND PROGRAM

     NAICO  writes surety bonds, commonly referred to as contract performance
bonds, to secure the performance of contractors and suppliers on construction
projects.  Individual bonds generally do not exceed $5 million, and an
individual contractor generally does not have "work in progress" for both
bonded and unbonded jobs in excess of $10 million.  A substantial portion of
this business is written in Oklahoma, Texas and California.  NAICO also writes
bail bonds, which guarantee that the principal will discharge obligations set
by the court, as well as other types of miscellaneous bonds.

GROUP ACCIDENT AND HEALTH PROGRAM

      In 1996, NAICO began offering excess accident and health coverage for
small to medium sized employers that self-insure a portion of their company
medical plans.  In January 1999, NAICO began a new program covering primarily
Oklahoma employers on a fully insured basis.  NAICO discontinued writing new
policies for excess accident and health coverage effective April 1, 1999.
NAICO is currently evaluating the fully insured program and may modify or
discontinue the program during 2000.

     The following table shows gross premiums earned and net premiums earned by
insurance program for the years 1997, 1998 and 1999.  The term "gross premiums
earned" means gross premiums written (before reductions for premiums ceded to
reinsurers) less the increases or plus the decreases in the gross unearned
premium reserve for the unexpired portion of the policy term beyond the current
accounting period.  The term "net premiums earned" means gross premiums earned
less reductions for earned premiums ceded to reinsurers.
<TABLE>
<CAPTION>
                                                  GROSS PREMIUMS EARNED       NET PREMIUMS EARNED
                                               --------------------------  --------------------------
INSURANCE PROGRAMS                               1997     1998     1999      1997     1998     1999
---------------------------------------------- -------- -------- --------  -------- -------- --------
                                                                   (In thousands)
<S>                                            <C>      <C>      <C>       <C>      <C>      <C>
Standard property and casualty................ $ 62,841 $ 76,458 $ 99,512  $ 55,527 $ 41,662 $ 71,676
Political subdivisions........................   21,503   25,091   29,994    14,945   13,073   17,415
Surety bonds..................................   12,320   11,915   13,660    11,117    9,938   10,896
Group accident and health.....................    3,379    6,104    9,164     2,303    4,646    8,261
Nonstandard private-passenger automobile (1)..   14,303    6,016      118     8,841      482        4
Other (2).....................................    2,363      487       65     1,946      263       75
                                               -------- -------- --------  -------- -------- --------
TOTAL......................................... $116,709 $126,071 $152,513  $ 94,679 $ 70,064 $108,327
                                               ======== ======== ========  ======== ======== ========
--------------------------
<FN>

(1)     The nonstandard private-passenger automobile program was discontinued in 1997.

(2)     This category is comprised primarily of the run-off of other discontinued programs and
        NAICO's participation in various mandatory workers compensation pools and assigned risks.
</TABLE>

<PAGE>
                                                                         PAGE 3
LINES OF INSURANCE

     The lines of insurance written by NAICO through its programs are workers
compensation, automobile liability, surety, accident and health, automobile
physical damage, property, inland marine and other liability lines, which
include general and professional liability lines.  The following table shows
net premiums earned as a percentage of total net premiums earned by each line of
insurance written by the Company during the period indicated.  See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,
                                    ------------------------------------------------

                                      1995      1996      1997      1998      1999
                                    --------  --------  --------  --------  --------
<S>                                 <C>       <C>       <C>       <C>       <C>
Workers compensation...............     46%        48%       47%       28%       36%
Other liability....................      8%        10%       13%       20%       18%
Automobile liability...............     19%        20%       16%       20%       18%
Surety.............................     18%        11%       12%       14%       10%
Accident and health................      -%         -%        3%        7%        8%
Automobile physical damage.........      7%         8%        6%        7%        6%
Property...........................      2%         2%        2%        3%        3%
Inland marine......................      -%         1%        1%        1%        1%
                                    --------  --------  --------  --------  --------
     Total.........................    100%       100%      100%      100%      100%
                                    ========  ========  ========  ========  ========
</TABLE>

AGENCY AND BROKERAGE

     L&W is appointed by insurers to solicit applications for insurance
policies, primarily in Oklahoma.  L&W represents various personal and commercial
lines insurance companies in marketing property and casualty insurance.  L&W
also markets individual and group life, medical and disability income coverage.
Major target classes of business include political subdivisions, health care
facilities, transportation companies, manufacturers, contractors, energy
businesses, retailers, wholesalers and service organizations.  L&W places a
large portion of its property and casualty business with NAICO.  It also acts as
a surplus lines broker specializing in risk management and brokering insurance
for commercial enterprises.  L&W places direct agency business as well as
business from other agents with specialty insurance companies.

     L&W acts as a broker for NAICO, accepting applications for insurance and
surety bonds from independent agents who, in many instances, are not agents
appointed directly by NAICO.  L&W also acts as an underwriter for a significant
portion of NAICO's surety bond program.

UNDERWRITING AND CLAIMS

     Independent insurance agents submit applications for insurance coverage for
prospective customers to NAICO.  NAICO reviews a prospective risk in accordance
with its specific underwriting guidelines.  If the risk is approved and coverage
is accepted by the insured, NAICO issues an insurance policy.

     NAICO has maintained a continuous contractual relationship with an
underwriting manager for its bail bond program.  During 1997, 1998 and 1999, the
gross written premiums in this program were $2.6 million, $2.8 million and $2.8
million, respectively.  This underwriting manager operates through a network of
bail bond agents who submit applications to the underwriting manager.  If the
application meets the specific guidelines set by the underwriting manager, a
bail bond is issued.  This underwriting manager is an independent contractor and
is responsible for collection of all premiums and payment of all commissions to
bail bond agents.  Additionally, it is responsible for all claims and recoveries
and is required to maintain collateral security for each bond.

     NAICO's claim department reviews and administers all claims.  When a claim
is received, it is reviewed and assigned to an in-house claim adjuster based on
the type and geographic location of the claim, its severity and its class of
business.  NAICO's claim department is responsible for reviewing each claim,
obtaining necessary documentation and establishing loss and loss adjustment
expense reserves.  NAICO's in-house claims staff handles and supervises the
claims, coordinates with outside legal counsel and independent claims adjusters
if necessary, and processes the claims to conclusion.

<PAGE>
                                                                         PAGE 4
REINSURANCE

     In the ordinary course of business, NAICO cedes insurance risks and a
portion of the insurance premiums to its reinsurers under various reinsurance
contracts that cover individual risks (facultative reinsurance) or entire
classes of business (treaty reinsurance).  Reinsurance provides greater
diversification of insurance risk associated with business written and also
reduces NAICO's exposure from high policy limits or from catastrophic events
and hazards of an unusual nature.  Amounts recoverable from reinsurers are
estimated in a manner consistent with the claim liability associated with the
reinsured policies.  In formulating its reinsurance programs, NAICO considers
numerous factors, including the financial stability of the reinsurer, the
reinsurer's ability to provide sufficient collateral (if required), reinsurance
coverage offered and price.

     Treaty reinsurance may be ceded under treaties on both a pro rata or
proportional basis (where the reinsurer shares proportionately in premiums and
losses) and an excess of loss basis (where only losses above a specific amount
are reinsured).  The availability, costs and limits of reinsurance purchased
varies from year to year based upon prevailing market conditions, reinsurers'
underwriting results and NAICO's desired risk retention levels.  A majority of
NAICO's reinsurance programs renew on January 1, April 1 or July 1 of each year.
NAICO renewed all January 1, 2000 reinsurance programs.  At the present time,
NAICO expects to renew the reinsurance programs that renew on April 1 or
July 1, 2000 as applicable.

     NAICO has structured separate reinsurance programs for construction surety
bonds, property (including inland marine), workers compensation, casualty
(including automobile liability, general liability, umbrella liability and
related professional liability), automobile physical damage and group accident
and health.  Chandler Barbados reinsures NAICO for a portion of the risk on
NAICO's construction surety bonds, workers compensation and casualty
reinsurance programs.  A portion of the risk that Chandler Barbados assumes from
NAICO is reinsured by the Company.

     Under the 1997 workers compensation reinsurance program, the combined net
retention for NAICO and Chandler Barbados was $1,000,000 of loss per occurrence.
During 1998, the combined net retention was reduced to 70% of the first $10,000
of loss per occurrence.  During the fourth quarter of 1999, NAICO agreed to
rescind reinsurance treaties which covered 15% of the first $10,000 of loss
per occurrence and 75% of $490,000 excess of $10,000 of loss per occurrence
for its workers compensation business and which had been in effect since
January 1, 1999.  NAICO received a fee of $10.0 million as compensation for
agreeing to rescind the reinsurance treaties and to assume the additional risk.
Effective January 1, 2000, the combined net retention was reduced to 85% of
the first $10,000 of loss per occurrence plus 75% of $90,000 excess of $10,000
of loss per occurrence.

     Under the 1997 casualty reinsurance program, the combined net retention was
$500,000 of loss per occurrence.  During 1998, the combined net retention was
reduced to $250,000 of loss per occurrence.  Effective January 1, 2000, the
combined net retention was reduced to $100,000 of loss per occurrence.

     Under the 1997 construction surety bond reinsurance program, the combined
net retention was $500,000 per bond or per principal (e.g., contractor).
During 1998, the combined net retention was reduced to $250,000 per bond or
per principal.

     Under the property reinsurance program, NAICO retains 30% of the first
$500,000 of risk for each loss per location.  Under the group accident and
health program, NAICO retains the first $50,000 in excess of the self-insured
retention for each insured person, each policy, and the first $100,000 (or the
first $250,000 for cases exceeding 400 covered employees) of losses in excess
of the self-insured aggregate retention.  NAICO retains the first $100,000 of
risk for each insured person for fully insured cases under its group accident
and health program.

     NAICO purchases catastrophe protection for its automobile physical damage
and certain property coverages to limit its retention for single loss
occurrences involving multiple policies and/or policyholders resulting from
perils such as floods, winds and severe storms.  This catastrophe protection is
purchased primarily from Lloyd's of London.  Under its automobile physical
damage reinsurance program, NAICO retains the first $250,000 of loss per
occurrence, plus 5% of amounts exceeding $250,000 of loss per occurrence up to
$1 million of loss per occurrence.  NAICO has also purchased reinsurance which
limits its net retained loss for both automobile physical damage and property
losses to $1,000,000 for each loss occurrence.  NAICO also purchases facultative
reinsurance when it writes a risk with limits of liability exceeding the maximum
limits of its treaties or when it otherwise considers such action appropriate.

<PAGE>
                                                                         PAGE 5

     The following table sets forth certain information related to NAICO's five
largest reinsurers (excluding Chandler Barbados) determined on the basis of net
reinsurance recoverables as of December 31, 1999.

<TABLE>
<CAPTION>
                                                                           CEDED REINSURANCE
                                                                NET           PREMIUMS FOR        A.M.
                                                            REINSURANCE      THE YEAR ENDED     BEST CO.
NAME OF REINSURER                                         RECOVERABLE (1)  DECEMBER 31, 1999     RATING
--------------------------------------------------------- ---------------  ------------------  ----------
<S>                                                       <C>              <C>                 <C>
                                                                      (Dollars in thousands)
First Excess and Reinsurance Corporation................. $       16,528   $          10,709        A
Swiss Reinsurance America Corporation....................         10,801              12,909        A+
SCOR Reinsurance Company.................................          8,544               9,479        A+
Reliance Insurance Company (2)...........................          5,253              (5,484)       A-
Red River Reinsurance, Ltd...............................          2,193               3,629        -(3)
                                                          ---------------  ------------------
     Top five reinsurers................................. $       43,319   $          31,242
                                                          ===============  ==================
     All reinsurers...................................... $       60,780   $          41,698
                                                          ===============  ==================
Percentage of total represented by top five reinsurers...            71%                 75%
---------------------------------------------------------
<FN>

(1)  Includes losses and loss adjustment expenses paid and outstanding, unpaid losses and loss
     adjustment expenses and prepaid reinsurance premiums recoverable from reinsurers as of December 31, 1999.

(2)  Excludes premiums receivable of $12.9 million as of December 31, 1999 related to the
     rescission of two reinsurance treaties.  NAICO collected this amount during January 2000.

(3)  Red River Reinsurance, Ltd. ("Red River") is required to secure its reinsurance obligations
     by depositing acceptable securities in trust for NAICO's benefit.  At December 31, 1999, Red River's
     reinsurance recoverables were collateralized by cash and investments with a fair value of $1.9 million
     deposited in a trust account for the benefit of NAICO and premiums payable to Red River of approximately $400,000.

</TABLE>

     Transamerica Occidental Life Insurance Company ("Transamerica") reinsured
NAICO for certain workers compensation risks during 1989, 1990 and 1991.
Beginning in 1996, Transamerica refused to pay NAICO for balances that it owed
under the reinsurance treaties.  Transamerica owed NAICO approximately $1.3
million for reinsurance recoverables on paid losses and loss adjustment expenses
as of December 31, 1999.  NAICO is seeking arbitration in order to enforce the
terms of the reinsurance treaties.

     Reinsurance contracts do not relieve an insurer from its obligation to
policyholders.  Failure of reinsurers to honor their obligations could result in
losses to the Company; consequently, allowances are established for amounts
deemed uncollectible.  During 1997 and 1998, NAICO incurred charges of $527,000
and $50,000, respectively, in uncollectible reinsurance recoverables from
unaffiliated reinsurers.  NAICO did not incur any charges for uncollectible
reinsurance recoverables from unaffiliated reinsurers in 1999.

<PAGE>
                                                                         PAGE 6
LOSS AND UNDERWRITING EXPENSE RATIOS

     The combined loss and underwriting expense ratio ("Combined Ratio") is the
traditional measure of underwriting experience for property and casualty
insurance companies.  It is the sum of the ratios of (i) incurred losses and
loss adjustment expenses to net premiums earned ("loss ratio") and (ii)
underwriting expenses to net premiums written and assumed ("underwriting
expense ratio").

     The following table shows the underwriting experience of the Company for
the periods indicated by line of insurance written.  Adjustments to reserves
made in subsequent periods are reflected in the year of adjustment.  In the
following table, incurred losses  include paid losses and loss adjustment
expenses, net changes in case reserves for losses and loss adjustment expenses
and net changes in reserves for incurred but not reported losses and loss
adjustment expenses.  See also "Reserves" and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                     ------------------------------------------------------------
                                         1995        1996        1997        1998        1999
                                     ----------  ----------  ----------  ----------  ------------
                                                       (Dollars in thousands)
<S>                                  <C>         <C>         <C>         <C>         <C>
Workers compensation:
     Net premiums earned.............$   37,066  $   42,813  $   44,954  $   19,651  $ 39,329 (2)
     Loss ratio......................       62%         53%         66%         71%       69% (2)
Other liability:
     Net premiums earned.............$    6,579  $    8,656  $   12,209  $   14,045  $ 19,799
     Loss ratio......................       43%         60%         49%         70%       67%
Automobile liability:
     Net premiums earned.............$   15,498  $   17,581  $   15,593  $   14,139  $ 19,030
     Loss ratio......................       74%         98%         89%         75%       82%
Surety:
     Net premiums earned.............$   14,237  $   10,123  $   11,256  $   10,101  $ 11,122
     Loss ratio......................       56%         -1%          9%         16%        8%
Automobile physical damage:
     Net premiums earned.............$    5,881  $    6,788  $    5,726  $    4,702  $  7,039
     Loss ratio......................       68%         74%         60%         85%      104%
Accident and health:
     Net premiums earned.............$      230  $      564  $    2,529  $    4,646  $  8,261
     Loss ratio......................      -49%         56%         43%         91%      103%
Property:
     Net premiums earned.............$    1,369  $    1,467  $    1,912  $    2,332  $  2,972
     Loss ratio......................       73%        114%         74%        136%      203%
Inland marine:
     Net premiums earned.............$      227  $    1,294  $      500  $      448  $    775
     Loss ratio......................       84%        115%        195%        123%      138%
Total:
     Net premiums earned.............$   81,087  $   89,286  $   94,679  $   70,064  $108,327 (2)
     Loss ratio......................       62%         60%         61%         68%       74% (2)
     Underwriting expense ratio (1)..       39%         46%         39%         37%       33%
                                     ----------  ----------  ----------  ----------  ------------
     Combined ratio (1)..............      101%        106%        100%        105%      107% (2)
                                     ==========  ==========  ==========  ==========  ============
-------------------------------------
<FN>
(1)  Interest expense and litigation expenses are not considered underwriting expenses;
     therefore, such costs have been excluded from these ratios.  The 1996 underwriting expense
     ratio was increased by 4 percentage points by a reinsurance arbitration adjustment and the
     termination of relations with the Company's former surety bond underwriting manager.

(2)  The rescission of two reinsurance treaties during 1999 increased net premiums earned for
     workers compensation by $19.6 million and increased the workers compensation loss ratio by
     17 percentage points.  The rescission of the reinsurance treaties also increased the total
     1999 loss ratio and combined ratio by 3 percentage points.

</TABLE>
<PAGE>
                                                                         PAGE 7
RESERVES

     Insurance companies provide in their financial statements reserves for
unpaid losses and loss adjustment expenses which are estimates of the expense
of investigation and settlement of all reported and incurred but not reported
losses under their previously issued insurance policies and/or reinsurance
contracts.  In estimating reserves, insurance companies use various standardized
methods based on historical experience and payment and reporting patterns for
the type of risk involved.  The application of these methods involves subjective
determinations by the personnel of the insurance company.  Inherent in the
estimates of the ultimate liability for unpaid claims are expected trends in
claim severity, claim frequency and other factors that may vary as claims are
settled.  The amount of and uncertainty in the estimates is affected by such
factors as the amount of historical claims experience relative to the
development period for the type of risk, knowledge of the actual facts and
circumstances and the amount of insurance risk retained.  The ultimate cost of
insurance claims can be adversely affected by increased costs, such as medical
expenses, repair expenses, costs of providing legal defense for policyholders,
increased jury awards and court decisions and legislation that expand insurance
coverage after the insurance policy was priced and sold.  Accordingly, the loss
and loss adjustment expense reserves may not accurately predict an insurance
company's ultimate liability for unpaid claims.

     NAICO periodically reviews the reserve estimates relating to insurance
business written or assumed by NAICO, Chandler Barbados and the Company and the
methods used to arrive at such reserve estimates.  NAICO also retains
independent professional actuaries who review such reserve estimates and
methods.  Any changes in the estimates are reflected in current operating
results.  Salvage and subrogation recoverables are accrued using the "case
basis" method for large recoverables and statistical estimates based on
historical experience for smaller recoverables.  Recoverable amounts deducted
from the Company's net liability for losses and loss adjustment expenses were
approximately $5.3 million and $4.4 million at December 31, 1998 and 1999,
respectively.

     The Company and Chandler Barbados report their reserves on the basis of
United States generally accepted accounting principles ("U.S. GAAP"), which do
not differ from the manner in which they are reported to the Monetary Authority
and the Supervisor of Insurance of Barbados.  NAICO's statutory-based reserves
(reserves calculated in accordance with an insurer's domiciliary state insurance
regulatory authorities) do not differ from its U.S. GAAP reserves.  The Company
and its subsidiaries do not discount their reserves for unpaid losses or loss
adjustment expenses.

     NAICO participates in various pools covering workers compensation risks for
insureds who were unable to purchase this coverage from an insurance company on
a voluntary basis.  In addition, NAICO receives direct assignments to write
workers compensation for such insureds in lieu of participating in the pools.
The consolidated financial statements reflect the reserves for unpaid losses and
loss adjustment expenses and net premiums earned from its participation in the
pools and from these direct assignments.

     There may be significant reporting lags between the occurrence of the
insured loss and the time it is actually reported to the insurer.  The inherent
uncertainties in estimating insurance reserves are generally greater for
casualty coverages, such as  workers compensation, general and automobile
liability, than for property coverages primarily due to the longer period of
time that typically elapses before a definitive determination of ultimate loss
can be made, which is also affected by changing theories of legal liability and
changing political climates.

     There are significant additional uncertainties in estimating the amount of
reserves required for environmental, asbestos-related and other latent exposure
claims, including a lack of historical data, long reporting delays and complex
unresolved legal issues regarding policy coverage and the extent and timing of
any such contractual liability.  Courts have reached different and frequently
inconsistent conclusions as to when the loss occurred, what claims are covered,
under what circumstances the insurer has an obligation to defend, how policy
limits are determined and how policy exclusions are applied and interpreted.

     The loss settlement period on insurance claims for property damage is
relatively short.  The more severe losses for bodily injury and workers
compensation claims have a much longer loss settlement period and may be paid
out over several years.  It is often necessary to adjust estimates of liability
on a loss either upward or downward from the time a claim arises to the time of
payment.  Workers compensation indemnity benefit reserves are determined based
on statutory benefits described by state law and are estimated based on the
same factors generally discussed above which may include, where state law
permits, inflation adjustments for rising benefits over time.  Generally, the
more costly automobile liability claims involve one or more severe bodily
injuries or deaths.  The ultimate cost of these types of claims is dependent on
various factors including the relative liability of the parties involved, the
number and severity of injuries and the legal jurisdiction where the incident
occurred.

<PAGE>
                                                                         PAGE 8

     The following table sets forth a reconciliation of the beginning and ending
reserves for losses and loss adjustment expenses which are net of reinsurance
deductions for the years indicated.
<TABLE>
<CAPTION>

                                                                  YEAR ENDED DECEMBER 31,
                                                  -------------------------------------------------------
                                                     1995       1996       1997       1998       1999
                                                  ---------- ---------- ---------- ---------- -----------
                                                                      (In thousands)
<S>                                               <C>        <C>        <C>        <C>        <C>
Net balance before provision for uncollectible
     reinsurance at beginning of year............ $  97,894  $  81,388  $  64,430  $  62,890  $   51,194
Net losses and loss adjustment expenses
     incurred related to:
          Current year...........................    50,975     53,314     53,704     42,724      74,997
          Prior years............................      (432)        77      3,808      5,155       4,819
                                                  ---------- ---------- ---------- ---------- -----------
               Total.............................    50,543     53,391     57,512     47,879      79,816
                                                  ---------- ---------- ---------- ---------- -----------
Net paid losses and loss adjustment expenses
     related to:
          Current year...........................   (21,106)   (23,836)   (22,214)   (23,152)    (37,806)
          Prior years............................   (45,943)   (46,513)   (36,838)   (36,423)    (32,877)
                                                  ---------- ---------- ---------- ---------- -----------
               Total.............................   (67,049)   (70,349)   (59,052)   (59,575)    (70,683)
                                                  ---------- ---------- ---------- ---------- -----------
Net balance before provision for uncollectible
     reinsurance at end of year..................    81,388     64,430     62,890     51,194      60,327
Adjustments to reinsurance recoverables on
     unpaid losses for uncollectible reinsurance..      629        777      1,163        745         594
                                                   --------- ---------- ---------- ---------- -----------
Net balance at end of year........................ $ 82,017  $  65,207  $  64,053  $  51,939  $   60,921
                                                   ========= ========== ========== ========== ===========

</TABLE>
     The following table represents the development of net balance sheet
reserves for 1990 through 1999.  The top line of the table shows the net
reserves at the balance sheet date for each of the indicated years.  This
represents the estimated amounts of claims and claim expenses, net of
reinsurance deductions, arising in the current and all prior years that are
unpaid at the balance sheet date, including the net reserve for incurred but
not reported claims.  The upper portion of the table shows the cumulative net
amounts paid as of successive years with respect to that reserve liability.
The estimate for unpaid losses and loss adjustment expenses changes as more
information becomes known about the frequency and severity of claims for
individual years.  The next portion of the table shows the revised estimated
amount of the previously recorded net reserve based on experience as of the
end of each succeeding year.  The heading "net cumulative deficiency"
represents the cumulative aggregate change in the estimates over all prior
years.  The last portion of the table provides a reconciliation of the net
amounts to the gross amounts before any deductions for reinsurance for the
last eight years presented.

     In evaluating the information in the following table, it should be noted
that each amount includes the effects of all changes in amounts for prior
periods.  For example, the amount of the deficiency recorded in 1993 for claims
that occurred in 1990 will be included in the cumulative deficiency amount for
years 1990, 1991, 1992 and 1993.  This table does not present accident or policy
year development data.  Conditions and trends that have affected development of
the liability in the past may not necessarily occur in the future.  Accordingly,
it may not be appropriate to extrapolate future deficiencies or redundancies
based on this table.

<PAGE>
                                                                         PAGE 9
<TABLE>
<CAPTION>
                                                                      DEVELOPMENT OF RESERVES
                                                                         AS OF DECEMBER 31,
                                 ---------------------------------------------------------------------------------------------------
                                    1990      1991      1992      1993      1994      1995      1996      1997      1998      1999
                                 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
                                                                            (In thousands)
<S>                              <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Net reserve for unpaid losses and
   loss adjustment expenses (1)..$125,348  $144,430  $119,963  $ 99,685  $ 98,592  $ 82,017  $ 65,207  $ 64,053  $ 51,939  $ 60,921
Net paid (cumulative) as of
   One year later................  67,898    78,323    61,417    49,798    45,943    46,513    36,837    36,423    32,876
   Two years later............... 114,793   120,319    94,047    73,225    72,718    65,754    52,078    54,753
   Three years later............. 136,134   144,900   109,885    90,909    85,006    72,206    60,858
   Four years later.............. 150,709   155,816   122,757    98,193    88,986    76,633
   Five years later.............. 155,589   165,357   127,725   100,117    92,128
   Six years later............... 159,396   168,509   129,070   102,055
   Seven years later............. 160,358   169,494   130,633
   Eight years later............. 160,771   170,745
   Nine years later.............. 161,307

Net liability re-estimated as of (1)
   One year later................ 144,798   160,938   125,202   100,804    98,160    82,094    69,015    69,208    56,758
   Two years later............... 156,986   163,100   127,557   101,467    96,279    84,023    71,183    70,877
   Three years later............. 157,264   166,807   129,449   101,539    98,549    84,277    70,962
   Four years later.............. 160,961   167,935   129,958   102,626    98,750    84,137
   Five years later.............. 160,481   169,143   131,109   103,275    99,165
   Six years later............... 160,736   170,077   131,522   104,110
   Seven years later............. 161,117   170,403   132,444
   Eight years later............. 161,395   171,137
   Nine years later.............. 161,583

Net cumulative deficiency........$(36,235) $(26,707) $(12,481) $ (4,425) $   (573) $ (2,120) $ (5,755) $ (6,824) $ (4,819) $      -
Supplemental gross data:
   Gross liability after reclassification of pools-
      end of year....................................$225,610  $179,815  $156,060  $128,794  $ 79,639  $ 74,929  $ 80,909  $ 98,460
   Reclassification of pool liabilities (1)..........(18,875)   (15,694)        -         -         -         -         -         -
                                                     --------- --------- --------- --------- --------- --------- --------- ---------
   Gross liability before reclassification of pools-
      end of year (1)................................$206,735  $164,121  $156,060  $128,794  $ 79,639  $ 74,929  $ 80,909  $ 98,460
   Reinsurance recoverable...........................  86,772    64,436    57,468    46,777    14,432    10,876    28,970    37,539
                                                     --------- --------- --------- --------- --------- --------- --------- ---------
   Net liability - end of year (1)...................$119,963  $ 99,685  $ 98,592  $ 82,017  $ 65,207  $ 64,053  $ 51,939  $ 60,921
                                                     ========= ========= ========= ========= ========= ========= ========= =========
   Gross re-estimated liability - latest (1).........$211,063  $163,348  $156,254  $132,874  $ 93,777  $ 87,645  $ 96,241
   Re-estimated recoverable - latest.................  78,619    59,238    57,089    48,737    22,815    16,768    39,483
                                                     --------- --------- --------- --------- --------- --------- ---------
   Net re-estimated liability - latest (1)...........$132,444  $104,110  $ 99,165  $ 84,137  $ 70,962  $ 70,877  $ 56,758
                                                     ========= ========= ========= ========= ========= ========= =========
   Gross cumulative (deficiency) redundancy..........$ (4,328) $    773  $   (194) $ (4,080) $(14,138) $(12,716) $(15,332)
                                                     ========= ========= ========= ========= ========= ========= =========
-----------------------------------------------------
<FN>
(1)  The December 31, 1993 and prior amounts do not include the reclassification of pool
     liabilities.
</TABLE>

TRUST ARRANGEMENTS AND SPECIAL DEPOSITS

     Under the reinsurance arrangements with NAICO, Chandler Barbados has
entered into a trust arrangement and established a trust account in favor of
NAICO into which investments are deposited.  The amount required in the trust
account is adjusted periodically to secure losses and loss adjustment expenses
paid and outstanding, unpaid losses and loss adjustment expenses and unearned
premium reserves after giving effect for any reinsurance premiums receivable
from NAICO.  NAICO requires substantially the same trust arrangements or
irrevocable letters of credit from all of its non-admitted reinsurers.  This
not only provides security to NAICO concerning such reinsurance obligations but
also enables NAICO to take credit on its statutory financial statements for
such reinsurance pursuant to state laws and regulations.

     NAICO is required to deposit securities with regulatory agencies in
several states in which it is licensed as a condition of conducting operations
in those states.  For additional information see Notes to Consolidated
Financial Statements.

<PAGE>
                                                                         PAGE 10
INVESTMENTS

     Funds available for investment include the Company's present capital as
well as premiums received and retained under insurance policies and reinsurance
agreements issued by its subsidiaries.  Until these funds are required to be
used for the settlement of claims and the payment of operating expenses of the
Company's subsidiaries, they are invested with the objective of generating
income, preserving principal and maintaining liquidity.

     Fixed-maturity investments are purchased to support the investment
strategies of the Company and its subsidiaries, which are developed based on
many factors including rate of return, maturity, credit risk, tax
considerations, regulatory requirements and their mix of business.   At the
time of purchase, investments in debt securities that the Company has the
positive intent and ability to hold to maturity are classified as held to
maturity and reported at amortized cost; all other debt securities are reported
at fair value.  Investments classified as trading are actively and frequently
bought and sold with the objective of generating income on short-term
differences in price.  Realized and unrealized gains and losses on securities
classified as trading account assets are recognized in current operations.  The
Company has not classified any investments as trading account assets.
Securities not classified as held to maturity or trading are classified as
available for sale, with the related unrealized gains and losses excluded from
earnings and reported net of income tax as a separate component of shareholders'
equity until realized.  Realized gains and losses on sales of securities are
based on the specific identification method.  Declines in the fair value of
investment securities below their carrying value that are other than temporary
are recognized in earnings.

     As of December 31, 1999, all of the investments of Chandler Barbados and of
NAICO were in fixed-maturity investments (rated Aa3 or AA- or better by Moody's
Investors Service, Inc. or Standard & Poor's, respectively), interest-bearing
money market accounts, a collateralized repurchase agreement and common stock
received in connection with two unaffiliated entities' conversion to for-profit
corporations.  Madison Scottsdale, L.C. is responsible for managing
$21.5 million of Chandler Barbados' portfolio at December 31, 1999.  The
remainder is managed by the Investment Committee of the Company's Board of
Directors.  Approximately $80.4 million of NAICO's investment portfolio at
December 31, 1999 is managed by Madison Scottsdale, L.C.  The remainder is
managed by the Investment Committee of its Board of Directors.  For additional
information, see "Trust Arrangements and Special Deposits" and Notes to
Consolidated Financial Statements.

DEBENTURE OFFERING

     On July 16, 1999, Chandler USA completed a public offering of $24 million
principal amount of senior debentures with a maturity date of July 16, 2014.
The debentures were priced at $1,000 each with an interest rate of 8.75% and
are redeemable by Chandler USA on or after July 16, 2009 without penalty or
premium.  The proceeds to Chandler USA before expenses but after the
underwriter's discount were $23.16 million.  The proceeds of the offering were
used to repay existing bank debt, to repay amounts owed by Chandler USA to
Chandler Barbados, and for general corporate purposes.  Chandler USA's
subsidiaries and affiliates are not obligated by the debentures.  Accordingly,
the debentures are effectively subordinated to all existing and future
liabilities and obligations of Chandler USA's existing and future subsidiaries.

EMPLOYEES AND ADMINISTRATION

     The Company and Chandler Barbados have no employees.  Day-to-day management
of the Company's operations and administrative affairs is performed in the
Cayman Islands by Chandler Insurance Management, Ltd. ("CIM"), a wholly owned
subsidiary of the Company.  Day-to-day management of Chandler Barbados'
operations and administrative affairs is performed in Barbados by Chandler
Insurance Management (Barbados), Ltd. ("CIM Barbados"), a wholly owned
subsidiary of the Company.  Steven R. Butler, the Vice President-Administration
of the Company and the President of Chandler Barbados, is the Financial Director
of CIM and the Treasurer and a director of CIM Barbados.

     At December 31, 1999, the subsidiaries of the Company organized under the
laws of the United States had approximately  390 full-time employees.  The
subsidiaries generally have enjoyed good relations with their employees.

COMPETITION

     NAICO operates in a highly competitive industry and faces competition from
domestic and foreign insurers, many of which are larger, have greater financial,
marketing and management resources, have more favorable ratings by ratings
agencies and offer more diversified insurance coverages than NAICO.

     A company's capacity to write insurance policies is dependent on a variety
of factors including its net worth or "surplus," the lines of business written,
the types of risk insured and its profitability.  Since the late 1980's, the
industry has generally had excess underwriting capacity.  This condition has
resulted in depressed premium rates and expanded policy terms, which generally
occur when excess underwriting capacity exists.  NAICO continues to experience
pricing competition as the conditions of heightened price competition and
impaired underwriting performance continue in the industry as a whole.

<PAGE>
                                                                         PAGE 11

REGULATION

REGULATION IN GENERAL

     The Company's insurance subsidiaries are subject to regulation by
government agencies in the jurisdictions in which they do business. The nature
and extent of such regulation vary from jurisdiction to jurisdiction, but
typically involve prior approval of the acquisition of control of an insurance
company or of any company controlling an insurance company, regulation of
certain transactions entered into by an insurance company with any of its
affiliates, approval of premium rates, forms and policies used for many lines
of insurance, standards of solvency and minimum amounts of capital and surplus
which must be maintained, establishment of reserves required to be maintained
for unearned premiums, unpaid losses and loss adjustment expenses or for other
purposes, limitations on types and amounts of investments, restrictions on the
size of risks which may be insured by a single company, licensing of insurers
and agents, deposits of securities for the benefit of policyholders and the
filing of periodic reports with respect to financial condition and other
matters.  In addition, regulatory examiners perform periodic financial and
market conduct examinations of insurance companies. Such regulation is
generally intended for the protection of policyholders rather than
shareholders or creditors.

     NAICO is required to deposit securities with regulatory agencies in
several states in which it is licensed as a condition of conducting operations
in those states.

     In addition to the regulatory oversight of the Company's insurance
subsidiaries, the Company is also subject to regulation under the laws of the
Cayman Islands and the Company and all of its affiliates are subject to
regulation under the Nebraska Insurance Holding Company System Act (the
"Holding Company Act"). The Holding Company Act contains certain reporting
requirements including those requiring the Company, as the ultimate parent
company, to file information relating to its capital structure, ownership,
and financial condition and the general business operations of its insurance
subsidiaries. The Holding Company Act contains special reporting and prior
approval requirements with respect to transactions among affiliates.

     NAICO is also affected by a variety of state and federal legislative
and regulatory measures and judicial decisions that define and extend the
risks and benefits for which insurance is sought and provided.  These
include redefinitions of risk exposure in areas such as product liability,
environmental damage and workers compensation. In addition, individual state
insurance departments may prevent premium rates for some classes of insureds
from reflecting the level of risk assumed by the insurer for those classes.
Such developments may adversely affect the profitability of various lines of
insurance. In some cases, these adverse effects on profitability can be
minimized through re-pricing, if permitted by applicable regulations, of
coverages or limitations or cessation of the affected business.

     The activities of L&W related to insurance brokerage and agency services
and claims administration services are subject to licensing and regulation by
the jurisdictions in which it conducts such activities.  In addition, most
jurisdictions require that certain individuals engaging in brokerage and
agency activities be personally licensed.  As a result, a number of L&W's
employees are so licensed.

     The Company and NAICO Indemnity (Cayman), Ltd. ("NAICO Indemnity"), a
wholly owned subsidiary of the Company, hold Unrestricted Class "B" Insurer's
Licenses under provisions of the Insurance Law (1998 Revision) as amended of
the Cayman Islands (the "Cayman Insurance Law").  An insurance company that is
issued a Class "B" Insurer's License in the Cayman Islands is limited to
writing insurance risks in jurisdictions other than the Cayman Islands.

     The Company, NAICO Indemnity and CIM are regulated by the Monetary
Authority and must comply with the Cayman Insurance Law.  The Monetary
Authority has broad discretionary powers to regulate the operations of
insurance companies in the Cayman Islands, including among other things the
approval of shareholders that may own shares in such companies and the
establishment of insurance ratio guidelines such as the ratio of net premium
income to shareholders' equity.  Such regulation is generally less restrictive
than that of state insurance regulatory agencies in the United States.

     The Cayman Insurance Law requires a licensed insurer to provide annual
audited financial statements.  The Company, NAICO Indemnity and CIM prepare
their financial statements in accordance with U.S. GAAP.  The Monetary
Authority is charged with the responsibility of ensuring that licensed insurers
comply with the provisions of the law, are in a sound financial position and
are carrying on business in a satisfactory manner.

     The Cayman Islands currently does not have restrictions or exchange
controls applicable to the Company or NAICO Indemnity concerning the transfer
of any funds into or out of the Cayman Islands.

     Under the Cayman Insurance Law, any change in the information supplied on
the application for the license must receive the prior approval of the Monetary
Authority.  Therefore, licensed insurers must generally obtain prior approval
of the Monetary Authority of changes in their shareholders or their
shareholdings.  The Company has, however, obtained an exemption from such
approval for shareholders owning 5% or less of the issued common shares of
the Company.

<PAGE>
                                                                         PAGE 12

     Chandler Barbados is licensed as an "exempt insurance company" by the
Barbados Minister of Finance pursuant to the Barbados Exempt Insurance Act,
Chapter 308A.  That statute requires the maintenance of a minimum level of
capital, payment of applicable annual taxes, annual preparation and filing of
audited financial statements, and establishes standards of solvency that must
be maintained.  Exempt insurance companies are exempted from the provisions of
the Barbados Exchange Control Act.  Chandler Barbados and CIM Barbados are
subject to regulation by the Supervisor of Insurance in Barbados.

INSURANCE REGULATION CONCERNING CHANGE OR ACQUISITION OF CONTROL

     NAICO is a domestic property and casualty insurance company organized
under the insurance laws of Nebraska (the "Insurance Code"). The Insurance Code
provides that the acquisition or change of "control" of a domestic insurer or
of any person that controls a domestic insurer cannot be consummated without
the prior approval of the Nebraska Department of Insurance.  A person seeking
to acquire control, directly or indirectly, of a domestic insurance company or
of any person controlling a domestic insurance company must generally file with
the relevant insurance regulatory authority an application for change of
control containing certain information required by statute and published
regulations and provide a copy of such to the domestic insurer. In Nebraska,
control is generally presumed to exist if any person, directly or indirectly,
owns, controls, holds with the power to vote or holds proxies representing 10%
or more of the voting securities of the insurance company or of any other
person or entity controlling the insurance company.  The 10% presumption is not
conclusive and control may be found to exist at less than 10%.

     In addition, many state insurance regulatory laws contain provisions that
require pre-notification to state agencies of a change in control of a
non-domestic insurance company admitted in that state. While such
pre-notification statutes do not authorize the state agency to disapprove the
change of control, such statutes do authorize issuance of a cease and desist
order with respect to the non-domestic insurer if certain conditions exist such
as undue market concentration.

     Any future transactions that would constitute a change in control of the
Company would also generally require prior approval by the Nebraska Department
of Insurance and would require pre-acquisition notification in those states
which have adopted pre-acquisition notification provisions and in which the
insurers are admitted. Because such requirements are primarily for the benefit
of policyholders, they may deter, delay or prevent certain transactions that
could be advantageous to the shareholders or creditors of the Company.

RESTRICTIONS ON SHAREHOLDER DIVIDENDS

     A significant portion of the Company's consolidated assets represents
assets of the Company's insurance subsidiaries that may not be immediately
transferable to the holding company in the form of shareholder dividends,
loans, advances or other payments.

     Statutes and regulations governing NAICO and other insurance companies
domiciled in Nebraska regulate the payment of shareholder dividends and other
payments by NAICO to Chandler USA.  Under applicable Nebraska statutes and
regulations, NAICO is permitted to pay shareholder dividends only out of
statutory earned surplus.  To the extent NAICO has statutory earned surplus,
NAICO may pay shareholder dividends only to the extent that such dividends are
not defined as extraordinary dividends or distributions.  If the dividends are,
under applicable statutes and regulations, extraordinary dividends or
distributions, regulatory approval must be obtained.  Under the applicable
Nebraska statute, and subject to the availability of statutory earned surplus,
the maximum shareholder dividend that may be declared (or cash or property
distribution that may be made) by NAICO in any one calendar year without
regulatory approval is the greater of (i) NAICO's statutory net income,
excluding realized capital gains, for the preceding calendar year plus
statutory net income, excluding realized capital gains, from the second and
third preceding calendar years, that was not paid in dividends or other
distributions; or (ii) 10% of NAICO's statutory policyholders' surplus as of
the preceding calendar year end, not to exceed NAICO's statutory earned surplus.

     As of December 31, 1999, NAICO had statutory earned surplus of
$11.9 million.  Applying the Nebraska statutory limits described above, the
maximum shareholder dividend NAICO may pay in 2000 without the approval of the
Nebraska Department of Insurance is $4.9 million.  In January 2000, NAICO paid
a shareholder dividend of $1,250,000 to Chandler USA.  NAICO paid a shareholder
dividend of $6.0 million to Chandler USA during 1998.

     In addition to the statutory limits described above, the amount of
shareholder dividends and other payments to affiliates permitted can be further
limited by contractual or regulatory restrictions or other agreements with
regulatory authorities restricting dividends and other payments, including
regulatory restrictions that are imposed as a matter of administrative policy.
If insurance regulators determine that payment of a shareholder dividend or
other payments to an affiliate (such as payments under a tax sharing agreement,
payments for employee or other services, or payments pursuant to a surplus
note) would be hazardous to such insurance company's policyholders or
creditors, the regulators may block such payments that would otherwise be
permitted without prior approval.

<PAGE>
                                                                         PAGE 13

     The payment of cash dividends by Chandler Barbados is limited to its
realized earned surplus and margin of solvency requirements.  Chandler Barbados
has not paid any cash shareholder dividends.

RISK-BASED CAPITAL

     The National Association of Insurance Commissioners has adopted a
methodology for assessing the adequacy of statutory surplus of domestic
property and casualty insurers.  This methodology is described in the Risk Based
Capital Model Act (the "RBC Model Act").  The RBC Model Act includes a
risk-based capital requirement that requires insurance companies to calculate
and report information under a risk-based formula which attempts to measure
statutory capital and surplus needs based on the risks in the insurance
company's mix of products and investment portfolio.  The formula is designed to
allow state insurance regulators to identify potential under-capitalized
companies.  Under the formula, an insurer determines its "risk-based capital"
("RBC") by taking into account certain risks related to the insurer's assets
(including risks related to its investment portfolio and ceded reinsurance) and
the insurer's liabilities (including underwriting risks related to the nature
and experience of its insurance business).  The RBC rules provide for different
levels of regulatory attention depending on the ratio of a company's total
adjusted capital to its "authorized control level" of RBC.  Insurers below the
specific ratios are classified within certain levels, each of which requires
specific corrective action.  The levels and ratios are as follows:

<TABLE>
<CAPTION>
                                                 Ratio of Total Adjusted Capital to
                                                    Authorized Control Level RBC
                                                       (Less than or equal to)
                                                ------------------------------------
           Regulatory Event (1)
           --------------------
           <S>                                                   <C>
           Company Action Level (2)............                  2.0
           Regulatory Action Level (3).........                  1.5
           Authorized Control Level (4)........                  1.0
           Mandatory Control Level (5).........                  0.7
           --------------------------
<FN>
(1)  When an insurer's ratio exceeds 2.0, it is not subject to regulatory attention under the
     RBC Model Act.

(2)  "Company Action Level" requires an insurer to prepare and submit an RBC Plan to the
     insurance commissioner of its state of domicile.  After review, the insurance
     commissioner will notify the insurer if the Plan is satisfactory.

(3)  "Regulatory Action Level" requires the insurer to submit an RBC Plan, or if applicable,
     a Revised RBC Plan to the insurance commissioner of its state of domicile.  After
     examination or analysis, the insurance commissioner will issue an order specifying
     corrective actions to be taken.

(4)  "Authorized Control Level" authorizes the insurance commissioner to take such regulatory
     actions considered necessary to protect the best interest of the policyholders and
     creditors of an insurer which may include the actions necessary to cause the insurer to be
     placed under regulatory control (i.e., rehabilitation or liquidation).

(5)  "Mandatory Control Level" authorizes the insurance commissioner to take actions necessary
     to place the insurer under regulatory control (i.e., rehabilitation or liquidation).
</TABLE>

The ratios of total adjusted capital to authorized control level RBC for NAICO
were 7.5:1 and 4.4:1 at December 31, 1998 and 1999, respectively.  Therefore,
NAICO's capital exceeds the level that would trigger regulatory attention
pursuant to the risk-based capital requirement.

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS-IRIS RATIOS

     The National Association of Insurance Commissioners Insurance Regulatory
Information System ("IRIS") was developed by a committee of state insurance
regulators and is primarily intended to assist state insurance departments in
executing their statutory mandates to oversee the financial condition of
insurance companies operating in their respective states. IRIS identifies 11
industry ratios and specifies "usual values" for each ratio. Departure from the
"usual values," which fluctuate annually, on four or more ratios generally
leads to inquiries from individual state insurance commissioners.  Although
NAICO has not received the official IRIS test results for 1999, management
believes that NAICO had four 1999 ratios that would have been outside of the
"usual values."

<PAGE>
                                                                         PAGE 14

     In 1999, NAICO experienced a "change in net writings" of 124% compared to
a usual value of plus or minus 33%.  NAICO experienced an increase in gross
premiums written of 26% during 1999, and changes in NAICO's reinsurance programs
which reduced NAICO's net retention in 1998, as well as the rescission of two
reinsurance treaties during 1999 (which increased this ratio by 59 percentage
points) were all contributing factors in the increase in this ratio in 1999.

     NAICO's "investment yield" as calculated using the IRIS formula was 3.4%
during 1999 compared to a usual value of 4.5% to 10%.  NAICO maintains a
high-quality investment portfolio, approximately 10% of which was invested in
tax-exempt bonds as of December 31, 1999.  Tax-exempt bonds generally have a
lower pre-tax yield than taxable bonds.  During 1999, NAICO incurred $851,000
in investment expenses to subsidize a premium finance program for certain
insureds of NAICO.  While such expenses reduced NAICO's investment yield, the
premium finance program enhances cash flow by providing cash which is available
for investment earlier than conventional deferred payment plans.

     The ratio of "agents' balances to surplus" was 47% at December 31, 1999
compared to a usual value of 40% or less.  The increase in gross premiums
written during 1999, particularly during the fourth quarter of 1999, was the
primary factor for the increase in this ratio.

     NAICO's "estimated current reserve deficiency to surplus" was 34% at
December 31, 1999 compared to a usual value of 25% or less.  The primary
factors that affect this ratio were the significant increase in NAICO's net
premiums earned in 1999 and the changes in NAICO's net retention during 1997,
1998 and 1999.  The calculation of this ratio assumes that factors that led to
past under reserving will cause current under reserving without regard to
changes in premium volume, product mix, the amount of risk retained by NAICO
and current reserving practices.  See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and "Reinsurance."

CODIFICATION

     In 1998, the National Association of Insurance Commissioners adopted
codified statutory accounting principles ("Codification").  Codification will
change, to some extent, prescribed statutory accounting practices and will
result in changes to the accounting practices that NAICO uses to prepare its
statutory financial statements.  The state of Nebraska has adopted Codification
to be effective January 1, 2001.  Management believes the most significant
changes would be the elimination of the statutory liability for the "excess of
statutory reserves over statement reserves" and the recognition of a deferred
tax asset subject to an admissibility test.  If Codification had been in effect
at December 31, 1999, NAICO's statutory surplus would have increased
approximately $7.6 million as a result of these items.

EFFECT OF FEDERAL LEGISLATION

     Although the federal government does not directly regulate the business of
insurance, federal initiatives often affect the insurance business in a variety
of ways.  Current and proposed federal measures which may significantly affect
the insurance business include federal government participation in asbestos and
other product liability claims, pension and other employee benefit plan
regulation (ERISA), examination of the taxation of insurers and reinsurers,
minimum levels of liability insurance and automobile safety regulations.
Federal regulation of the health care industry may directly and indirectly
impact the business of insurance.

TAXATION

     The following summary of certain United States and foreign taxes is based
upon the Company's understanding of applicable tax law.  The tax treatment of
an investment in the Company's common shares may vary depending upon a
shareholder's individual circumstances.  Certain shareholders, such as foreign
corporations, may be subject to special rules not discussed below.

     FOREIGN TAXES.  The Company, Chandler Barbados and NAICO Indemnity are not
obligated to pay any income or capital gains taxes in the Cayman Islands or
Barbados.  The Company is required to pay an annual fee based on its authorized
capital, plus an annual license fee.  Chandler Barbados is required to pay an
annual license fee.  The Company, NAICO Indemnity and Chandler Barbados have
received tax concession guarantees from the Cayman Islands or Barbados, as
applicable, for all taxes levied upon profits, income, gains and appreciation
that are valid through September 30, 2003, March 10, 2012 and May 19, 2003,
respectively.

     UNITED STATES EXCISE TAXES.  Foreign insurance and reinsurance companies
such as the Company, NAICO Indemnity and Chandler Barbados are subject to a 1%
United States excise tax on reinsurance premiums received with respect to
reinsured risks located in the United States and a 4% United States excise tax
on direct premiums written and received with respect to insured risks located
in the United States.

<PAGE>
                                                                         PAGE 15

     UNITED STATES TAXATION OF SHAREHOLDERS.  Under Section 951(b) of the
Internal Revenue Code of 1986 as amended (the "Code"), any United States
corporation, citizen, resident or other United States person who owns, directly
or indirectly, or is considered to own (by application of the rules of
constructive ownership set forth in Code Section 958(b), generally applying to
family members, partnerships, estates, trusts or controlled corporations) 10%
or more of the total combined voting power of all classes of voting stock of the
Company will be considered a "United States shareholder" for United States
income tax purposes.  If such "United States shareholders" collectively own more
than 25% of the value or combined voting power of all classes of the Company's
stock for an uninterrupted period of 30 days or more during any taxable year,
each "United States shareholder" will be required to include in his gross income
his share of the Company's "subpart F insurance income," whether or not this
income is distributed to him.  The Company's "subpart F insurance income" would
include, among other items, income (including premium and investment income)
derived from the reinsurance of risks located outside the Company's country of
incorporation.  In addition, if such "United States shareholders" collectively
own more than 50% of the Company's stock for an uninterrupted period of 30 days
or more during any taxable year, each "United States shareholder" will be
required to include in gross income the Company's "other subpart F income" and
amounts under Section 956, whether or not such income and amounts are
distributed to him.  The Company's Section 956 amounts would include certain
amounts invested by the Company in U.S. property.  The Company's "other
subpart F income" would include most interest and other investment income and
gains.  See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -
Possible Change in Control."

     As of December 31, 1999, M. J. Moroun, individually and through CenTra,
Inc. ("CenTra") and their affiliates (the "Moroun Group"), beneficially owned
approximately 26% of the outstanding voting stock of the Company.  See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - Other
Matters Regarding Beneficial Ownership."  The Company is not aware of any
other U.S. shareholders who currently own (directly or indirectly) 10% or more
of the Company's stock, after giving effect to the tax rules concerning the
constructive ownership of certain shares of the Company's stock.  Assuming that
the Moroun Group is considered to own the value and voting power of shares that
it owns directly or indirectly, notwithstanding certain temporary restraints on
its right to vote such stock, the Company and Chandler Barbados will each be
treated as a controlled foreign corporation ("CFC"), at least with respect to
its "subpart F insurance income," and possibly with respect to its "other
subpart F income" and Section 956 amounts, and the Moroun Group and any other
"United States shareholders" may be subject to tax on the Company's and
Chandler Barbados' "subpart F insurance income" and possibly also its "other
subpart F income" and Section 956 amounts.

     Under Section 953(c) of the Code, if U.S. persons indirectly own (i.e.,
through ownership of the Company) 25% or more of the total combined voting
power of all classes of Chandler Barbados' stock entitled to vote or 25% or
more of the total value of Chandler Barbados' stock, then each such person is
required to include in his gross income a portion of any insurance income of
the Company and Chandler Barbados attributable to a policy of insurance or
reinsurance with respect to which the person insured (directly or indirectly)
is related to a United States person who is a shareholder in the Company or
Chandler Barbados ("related person insurance income" or "RPII").  Under these
rules, all U.S. persons who own stock in the Company would generally be
required, subject to the exception discussed hereinafter, to include in their
gross incomes a portion of the RPII received by Chandler Barbados from NAICO.
However, related person insurance income of Chandler Barbados need not be
included in the income of a U.S. person who is not a "United States
shareholder," as defined above, if, at all times during Chandler Barbados'
taxable year, less than 20% of the total combined voting power of all classes
of stock of Chandler Barbados and less than 20% of the total value of Chandler
Barbados is owned (directly or indirectly) by persons who are (directly or
indirectly) insured under any policy of insurance or reinsurance issued by
Chandler Barbados, or who are related persons to any such person.

     Under Section 552 of the Code, the Company or any foreign subsidiary may
be classified as a foreign personal holding company ("FPHC") if (i) at least
60% (or in the case of any corporation that has been classified as an FPHC in
a previous year, 50%) of its gross income for the taxable year is FPHC income
and (ii) at any time during the taxable year more than 50% of the total voting
power or the total value of the stock of such company is owned (directly or
indirectly) by or for not more than five individuals who are citizens or
residents of the United States.  FPHC income generally includes interest,
royalties, annuities, gains from the sale or exchange of stock or securities
and dividends, other than the non-FPHC portion of dividends.  For purposes of
determining a person's stock ownership, stock owned by a corporation will be
considered to be owned proportionately by its shareholders.  Hence, each
ultimate individual owner of the Company will be treated as owning a portion
of the stock of the Company determined by looking through all intermediate
ownership entities.  If the Company or any foreign subsidiary is classified as
an FPHC by application of the above-stated rules, then each U.S. person owning
stock in the Company or such foreign subsidiary will be required to include in
his gross income, as a dividend, for the taxable year an amount equal to his
share of the undistributed FPHC income of such corporation.  Although
management has concluded that the Company and its foreign subsidiaries satisfy
the 50% ownership test, none of the foreign subsidiaries satisfies the 60%
gross income test, and the Company did not receive any material FPHC income
for its taxable years ending in 1997, 1998 and 1999.

<PAGE>
                                                                         PAGE 16

     Under Section 542 of the Code, the Company and each of its subsidiaries
may be classified as a personal holding company ("PHC").  A corporation will be
classified as a PHC if (i) it is not an FPHC or a passive foreign investment
company ("PFIC"); (ii) at least 60% of its adjusted ordinary gross income (as
defined in Section 543) for the taxable year is PHC income; (e.g., dividends,
interest, annuities, royalties and rents) and (iii) at any time during the last
half of the taxable year more than 50% in value of its outstanding stock is
owned (directly or indirectly) by or for not more than five individuals.  In
the case of an affiliated group filing or required to file a consolidated U.S.
income tax return, the 60% test is generally applied to the affiliated group as
a whole and no members of the affiliated group will be considered to satisfy
the 60% test unless the affiliated group meets the 60% test.   If either the
Company or any of its subsidiaries are classified as a PHC, such PHC will be
subject to a PHC tax equal to 39.6% of the undistributed PHC income.  Based on
the proportion of the gross income of the Company and each of its subsidiaries
that consisted of PHC income, the Company's management believes that neither
the Company nor any of its subsidiaries constituted a PHC for its taxable years
ending in 1997, 1998 and 1999.

     UNITED STATES INCOME TAXATION OF THE COMPANY AND ITS SUBSIDIARIES.
Chandler Barbados is organized and endeavors to conduct its business from
Barbados and not within the United States.  Accordingly, Chandler Barbados
does not presently file United States income tax returns.  Pursuant to United
States Treasury Regulations, Chandler Barbados has filed, and will continue
to file, protective returns for its taxable years ending after July 31, 1990
indicating that it is not engaged in business in the United States and that
even if it is so engaged it does not conduct such business through a permanent
establishment in the United States so that, under the U.S.-Barbados Income
Tax Treaty it is not subject to United States Federal income tax on its
insurance income.  However, since neither the Code, court decisions nor
regulations definitively describe activities that constitute being engaged in
a trade or business in the United States, there can be no assurance that the
IRS will not successfully contend that Chandler Barbados is engaged in a
trade or business in the United States through a permanent establishment on
the basis that the Company's affiliates or its shareholders, employees,
officers or directors are agents of Chandler Barbados in the United States.
If Chandler Barbados is deemed to be so engaged, it will be subject to United
States Federal income tax on its income that is effectively connected with
the conduct of that trade or business.  Such income tax, if imposed, would be
computed on the effectively connected income in a manner comparable to the
computation of income of a domestic insurance corporation, except that (i)
Chandler Barbados may be subject to an additional "branch profits tax" on
deemed dividend equivalents and interest payments, and (ii) Chandler Barbados'
applicable deductions and credits will be disallowed if it fails to file a
return for its taxable years ended prior to July 31, 1990 or to timely file
the protective United States income tax return described above for taxable
years ended after July 31, 1990.  Chandler Barbados has not filed a return for
the taxable years ended prior to July 31, 1990.

     Regardless of whether Chandler Barbados is considered to be engaged in a
trade or business in the United States, it is subject to United States income
tax on certain "fixed or determinable annual or periodic gains, profits and
income" derived from sources within the United States as enumerated in
Section 881(a) of the Code, including dividends and related party interest
but generally excluding interest from unrelated parties.  This tax is imposed
on the gross amount of such income, generally at a fixed 30% rate but, in the
case of dividends from Chandler USA to Chandler Barbados, at a 5% rate.  The
United States person responsible for payment of such items of income to
Chandler Barbados is obligated to withhold this tax before payment is made to
Chandler Barbados.

     NAICO is subject to tax on its taxable income under subchapter L of the
Code.  Reinsurance premiums paid by NAICO are generally deductible for this
purpose.  The IRS in Revenue Ruling 77-316 has taken the position that where
a United States parent corporation and its domestic subsidiaries insure their
risks with an offshore subsidiary, the premiums paid to the offshore
corporation are not deductible by the United States corporation and, if paid
by the United States subsidiaries, are constructive distributions to the United
States parent.  Certain court cases have supported the IRS's position that
premiums paid by a parent to its subsidiary are not deductible.  The IRS could
argue that premiums paid to Chandler Barbados should not be deductible and that
instead, to the extent of Chandler USA's earnings and profits, they should be
characterized as dividends subject to a 5% withholding tax.

     The IRS has the authority under Section 482 of the Code to reallocate
income, deductions and credits among related taxpayers.  If the IRS were
successfully to contend that a portion of the premiums paid by NAICO to
Chandler Barbados exceeded an arm's length premium, such excess amount would
probably be characterized as a distribution by Chandler USA to Chandler
Barbados with the result that the United States consolidated group would not
be permitted a deduction, and Chandler Barbados would be subject to a 5%
withholding tax with respect to such excess amount.

     Any determination that Chandler Barbados was engaged in business in the
United States, any disallowance of deductions for most or all of the
reinsurance premiums paid by NAICO to Chandler Barbados or any substantial
reallocation of income from Chandler Barbados to NAICO would cause
substantially all of the Company's consolidated net income before income taxes
to be subject to United States income tax with credit given for income and
excise taxes previously paid.

<PAGE>
                                                                         PAGE 17

     DISPOSITIONS OF COMMON SHARES.  Subject to the discussion below relating
to the potential application of Section 1248 of the Code, a United States
shareholder will generally, upon the sale or exchange of any common shares of
the Company, recognize a gain or loss for United States Federal income tax
purposes equal to the difference between the amount realized upon such sale or
exchange and the shareholder's basis in the common shares of the Company.  If
the shareholder's holding period for such common shares of the Company is more
than 12 months, any gain will be subject to tax at a current maximum marginal
tax rate of 20% for individuals and 35% for corporations.

     Section 1248 of the Code provides that if a United States person disposes
of stock in a foreign corporation and such person owned directly, indirectly
or constructively 10% or more of the voting shares of the corporation at any
time during the five-year period ending on the date of disposition when the
corporation was a CFC, any gain from the sale or exchange of the shares may be
treated as ordinary income to the extent of the CFC's previously untaxed
earnings and profits during the period that the shareholder held the shares
(with certain adjustments).  A 10% United States shareholder may in certain
circumstances be required to report a disposition of shares of a CFC by
attaching IRS Form 5471 to the United States income tax or information return
that the shareholder would normally file for the taxable year in which the
disposition occurs.

     Section 953(c)(7) of the Code generally provides that Section 1248 will
also apply to any sale or exchange of shares in a foreign corporation that
earns RPII if the foreign corporation would be taxed as an insurance company
if it were a domestic corporation, regardless of whether the selling
shareholder is or was a 10% shareholder or whether RPII constitutes 20% or
more of the corporation's gross insurance income.  Existing treasury
regulations do not address whether Section 1248 of the Code and the
requirement to file Form 5471 would apply if the foreign corporation is not
a CFC but the foreign corporation has a subsidiary that is a CFC or that would
be taxed as an insurance company if it were a domestic corporation (although,
as discussed above, shareholders of 10% or more of the common shares of the
Company may have an independent obligation to file Form 5471).

     The foregoing discussion is based upon current law.  The tax treatment of
a shareholder of common shares of the Company, or a person treated as a
shareholder of common shares of the Company for United States Federal income,
state, local or non-United States tax purposes, may vary depending on the
owner's particular tax situation.  Legislative, judicial or administrative
changes or interpretations may be forthcoming that could be retroactive and
could affect the tax consequences to owners of common shares of the Company.

     SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED
STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES TAX CONSEQUENCES OF
OWNERSHIP AND DISPOSITION OF THE COMMON SHARES OF THE COMPANY.

     During 1998, the IRS conducted an examination of the 1995 United States
Federal income tax return of Chandler Barbados.  The IRS completed the
examination in the third quarter of 1998 and there were no proposed
adjustments to tax liabilities.

ITEM 2.  PROPERTIES

     The Company's principal office is located on the 5th Floor, Anderson
Square in Grand Cayman, Cayman Islands, B.W.I.  Chandler Barbados' principal
office is located in the Stevmar House, Rockley, Christ Church, Barbados.  The
Company and Chandler Barbados have no offices in the United States.

     The Company's United States-based subsidiaries own and occupy three office
buildings with approximately 81,000 square feet of usable space in Chandler,
Oklahoma, and an additional office building with approximately 46,000 square
feet of usable space is being constructed in Chandler, Oklahoma.  The
Company's subsidiaries also lease approximately 10,000 square feet in the
aggregate for its branch offices.  The Company believes such space is
sufficient for its operations for the foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS

CENTRA LITIGATION

     The Company and certain of its subsidiaries and affiliates have been
involved in litigation with CenTra and certain of its affiliates, officers and
directors (the "CenTra Group") since July 1992.  See Note 11 to Consolidated
Financial Statements for a detailed discussion.  See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CenTra
Litigation."

OTHER LITIGATION

     The Company and its subsidiaries are not parties to any other material
litigation other than as is routinely encountered in their respective
business activities.

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

     No matters were submitted to a vote of security holders during 1999.

<PAGE>
                                                                         PAGE 18

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

MARKET

     The common shares of the Company trade on The Nasdaq Stock Market under
the symbol:  CHANF.

     The following table sets forth the quarterly high and low closing sales
prices of the Company's common shares, as reported by The Nasdaq Stock Market,
since January 1, 1998.
<TABLE>
<CAPTION>
               1999          HIGH     LOW             1998          HIGH     LOW
        ------------------ -------- -------    ------------------ -------- -------
        <S>                <C>      <C>        <S>                <C>      <C>
        First Quarter..... $  10.00 $  7.25    First Quarter..... $   8.38 $  5.13
        Second Quarter....     8.94    7.50    Second Quarter....     8.00    7.19
        Third Quarter.....     8.13    7.25    Third Quarter.....     8.13    6.75
        Fourth Quarter....     8.63    7.25    Fourth Quarter....     7.88    7.00
</TABLE>
     The closing market price of the common shares on The Nasdaq Stock Market
on March 20, 2000 was $7.81 per share.

SHAREHOLDERS

     As of February 29, 2000, there were 138 shareholders of record and
approximately 431 beneficial holders of the Company's common shares, and the
number of common shares issued was 4,428,033 shares, which includes 1,142,625
common shares which were rescinded through litigation and are held by a court.
See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."

     The provisions of Article XI of the Company's Articles of Association,
which was adopted by the shareholders in 1988, prohibits business combinations
lacking approval of the Continuing Directors (those not affiliated with a 20%
or more shareholder) or 80% of the shareholders and may result in a prohibition
against voting such shares held by a shareholder acquiring 20% or more of the
common shares (and its affiliates and associates) if the Continuing Directors
deny approval.  In addition to the regulatory oversight of NAICO by the
Nebraska Department of Insurance, the Company is also subject to regulation
under the Nebraska Insurance Holding Company Systems Act (the "Holding Company
Act").  In addition to various reporting requirements imposed on the Company,
the Holding Company Act requires any person who seeks to acquire or exercise
control over NAICO (which is presumed as to any person who owns 10% or more of
the Company's outstanding voting stock) to file and obtain approval of certain
applications with the Nebraska Department of Insurance regarding their current
or proposed ownership of such shares.  Noncompliance with the Holding Company
Act may result in certain civil and criminal penalties or a requirement that
the non-approved owner divest itself of such shares.

DIVIDENDS

     The Company has never paid cash dividends on its common shares, and its
current policy is to retain earnings to support its insurance operations.  As
a holding company, the Company depends primarily on share issuances,
borrowings and dividends from its subsidiaries for its cash flow requirements.
Any payment of future dividends will be dependent upon earnings of the
Company's subsidiaries and their ability to pay shareholder dividends
therefrom, financial requirements of the Company and its subsidiaries, business
outlook, and other relevant factors.  See "BUSINESS - Regulation - Restrictions
on Shareholder Dividends."

<PAGE>
                                                                         PAGE 19
FOREIGN ISSUER

     The Cayman Islands currently does not have any restrictions or exchange
controls on the transfer of funds into and out of the Cayman Islands.  Chandler
Barbados is licensed as an "exempt insurance company," and Barbados currently
does not have any restrictions or exchange controls for exempt insurance
companies on the transfer of funds out of Barbados.  If in the future the
Company's assets are invested in foreign securities or held in currencies other
than United States dollars, the Company will be subject to a risk of currency
fluctuations and devaluations.  See "BUSINESS-Regulation."

     All or a substantial portion of the Company's assets are or may be located
outside the United States.  As a result, it may be difficult to obtain
jurisdiction over or to enforce judgments against the Company in any legal
proceeding by the Company's shareholders.  Certain remedies available under
United States securities laws may not be allowed in a Cayman Islands or Barbados
court as a violation of their public policy.

     The operations of the Company and Chandler Barbados will be conducted in
the Cayman Islands and Barbados, respectively, and may, therefore, be affected
by changes in those governments and other economic and political conditions.

ITEM 6.  SELECTED FINANCIAL DATA

     The selected financial data has been derived from the consolidated
financial statements of the Company and its subsidiaries, which appear in Item
14(a).  The consolidated balance sheets of the Company and its subsidiaries as
of December 31, 1998 and 1999, and the related consolidated statements of
operations, comprehensive income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1999, have been audited by
Deloitte & Touche, independent auditors whose independent auditors report
expresses an unqualified opinion and includes an explanatory paragraph relating
to litigation.  The selected financial data should be read in conjunction with
"LEGAL PROCEEDINGS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" and the consolidated financial statements
of the Company and the notes thereto appearing in Item 14(a).  See Notes to
Consolidated Financial Statements for various litigation and contingency
matters.

<PAGE>
                                                                         PAGE 20

ITEM 6.  SELECTED FINANCIAL DATA  (CONTINUED)

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                     --------------------------------------------------------------
                                                        1995         1996         1997        1998         1999
                                                     ----------   ----------   ----------   ----------   ----------
                                                      (Amounts in thousands except per share data and percentages)
<S>                                                  <C>          <C>          <C>          <C>          <C>
OPERATING DATA
Revenues
   Direct premiums written and assumed.............. $  98,768    $ 107,943    $ 123,088    $ 134,329    $ 169,635
                                                     ==========   ==========   ==========   ==========   ==========
   Net premiums earned (1).......................... $  81,087    $  89,286    $  94,679    $  70,064    $ 108,327
   Interest income, net.............................     7,641        7,199        7,253        6,467        5,594
   Realized investment gains, net...................       412          140          764        1,163           55
   Fee for rescinded reinsurance treaties...........         -            -            -          -         10,000
   Commissions, fees and other income...............     3,095        3,620        2,528        1,952        1,730
                                                     ----------   ----------   ----------   ----------   ----------
Total revenues......................................    92,235      100,245      105,224       79,646      125,706
                                                     ----------   ----------   ----------   ----------   ----------
Operating expenses
   Losses and loss adjustment expenses..............    50,543       53,391       57,512       47,879       79,816
   Policy acquisition costs.........................    23,995       32,123       28,145       17,033       28,681
   General and administrative expenses..............    12,770       14,038       13,116       12,710       12,029
   Interest expense.................................        52          146          463          936        1,531
   Litigation expenses, net.........................       285         (108)       4,772       (2,707)       1,133
                                                     ----------   ----------   ----------   ----------   ----------
Total operating expenses............................    87,645       99,590      104,008       75,851      123,190
                                                     ----------   ----------   ----------   ----------   ----------
Income before income taxes..........................     4,590          655        1,216        3,795        2,516
Federal income tax benefit (provision) of
   consolidated U.S. subsidiaries...................      (812)         317       (2,281)        (353)        (365)
                                                     ----------   ----------   ----------   ----------   ----------
Net income (loss)................................... $   3,778    $     972    $  (1,065)   $   3,442    $   2,151
                                                     ==========   ==========   ==========   ==========   ==========
Diluted earnings (loss) per common share............ $    0.54    $    0.14    $   (0.16)   $    0.53    $    0.34
Diluted weighted average common shares outstanding..     6,942        6,942        6,687        6,438        6,347
Combined loss and underwriting expense ratio (2)....      101%         106%         100%         105%         107%

BALANCE SHEET DATA
Cash and investments................................ $ 122,561    $ 119,136    $ 125,063    $ 120,812    $ 118,455
Total assets........................................   246,949      206,827      210,790      236,025      269,120
Unpaid losses and loss adjustment expenses..........   128,794       79,639       74,929       80,909       98,460
Notes payable.......................................       300        4,391        2,796        9,410            -
Litigation liabilities..............................         -            -       16,618       13,228        8,905
Debentures..........................................         -            -            -            -       24,000
Total liabilities...................................   173,499      134,280      152,455      173,960      218,377
Stock held by subsidiary, at cost...................    (2,148)           -       (2,487)      (2,905)           -
Stock rescinded through litigation..................         -            -      (11,799)     (11,799)      (6,883)
Shareholders' equity................................    73,450       72,547       58,335       62,065       50,743
Book value per share (3)............................     10.58        10.45        12.19        13.05        15.45

<FN>

(1)   During 1997 and 1998, the Company purchased additional reinsurance coverages which resulted in significantly
      lower net premiums earned in 1998.  See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
      RESULTS OF OPERATIONS."

(2)   Interest expense and litigation expenses are not considered underwriting expenses; therefore, such expenses
      have been excluded from this ratio.  The 1996 combined loss and underwriting expense ratio was increased by
      four percentage points by a reinsurance arbitration adjustment and the termination of relations with the
      Company's former surety bond underwriting manager.  The rescission of two reinsurance treaties during 1999
      increased the 1999 combined loss and underwriting expense ratio by three percentage points.  See "MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."

(3)   Based on total common shares outstanding and common stock to be issued, less stock held by subsidiary and stock
      rescinded through litigation.  See Note 11 to Consolidated Financial Statements.

</TABLE>

<PAGE>
                                                                         PAGE 21

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

GENERAL

     References to the "Company" which follow within this Item 7 refer to the
Company and its subsidiaries on a consolidated basis unless otherwise indicated.

     The Company is engaged in various property and casualty insurance
operations through its wholly owned subsidiaries, NAICO and L&W.  NAICO writes
various property and casualty insurance products through four separate marketing
programs:  standard property and casualty, political subdivisions, surety bonds
(including both bail bonds and construction bonds) and group accident and
health.  The lines of insurance written by NAICO are commercial coverages
consisting of automobile liability, workers compensation, surety, automobile
physical damage, accident and health, property, inland marine and other
liability lines, which include general and professional liability lines.  L&W
represents various personal and commercial lines insurance companies in
marketing property and casualty insurance.  L&W also markets individual and
group life, medical and disability income coverage.  L&W places the majority
of its business with NAICO.  Business produced by L&W and placed with NAICO
constituted approximately 23% of NAICO's direct premiums written and assumed
in 1999.

     Many factors determine the profitability of an insurance company including
regulation and rate competition; the frequency and severity of claims; the cost,
availability and collectibility of reinsurance; interest rates; inflation;
general business conditions; and jury awards, court decisions and legislation
expanding the extent of coverage and the amount of compensation due for
injuries and losses.

CLAIM COSTS AND LOSS RESERVES

     Insurance companies provide in their financial statements reserves for
unpaid losses and loss adjustment expenses which are estimates of the expense
of investigation and settlement of all reported and incurred but not reported
losses under their previously issued insurance policies and reinsurance
contracts.  In estimating reserves, insurance companies use various
standardized methods based on historical experience and payment and reporting
patterns for the type of risk involved.  The application of these methods
necessarily involves subjective determinations by the personnel of the
insurance company.  Inherent in the estimates of the ultimate liability for
unpaid claims are expected trends in claim severity, claim frequency and other
factors that may vary as claims are settled.  The amount of and uncertainty in
the estimates is affected by such factors as the amount of historical claims
experience relative to the development period for the type of risk, knowledge
of the actual facts and circumstances, and the amount of insurance risk
retained.  The ultimate cost of insurance claims can be adversely affected by
increased costs, such as medical expenses, repair expenses, costs of providing
legal defense for policyholders, increased jury awards and court decisions and
legislation that expand insurance coverage after the insurance policy was
priced and sold.  Accordingly, the loss and loss adjustment expense reserves
may not accurately predict an insurance company's ultimate liability for unpaid
claims.

     NAICO periodically reviews the reserve estimates relating to insurance
business written or assumed by NAICO, Chandler Barbados and the Company and
the methods used to arrive at such reserve estimates.  NAICO also retains
independent professional actuaries who review such reserve estimates and
methods.  Any changes in the estimates are reflected in current operating
results.  See Notes to Consolidated Financial Statements.

     The loss settlement period on insurance claims for property damage is
relatively short.  The more severe losses for bodily injury and workers
compensation claims have a much longer loss settlement period and may be paid
out over several years.  It is often necessary to adjust estimates of
liability on a loss either upward or downward between the time a claim arises
and the time of payment.  Workers compensation indemnity benefit reserves are
determined based on statutory benefits prescribed by state law and are
estimated based on the same factors generally discussed above which may
include, where state law permits, inflation adjustments for rising benefits
over time. Generally, the more costly automobile liability claims involve one
or more severe bodily injuries or deaths.  The ultimate cost of these types of
claims is dependent on various factors including the relative liability of
the parties involved, the number and severity of injuries and the legal
jurisdiction where the incident occurred.

     NAICO does not ordinarily insure against environmental matters as that
term is commonly used.  However, in some cases, regulatory filings made on
behalf of an insured can make NAICO directly liable to the regulatory
authority for property damage, which could include environmental pollution.
In those cases,  NAICO ordinarily has recourse against the insured or the
surety bond principal for amounts paid.  NAICO has insured certain trucking
companies and pest control operators who are required to provide proof of
insurance which in some cases assures payment for cleanup and restoration of
damage resulting from sudden and accidental release or discharge of
contaminants or other substances which may be classified as pollutants.  NAICO
also provides surety bonds for construction contractors who use or have control
of such substances and for contractors who remove and dispose of asbestos as a
part of their contractual obligations.

<PAGE>
                                                                         PAGE 22

     NAICO also insures independent oil and gas producers who may purchase
coverage for the escape of oil, saltwater, or other substances which may be
harmful to persons or property, but may not generally be classified as
pollutants.  NAICO maintains claims records which segregate this type of risk
for the purpose of evaluating environmental risk exposure.  Based upon the
nature of such lines of business with NAICO's insureds, and current data
regarding the limited severity and infrequency of such matters, it appears
that potential environmental risks are not a significant portion of claim
reserves and therefore would not likely have a material adverse impact, if any,
on the financial condition of the Company.

     The Company and its subsidiaries report their reserves on the basis of
U.S. GAAP.  NAICO's statutory-based reserves (reserves calculated in accordance
with accounting practices prescribed or permitted by an insurer's domiciliary
state insurance regulatory authorities for purposes of financial reporting to
regulators) do not differ from its reserves reported on the basis of U.S. GAAP.
The Company and its subsidiaries do not discount their reserves for unpaid
losses and loss adjustment expenses.  See Notes to Consolidated Financial
Statements.

ECONOMIC CONDITIONS

     The impact of a recession on the Company would depend on its duration and
severity. A prolonged downturn in the economy could result in decreased demand
for NAICO's insurance products and an increase in uncollectible premiums and/or
reinsurance recoverables.  In addition, an economic downturn could result in an
increase in the number of insurance claims if insureds decrease expenditures
that promote safety.  Much of NAICO's insurance business is concentrated in
the Southwest and Midwest areas of the United States.  Approximately
$145 million, or 86%, of NAICO's direct written premiums in 1999 were in the
states of Oklahoma and Texas.  An economic downturn in these states could
have a significant adverse impact on the Company.  A recession might also
cause defaults on fixed-income securities owned by NAICO or Chandler
Barbados.  Management believes it has mitigated the impact of a recession by
employing conservative underwriting practices and strict credit policies and
maintaining a high-quality investment portfolio.

     Periods of inflation have varying effects on the Company and its
subsidiaries as well as other companies in the insurance industry.  Inflation
contributes to higher claims and related costs and operating costs as well as
higher interest rates which generally provide for potentially higher interest
rates on investable cash flow and decreases in the market value of existing
fixed-income securities.  During 1999, the market value of the Company's
available for sale investments declined by $4.6 million due primarily to higher
interest rates experienced during this time.  Premium rates and commissions,
however, are not significantly affected by inflation since competitive forces
generally control such rates.  NAICO's underwriting philosophy is to forego
underwriting risks from which it is unable to obtain what it believes to be
adequate premium rates.

REGULATION

     The Company's insurance subsidiaries are subject to regulation by
government agencies in the jurisdictions in which they do business. The nature
and extent of such regulations vary from jurisdiction to jurisdiction, but
typically involve prior approval of the acquisition of control of an insurance
company or of any company controlling an insurance company, regulation of
certain transactions entered into by an insurance company with any of its
affiliates, approval of premium rates, forms and policies used for many lines
of insurance, standards of solvency and minimum amounts of capital and surplus
which must be maintained, establishment of reserves required to be maintained
for unearned premiums, unpaid losses and loss adjustment expenses or for other
purposes, limitations on types and amounts of investments, restrictions on the
size of risks which may be insured by a single company, licensing of insurers
and agents, deposits of securities for the benefit of policyholders and the
filing of periodic reports with respect to financial condition and other
matters. In addition, regulatory examiners perform periodic examinations of
insurance companies. Such regulation is generally intended for the protection
of policyholders rather than shareholders or creditors.

     In addition to the regulatory oversight of the Company's insurance
subsidiaries, the Company is also subject to regulation under the laws of the
Cayman Islands and the Nebraska Insurance Holding Company System Act (the
"Holding Company Act"). The Holding Company Act contains certain reporting
requirements including those requiring the Company, as the ultimate parent
company, to file information relating to its capital structure, ownership and
financial condition and general business operations of its insurance
subsidiaries. The Holding Company Act contains special reporting and prior
approval requirements with respect to transactions among affiliates.  The
Holding Company Act also imposes certain requirements upon any person
controlling or seeking to control an insurance company domiciled in Nebraska.
Control is generally presumed to exist if any person, directly or indirectly,
owns, controls, holds with the power to vote or holds proxies representing 10%
or more of the voting securities of the insurance company or of any other
person or entity controlling the insurance company.  The 10% presumption is
not conclusive and control may be found to exist at less than 10%.  Persons
owning any securities of the Company must comply with the Holding Company Act.
See "BUSINESS - Regulation."

<PAGE>
                                                                         PAGE 23

     Insurance companies are also affected by a variety of state and federal
legislative and regulatory measures and judicial decisions that define and
extend the risks and benefits for which insurance is sought and provided.
These include the redefinition of risk exposure in areas such as product
liability, environmental damage and workers compensation. In addition,
individual state insurance departments may prevent premium rates for some
classes of insureds from reflecting the level of risk assumed by the insurer
for those classes. Such developments may adversely affect the profitability of
various lines of insurance. In some cases, these adverse effects on
profitability can be minimized through coverage repricing, if permitted by
applicable regulations, or limitations or cessation of the affected business.

COMPETITION

     NAICO operates in a highly competitive industry and faces competition from
domestic and foreign insurers, many of which are larger, have greater financial,
marketing and management resources, have more favorable ratings by ratings
agencies and offer more diversified insurance coverages than NAICO.

     A company's capacity to write insurance policies is dependent on a variety
of factors including its net worth or "surplus," the lines of business written,
the types of risk insured and its profitability.  Since the late 1980's, the
industry has generally had excess underwriting capacity.  This condition has
resulted in depressed premium rates and expanded policy terms, which generally
occur when excess underwriting capacity exists.  NAICO continues to experience
pricing competition as the conditions of heightened price competition and
impaired underwriting performance continue in the industry as a whole.

<PAGE>
                                                                         PAGE 24

ANALYSIS OF INSURANCE PROGRAM RESULTS OF OPERATIONS

     The following tables summarize the net premiums earned and the financial
year (losses incurred and recognized by the Company regardless of the year in
which the claim occurred) and accident year (losses incurred by the Company for
a particular year regardless of the period in which the Company recognizes the
costs) loss ratios (computed by dividing losses and loss adjustment expenses by
net premiums earned) in each of the years presented.  The first table is
summarized by major insurance program and includes all lines of insurance
written in each program.  The second table is summarized by line of insurance
written and includes all net premiums earned and net losses and loss adjustment
expenses incurred from all insurance programs for that particular line:

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                -----------------------------------------
                                                   1997           1998           1999
                                                -----------    -----------    -----------
                                                         (Dollars in thousands)
INSURANCE PROGRAMS
-----------------------------------------------
<S>                                             <C>            <C>            <C>
STANDARD PROPERTY AND CASUALTY
   Net premiums earned......................... $   55,527     $   41,662     $   71,676
   Financial year loss ratio...................       67.1%          75.4%          75.2%
   Accident year loss ratio....................       69.8%          68.4%          72.8%
POLITICAL SUBDIVISIONS
   Net premiums earned......................... $   14,945     $   13,073     $   17,415
   Financial year loss ratio...................       56.8%          80.3%          97.0%
   Accident year loss ratio....................       65.4%          81.1%          85.4%
SURETY BONDS
   Net premiums earned......................... $   11,117     $    9,938     $   10,896
   Financial year loss ratio...................        8.6%          15.8%           6.6%
   Accident year loss ratio....................       11.2%          17.1%           9.3%
GROUP ACCIDENT AND HEALTH
   Net premiums earned......................... $    2,303     $    4,646     $    8,261
   Financial year loss ratio...................       43.3%          89.3%         104.0%
   Accident year loss ratio....................       84.5%         103.2%          82.4%
NONSTANDARD PRIVATE-PASSENGER AUTOMOBILE
   Net premiums earned......................... $    8,841     $      482     $        4
   Financial year loss ratio...................       72.2%        (37.8)%     (9,325.2)%
   Accident year loss ratio....................       61.4%          18.2%             -%
OTHER
   Net premiums earned......................... $    1,946     $      263     $       75
   Financial year loss ratio...................      176.4%         161.3%         140.1%
   Accident year loss ratio....................       73.4%          73.0%         132.9%
TOTAL
   Net premiums earned......................... $   94,679     $   70,064     $  108,327
   Financial year loss ratio...................       60.7%          68.3%          73.7%
   Accident year loss ratio....................       61.9%          65.5%          69.2%

</TABLE>

<PAGE>
                                                                         PAGE 25
<TABLE>
<CAPTION>

                                                         YEAR ENDED DECEMBER 31,
                                                -----------------------------------------
                                                   1997           1998           1999
                                                -----------   -----------     -----------
                                                         (Dollars in thousands)
LINES OF INSURANCE
-----------------------------------------------
<S>                                             <C>           <C>             <C>
WORKERS COMPENSATION
   Net premiums earned......................... $   44,954     $   19,651     $   39,329
   Financial year loss ratio...................       66.3%          70.6%          69.4%
   Accident year loss ratio....................       71.7%          57.3%          72.5%
OTHER LIABILITY
   Net premiums earned......................... $   12,209     $   14,045     $   19,799
   Financial year loss ratio...................       48.5%          70.1%          66.7%
   Accident year loss ratio....................       51.5%          63.4%          53.6%
AUTOMOBILE LIABILITY
   Net premiums earned......................... $   15,593     $   14,139     $   19,030
   Financial year loss ratio...................       89.1%          75.0%          81.5%
   Accident year loss ratio....................       72.2%          77.4%          74.6%
SURETY
   Net premiums earned......................... $   11,256     $   10,101     $   11,122
   Financial year loss ratio...................        8.7%          15.9%           7.9%
   Accident year loss ratio....................       11.2%          18.6%           9.6%
AUTOMOBILE PHYSICAL DAMAGE
   Net premiums earned......................... $    5,726     $    4,702     $    7,039
   Financial year loss ratio...................       59.8%          85.3%         104.0%
   Accident year loss ratio....................       59.7%         87.6%         103.3%
ACCIDENT AND HEALTH
   Net premiums earned......................... $    2,529     $    4,646     $    8,261
   Financial year loss ratio...................       43.1%          90.9%         103.2%
   Accident year loss ratio....................       82.1%         103.2%          82.4%
PROPERTY
   Net premiums earned......................... $    1,912     $    2,332     $    2,972
   Financial year loss ratio...................       74.1%         135.8%         202.7%
   Accident year loss ratio....................       75.8%         148.4%         187.7%
INLAND MARINE
   Net premiums earned......................... $      500     $      448     $      775
   Financial year loss ratio...................      194.6%         122.8%         138.1%
   Accident year loss ratio....................      118.9%         114.6%         126.9%
TOTAL
   Net premiums earned......................... $   94,679     $   70,064     $  108,327
   Financial year loss ratio...................       60.7%          68.3%          73.7%
   Accident year loss ratio....................       61.9%          65.5%          69.2%

</TABLE>

<PAGE>
                                                                         PAGE 26
PURCHASE OF ADDITIONAL REINSURANCE

     During the second quarter of 1997, management concluded that it would be
in NAICO's best interest to substantially reduce its underwriting risk in the
California portion of the nonstandard private-passenger automobile program.
In July 1997, NAICO purchased additional reinsurance for this portion of the
program.

     In 1998, NAICO believed that reinsurance market conditions were conducive
to the purchase of additional reinsurance.  During the first quarter of 1998,
NAICO purchased additional reinsurance under its workers compensation and
casualty reinsurance programs.  During the second quarter of 1998, NAICO
purchased additional reinsurance for its construction surety bond reinsurance
program.  The purchase of the additional reinsurance coverages in 1997 and 1998
substantially reduced the per occurrence retention for NAICO's workers
compensation, casualty, surety bond and nonstandard private-passenger
automobile lines of business, but resulted in significantly lower net premiums
earned, losses and loss adjustment expenses and policy acquisition costs.  The
purchase of additional reinsurance also resulted in an increase in reinsurance
recoverables on unpaid losses, prepaid reinsurance premiums and premiums
payable and a decrease in deferred policy acquisition costs.  See "Premiums
Earned" and "Policy Acquisition Costs."  During the fourth quarter of 1999,
NAICO agreed to rescind two reinsurance treaties which covered a portion of its
workers compensation business and which had been in effect since
January 1, 1999.  The reinsurer agreed to return the reinsurance premiums that
had been paid by NAICO during 1999, less losses and ceding commissions that had
been paid by the reinsurer.  The reinsurer also agreed to pay NAICO a fee of
$10.0 million as additional compensation for entering into the agreement.  In
January 2000, NAICO received payment in the amount of $12.9 million relating
to the transaction.

PREMIUMS EARNED

     The following tables set forth premiums earned on a gross basis (before
reductions for premiums ceded to reinsurers) and on a net basis (after such
reductions) for each insurance program as well as each line of insurance as of
December 31 for each year presented:

<TABLE>
<CAPTION>

INSURANCE PROGRAMS                              GROSS PREMIUMS EARNED           NET PREMIUMS EARNED
------------------------------------------  -----------------------------  -----------------------------
                                               1997      1998      1999       1997      1998      1999
                                            --------- --------- ---------  --------- --------- ---------
                                                                   (In thousands)
<S>                                         <C>       <C>       <C>        <C>       <C>       <C>
Standard property and casualty............. $ 62,841  $ 76,458  $ 99,512   $ 55,527  $ 41,662  $ 71,676
Political subdivisions.....................   21,503    25,091    29,994     14,945    13,073    17,415
Surety bonds...............................   12,320    11,915    13,660     11,117     9,938    10,896
Group accident and health..................    3,379     6,104     9,164      2,303     4,646     8,261
Nonstandard private-passenger automobile...   14,303     6,016       118      8,841       482         4
Other......................................    2,363       487        65      1,946       263        75
                                            --------- --------- ---------  --------- --------- ---------
TOTAL...................................... $116,709  $126,071  $152,513   $ 94,679  $ 70,064  $108,327
                                            ========= ========= =========  ========= ========= =========
<CAPTION>
LINES OF INSURANCE                              GROSS PREMIUMS EARNED           NET PREMIUMS EARNED
------------------------------------------  -----------------------------  -----------------------------
                                               1997      1998      1999       1997      1998      1999
                                            --------- --------- ---------  --------- --------- ---------
                                                                   (In thousands)
<S>                                         <C>       <C>       <C>        <C>       <C>       <C>
Workers compensation......................  $ 47,198  $ 48,699  $ 51,106   $ 44,954  $ 19,651  $ 39,329
Other liability...........................    13,593    17,593    26,260     12,209    14,045    19,799
Automobile liability......................    20,672    20,005    22,701     15,593    14,139    19,030
Surety....................................    12,459    12,078    13,886     11,256    10,101    11,122
Automobile physical damage................     7,072     6,307     8,081      5,726     4,702     7,039
Accident and health.......................     3,697     6,111     9,164      2,529     4,646     8,261
Property..................................    10,331    12,916    17,196      1,912     2,332     2,972
Inland marine.............................     1,687     2,362     4,119        500       448       775
                                            --------- --------- ---------  --------- --------- ---------
TOTAL.....................................  $116,709  $126,071  $152,513   $ 94,679  $ 70,064  $108,327
                                            ========= ========= =========  ========= ========= =========
</TABLE>
<PAGE>
                                                                         PAGE 27

     Gross premiums earned, before reductions for premiums ceded to reinsurers,
increased 13%, 8% and 21% in 1997, 1998 and 1999, respectively.  The increases
are primarily attributable to an increase in written premium production in
Texas and Oklahoma, which we believe resulted from increased marketing efforts
in these states and new insurance programs in Texas.  Net premiums earned,
after such reductions, increased 6% in 1997, decreased 26% in 1998 and
increased 55% in 1999.  The reduction in net premiums earned in 1998 was due
primarily to the purchase of additional reinsurance for NAICO's workers
compensation,  casualty and nonstandard private-passenger automobile insurance
programs described previously.  The rescission of two reinsurance treaties
increased net premiums earned in 1999 by $19.6 million.  See "Purchase of
Additional Reinsurance."

     Gross premiums earned in the standard property and casualty program
increased 39%, 22% and 30% in 1997, 1998 and 1999, respectively.  The increases
are primarily attributable to increased written premium production in Texas.
Net premiums earned increased 45% in 1997, decreased 25% in 1998 and increased
72% in 1999.  The reduction in net premiums earned in 1998 was due primarily to
the purchase of additional reinsurance in 1998 as previously described.  The
rescission of the reinsurance treaties increased net premiums earned in 1999
by $17.3 million in this program.

     Gross premiums earned in the political subdivisions program increased 11%,
17% and 20% in 1997, 1998 and 1999, respectively, due primarily to expansion
of the school districts portion of the program in Texas and Missouri and
increased written premium production in Oklahoma.  Net premiums earned
increased 7% in 1997, decreased 13% in 1998 and increased 33% in 1999.  The
reduction in net premiums earned in 1998 was due primarily to the purchase of
additional reinsurance in 1998 as previously described.  The rescission of the
reinsurance treaties increased net premiums earned in 1999 by $2.3 million in
this program.

     Gross premiums earned in the surety bond program increased 8% in 1997,
decreased 3% in 1998 and increased 15% in 1999.  The increase in 1999 was due
primarily to increased written premium production in California.  Net premiums
earned in the surety bond program increased 11% in 1997, decreased 11% in 1998
and increased 10% in 1999.  Increased competition, higher reinsurance costs
and/or changes in risk retained contributed to the decline in 1998.

     Gross premiums earned in the group accident and health program increased
560%, 81% and 50% in 1997, 1998 and 1999, respectively, and net premiums
earned increased 629%, 102% and 78% in 1997, 1998 and 1999, respectively.
The significant increases in premiums in 1997 and 1998 are primarily the
result of the growth expected in start-up programs.  In January 1999, NAICO
began a new program covering primarily Oklahoma employers on a fully insured
basis.  Gross and net premiums earned for this program were $6.0 million and
$5.6 million, respectively, during 1999.  NAICO discontinued writing new
policies for the excess portion of its group accident and health program
effective April 1, 1999.  NAICO expects that premiums in its fully insured
program will decline during 2000 due to the effect of rate increases and other
changes in the program which were put in effect in late 1999.  NAICO is
currently evaluating the fully insured program and may modify or discontinue
it during 2000.

     Nonstandard private-passenger automobile gross premiums earned decreased
14%, 58% and 98% in 1997, 1998 and 1999, respectively.  Net premiums earned in
the nonstandard private-passenger automobile premiums decreased 47%, 95% and
99% in 1997, 1998 and 1999, respectively.  During 1997, NAICO discontinued the
Oklahoma and Arizona portions of its nonstandard private-passenger automobile
program.  Effective July 1, 1997, NAICO entered into a 100% quota share
reinsurance agreement to fully reinsure the risk in the California portion of
the program.  NAICO has discontinued the California program.

     Other programs in the preceding table include premiums from NAICO's
participation in various mandatory pools covering workers compensation for
insureds that were unable to purchase this coverage from an insurance company
on a voluntary basis, and direct assignments to write workers compensation for
such insureds in certain states in lieu of participating in related pools, in
addition to the runoff of various programs which are no longer offered by
NAICO.  The majority of the decrease in net premiums earned during the periods
is attributable to participation in the pools covering workers compensation
and from direct assignments.  The declines were attributable to decreased
activity from the pools and fewer assignments in certain states.  Both the
size of the involuntary market and NAICO's relative participation in states
having a mandatory pool mechanism declined in these years.

NET INTEREST INCOME AND NET REALIZED INVESTMENT GAINS

     At December 31, 1999, the Company's investment portfolio consisted
primarily of fixed income U.S. Government, high-quality corporate and tax
exempt bonds, with approximately 7% invested in cash and money market
instruments.  Income generated from this portfolio is largely dependent upon
prevailing levels of interest rates.  The Company's portfolio contains no
non-investment grade bonds or real estate investments.

<PAGE>
                                                                         PAGE 28

     Net interest income increased 1% in 1997 and decreased 11% and 13% in 1998
and 1999, respectively.  The decrease in 1998 was due primarily to lower
interest rates in 1998 and a reduction in invested assets due to the purchase
of additional reinsurance in 1998.  In addition, during the fourth quarter of
1997, NAICO shifted a portion of its fixed maturities portfolio from taxable to
tax exempt bonds (which generally have a lower before-tax yield).  In late 1998
and the first quarter of 1999, NAICO shifted approximately half of its
investment in tax exempt bonds to taxable bonds.  Net income from tax exempt
securities was $112,000, $1.0 million and $483,000 in 1997, 1998 and 1999,
respectively.  The decrease in net interest income in 1999 was due primarily to
a reduction in invested assets due to the purchase of additional reinsurance.
Net realized investment gains were $764,000, $1,163,000 and $55,000 in 1997,
1998 and 1999, respectively.

     The average net yield on the portfolio, including net realized investment
gains, was 6.6%, 6.1% and 4.7% in 1997, 1998 and 1999, respectively.  The
average net yield on the portfolio, excluding net realized investment gains,
was 5.9%, 5.2% and 4.7% for 1997, 1998 and 1999, respectively.  The decrease
in the average net yield in 1999 was due primarily to an increase in investment
expenses to subsidize a premium finance program for certain insureds of NAICO.
While such expenses reduce the Company's average net yield, the premium
finance program enhances cash flow by providing cash which is available for
investment earlier than conventional deferred payment plans.  Based on
information provided by the premium finance company, the outstanding balance
of premiums financed at December 31, 1999 was approximately $14 million.  The
average yield on the portfolio before deducting investment expenses was 6.3%,
5.8% and 5.7% in 1997, 1998 and 1999, respectively, excluding capital gains.

FEE FOR RESCINDED REINSURANCE TREATIES

     During the fourth quarter of 1999, NAICO agreed to rescind two reinsurance
treaties which covered a portion of its workers compensation business and which
had been in effect since January 1, 1999.  The reinsurer agreed to return the
reinsurance premiums that had been paid by NAICO during 1999, less losses and
ceding commissions that had been paid by the reinsurer.  The reinsurer also
agreed to pay NAICO a fee of $10.0 million as additional compensation for
entering into the agreement.

COMMISSIONS, FEES AND OTHER INCOME

     The Company's income from commissions, fees and other income decreased
30%, 23% and 11% for 1997, 1998 and 1999, respectively.  The majority of the
Company's income from commissions, fees and other income are from L&W's
brokerage commissions and fees.

     L&W's brokerage commissions and fees before intercompany eliminations
were $9.0 million in 1997, $8.5 million in 1998 and $9.6 million in 1999.  A
large portion of the brokerage commissions and fees for L&W is incurred by
NAICO and thus eliminated in the consolidation of the Company's subsidiaries.

     L&W disposed of certain equipment in 1998 that resulted in a gain of
approximately $145,000 which was included in other income.

     Fees generated by Network Administrators, Inc. ("Network"), a wholly owned
subsidiary of the Company, were $435,000 in 1997.  Network no longer functions
as a third-party administrator.

LOSSES AND LOSS ADJUSTMENT EXPENSES

     The Company estimates losses and loss adjustment expenses based on
historical experience and payment and reporting patterns for the type of risk
involved.  These estimates are based on data available at the time of the
estimate and are periodically reviewed by independent professional actuaries.
See "BUSINESS - Reserves."

     The percentage of losses and loss adjustment expenses to net premiums
earned ("loss ratio") was 60.7%, 68.3% and 73.7% in 1997, 1998 and 1999,
respectively.  The rescission of the reinsurance treaties increased losses
and loss adjustment expenses in 1999 by $17.0 million.  Excluding the effect
of the reinsurance rescission, the loss ratio was 70.9% in 1999.
Weather-related losses (net of applicable reinsurance) from wind and hail
were $459,000, $1.4 million and $4.3 million 1997, 1998 and 1999, respectively,
and increased the respective loss ratios by 0.5, 2.0 and 4.9 percentage points
(excluding the effect of the reinsurance rescission in 1999).

<PAGE>
                                                                         PAGE 29

     NAICO is a major insurer of property owned by businesses, cities, towns and
school districts in Oklahoma.  As a result, NAICO incurs weather-related losses.
On May 3, 1999, tornadoes, hail and strong winds caused severe damage to
property owned or used by NAICO insureds.  NAICO estimates total insured damages
from the storms at approximately $26.4 million.  Giving effect to NAICO's
applicable reinsurance, all of which is with unaffiliated reinsurers, NAICO
estimates its net loss before income tax benefit resulting from the May 3, 1999
storms at $1.8 million which was recorded in the second quarter of 1999.

POLICY ACQUISITION COSTS

     Policy acquisition costs consist of costs associated with the acquisition
of new and renewal business and generally include direct costs such as premium
taxes, commissions to agents and ceding companies and premium-related
assessments and indirect costs such as salaries and expenses of personnel who
perform and support underwriting activities. NAICO also receives ceding
commissions from reinsurers who assume premiums from NAICO under certain
reinsurance contracts and the ceding commissions are accounted for as a
reduction of policy acquisition costs.  Direct policy acquisition costs and
ceding commissions are deferred and amortized over the terms of the policies.
Recoverability of such deferred costs is dependent on the related unearned
premiums on the policies being more than expected claim losses.  The Company
considers anticipated interest income in determining if a premium deficiency
exists.

     The following table sets forth the Company's policy acquisition costs for
each of the three years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                             -----------------------------------
                                                1997        1998        1999
                                             ----------  ----------  -----------
                                                       (In thousands)
<S>                                          <C>         <C>         <C>
Commissions expense......................... $  15,860   $  15,478   $   20,542
Other premium related assessments...........       744         928        1,214
Premium taxes...............................     3,400       3,144        3,179
Excise taxes................................       153         161          237
Dividends to policyholders..................     1,155         242          324
Other expense...............................       146         151          205
                                             ----------  ----------  -----------
Total direct expenses.......................    21,458      20,104       25,701
Indirect underwriting expenses..............    13,464      13,858       16,354
Commissions received from reinsurers........    (6,458)    (19,860)      (9,267)
Adjustment for deferred acquisition costs...      (319)      2,931       (4,107)
                                             ----------  ----------  -----------
Net policy acquisition costs................ $  28,145   $  17,033   $   28,681
                                             ==========  ==========  ===========
</TABLE>

     Total gross direct and indirect expenses as a percentage of direct written
and assumed premiums were 28.4%, 25.3% and   24.8% in 1997, 1998 and 1999,
respectively.  For these periods, commission expense as a percentage of gross
written and assumed premiums was 12.9%, 11.5% and 12.1%.  Indirect underwriting
expenses were 10.9%, 10.3% and 9.6% of total direct written and assumed
premiums in 1997, 1998 and 1999, respectively.  Indirect expenses include
general overhead and administrative costs associated with the acquisition of
new and renewal business, some of which is relatively fixed in nature, thus,
the percentage of such expenses to direct written and assumed premiums will
vary depending on the Company's overall premium volume.

      NAICO  received commissions totaling approximately $1.9 million and
$909,000 during 1997 and 1998, respectively, under the quota-share reinsurance
arrangement for the California portion of the nonstandard private-passenger
automobile program which was effective July 1, 1997.  During 1998 and 1999,
NAICO received commissions from reinsurers totaling approximately $13.8 million
and $4.6 million, respectively, related to the purchase of additional
reinsurance under its workers compensation and casualty reinsurance programs.
Commissions received from reinsurers included the return of $9.7 million in
ceding commissions during the fourth quarter of 1999 related to the rescission
of the reinsurance treaties discussed previously.  Net policy acquisition costs
increased $7.0 million in 1999 due to the rescission of the reinsurance
treaties, net of the adjustment for deferred acquisition costs.  See "Purchase
of Additional Reinsurance."

<PAGE>
                                                                         PAGE 30

GENERAL AND ADMINISTRATIVE EXPENSES

     General and administrative expenses were 11.0%, 9.9% and 7.8% of gross
premiums earned and commissions, fees and other income (excluding the fee
related to the rescission of the reinsurance treaties) in 1997, 1998 and 1999,
respectively.  General and administrative expenses have historically not varied
in direct proportion to the Company's revenues.  A portion of such expenses is
allocated to policy acquisition costs (indirect underwriting expenses) and loss
and loss adjustment expenses based on various factors, including employee
counts, salaries, occupancy and specific identification.  Because certain types
of expenses are fixed in nature, the percentage of such expenses to revenues
will vary depending on the Company's revenues.  General and administrative
expenses decreased 3.1% in 1998, due primarily to a reduction in costs
attributable to Network.  Network ceased functioning as a third party
administrator during 1997.  General and administrative expenses decreased 5.4%
in 1999.

     In 1998, the Company adopted a stock option and stock grant plan for
certain non-employee directors of the Company.  Compensation expense related to
the plan in the amount of $272,000 is included in general and administrative
expenses in 1998.  Excluding the expense related to the plan, general and
administrative expenses declined $678,000 or 5.2% in 1998 compared to 1997 and
declined $409,000 or 3.3% in 1999 compared to 1998.

INTEREST EXPENSE

     Interest expense increased 217%, 102% and 64% in 1997, 1998 and 1999,
respectively.  The increase in 1997 and 1998 were due primarily to increased
levels of bank debt.  The increase in 1999 was due primarily to interest
expense on the $24 million debenture offering which was completed on
July 16, 1999 by Chandler USA.  See "Liquidity and Capital Resources."

LITIGATION EXPENSES

     Litigation expenses reflect expenses related to the ongoing legal
proceedings involving the CenTra Group.  Litigation expenses were $4.8 million
in 1997 compared to a credit of approximately $2.7 million in 1998, and were
an expense of approximately $1.1 million in 1999.  During the second quarter
of 1998, the U.S. District Court in Oklahoma City, Oklahoma ("Oklahoma Court")
in which the CenTra litigation is pending ordered all parties to pay their own
costs and attorney's fees in the case thus denying the CenTra Group's request
of approximately $4.7 million for those expenses.  CenTra did not initially
appeal this decision.  Accordingly, the Company reduced the previous first
quarter of 1997 net charge for CenTra litigation matters by approximately
$3.8 million during the second quarter of 1998.  In later papers filed with
the appellate court, CenTra has attempted to appeal this decision.  The
Company believes CenTra's appeal of the decision is barred.  Increased or
renewed activity could result in greater litigation expenses in 2000 or future
years.

     Certain litigation expenses may be recovered from the Company's directors
and officers liability insurer ("D&O Insurer").  As a result of various events
in 1995, the Company recorded an $818,000 estimated recovery of costs from the
D&O Insurer related to a $1 million claim for reimbursable amounts previously
paid that relate to allowable defense and litigation costs for such parties.
In 1996, the Company recorded an additional estimated recovery of $982,000.
The Company received a payment for the 1995 claim during 1996 in the amount of
$795,000.  In connection with the Oklahoma Court judgments, the Company
recorded an additional estimated recovery of $2.7 million from the D&O Insurer.
The Company is entitled to a total of $5 million under the applicable insurance
policy to the extent it has advanced reimbursable expenses.  Some amounts have
been previously paid without dispute and the Company is negotiating with the
D&O Insurer for payment of the policy balance.  The Company could recover the
remaining policy limits or could compromise its claim, and could incur
significant costs in either case.  The estimated insurance recovery is based
upon these variable factors.

     See "CenTra Litigation" and Note 11 to Consolidated Financial Statements.

INCOME TAX PROVISION

     The provision for or benefit from federal income taxes of the consolidated
U.S. subsidiaries varies with the level of income or loss before income taxes
of such subsidiaries.  The provision or benefit relative to the consolidated
income before income taxes will also vary dependent on the contribution to
income before income taxes by the consolidated U.S. subsidiaries.

<PAGE>
                                                                         PAGE 31

NET INCOME (LOSS)

     As a result of the factors described above, the Company reported net
income of $2,151,000 in 1999 compared to $3,442,000 in 1998 and a net loss of
$1,065,000 in 1997.  Net litigation expenses related to legal proceedings
involving the CenTra Group  reduced net income by $1.1 million in 1999 compared
to an increase of  $2.9 million in 1998 and a reduction of  $4.5 million in
1997.

     The rescission of the reinsurance treaties resulted in a net after tax
gain of $3.8 million during 1999.  The rescission of the reinsurance treaties
increased net premiums earned by $19.6 million in the fourth quarter of 1999.
The rescission also increased losses and loss adjustment expenses by
$17.0 million, and increased expenses for policy acquisition costs by
$7.0 million.  NAICO received a fee of $10.0 million as additional
compensation for entering into the agreement.  The provision for federal income
taxes increased by $1.9 million in 1999 due to the rescission of the
reinsurance treaties.

LIQUIDITY AND CAPITAL RESOURCES

     The Company is a reinsurance company and a  holding company receiving
cash principally through equity sales, borrowings and subsidiary dividends,
subject to various regulatory restrictions described in "Regulation" and the
Notes to Consolidated Financial Statements.  The capacity of insurance and
reinsurance companies to underwrite insurance and reinsurance is based on
maintaining liquidity and capital resources sufficient to pay claims and
expenses as they become due.  The primary sources of liquidity for the
Company's subsidiaries are funds generated from insurance and reinsurance
premiums, investment income, capital contributions from the Company and
proceeds from sales and maturities of portfolio investments.  The principal
expenditures are payment of losses and loss adjustment expenses, insurance
operating expenses and commissions.

     All significant Company subsidiaries maintain liquid operating positions
and follow investment guidelines that are intended to provide for an acceptable
return on investment while preserving capital, maintaining sufficient liquidity
to meet obligations and keeping a sufficient margin of capital and surplus to
ensure unimpaired ability to write insurance and assume reinsurance.

     Fixed-maturity investments are purchased to support the investment
strategies of the Company and its subsidiaries, which are developed based on
many factors including rate of return, maturity, credit risk, tax
considerations, regulatory requirements and their mix of business.  At the
time of purchase, investments in debt securities that the Company has the
positive intent and ability to hold to maturity are classified as held to
maturity and reported at amortized cost; all other debt securities are reported
at fair value.  Investments classified as trading are actively and frequently
bought and sold with the objective of generating income on short-term
differences in price.  Realized and unrealized gains and losses on securities
classified as trading account assets are recognized in current operations.  The
Company has not classified any investments as trading account assets.
Securities not classified as held to maturity or trading are classified as
available for sale, with the related unrealized gains and losses excluded from
earnings and reported net of income tax as a separate component of
shareholders' equity until realized.

     In 1997, the Company provided $3.9 million in cash from operations.
During 1998, the Company used $8.8 million in cash from operations due
primarily to the purchase of additional reinsurance described previously.
During 1999, the Company provided $8.7 million in cash from operations.

     Cash flows from investing activities were primarily the result of normal
purchases and sales of investment securities, and in 1997 NAICO sold the common
stock of Century Business Services, Inc. for a total of approximately
$2.5 million.  The Century Business Services common stock was received as a
part of NAICO's 1996 settlement with a former underwriting manager.  Net
realized investment gains before income taxes were $764,000, $1,163,000 and
$55,000 during 1997, 1998 and 1999, respectively, from the sale of
investments.  In addition, the Company received proceeds of $48.0 million and
$4.2 million during 1998 and 1999, respectively, from the sale of available
for sale fixed-income securities prior to their maturity.  In 1998, to augment
maturities and reposition their portfolios, Chandler Barbados and NAICO chose
to liquidate certain fixed maturity securities that were available for sale
prior to their maturities.  The average maturity of the Company's investments
was 4.0 years and 3.9 years at December 31, 1998 and 1999, respectively.

<PAGE>
                                                                         PAGE 32

    Chandler Barbados is required as a foreign reinsurer to secure reserves for
unpaid losses and loss adjustment expenses and unearned premiums for the
benefit of the primary insurer ceding such amounts.  Chandler Barbados secures
such amounts by trust arrangements whereby securities are deposited into a
trust account for the benefit of the primary insurer.  NAICO is required to
deposit securities with regulatory agencies in several states in which it is
licensed as a condition of conducting operations in the state.  At December 31,
1999, the total amount of cash and investments restricted for Chandler Barbados
and NAICO as a result of these arrangements was $24.1 million and $7.2 million,
respectively.

     Cash flows from financing activities include bank borrowings and
repayments, the sale of debentures and purchases of the Company's common stock
in accordance with the divestiture of stock owned by the CenTra Group.  In
February 1998, Chandler USA entered into a five-year loan agreement with a bank
having a principal amount of $2.3 million. The loan was collateralized by
certain equipment which was purchased with the proceeds of the loan.  The
equipment had previously been leased by Chandler USA.  In March 1998, Chandler
USA borrowed an additional $6.2 million under an existing loan agreement with a
bank and the proceeds were used to repay amounts due to Chandler Barbados.  The
bank note was collateralized by shares of NAICO stock owned by Chandler USA.
In July 1999, both bank notes were repaid from the proceeds of the debenture
offering.

     On July 16, 1999, Chandler USA completed a public offering of $24 million
principal amount of senior debentures with a maturity date of July 16, 2014.
The debentures were priced at $1,000 each with an interest rate of 8.75% and
are redeemable by Chandler USA on or after July 16, 2009 without penalty or
premium.  The proceeds to Chandler USA before expenses but after the
underwriter's discount were $23.16 million.  The proceeds of the offering were
used to repay existing bank debt, to repay amounts owed by Chandler USA to its
parent Chandler Barbados, and for general corporate purposes.

     In April 1998, CIM acquired 69,858 shares of the Company's common stock
from an agent for approximately $524,000.  These shares had previously been
pledged to NAICO to secure certain obligations resulting from insurance
balances produced by another agent.  In December 1999, these shares were
transferred to the Company and canceled.

     In December 1999, the Company made payments totaling approximately
$15.2 million to acquire 1,989,200 shares of its own stock previously owned
by CenTra and certain of its affiliates.  The shares have been formally
canceled.  The acquisitions were made in accordance with a divestiture plan
which had been proposed by NAICO and adopted by a U.S. District Court in
Nebraska ("Nebraska Court").

CENTRA LITIGATION

     In 1992, the Company became involved in certain legal proceedings beyond
the ordinary course of business.  Note 11 to  Consolidated Financial Statements
describes the extensive CenTra litigation related to the Company and its
affiliates and the CenTra Group.

     During December 1999, the Company acquired 1,989,200 shares of its own
stock in exchange for payment of $15,204,758 to CenTra and its affiliates
pursuant to a divestiture plan proposed by NAICO and approved by the Nebraska
Court.  All shares were canceled upon their return to the Company.  Based on
an April 22, 1997 judgement by the Oklahoma Court, the Company had previously
recorded the return of 517,500 of the 1,989,200 shares as a decrease to
shareholders' equity during 1997.  The Nebraska Court had ordered CenTra to
divest all shares of Chandler owned or controlled by it or its affiliates.  An
additional share block owned by CenTra and affiliates consists of 1,142,625
shares which will be divested following a ruling on CenTra's appeal of a
judgment entered by an Oklahoma Court in April 1997.  That judgment requires
CenTra to transfer the shares to the Company in exchange for payment of
$6,882,500.  Based on the April 22, 1997 judgement and subsequent actions by
the Oklahoma Court, the Company previously recorded the return of the
1,142,625 shares as a decrease to shareholders' equity during 1997.  Following
the conclusion of the appeal, the Nebraska Court will determine the method of
divestiture of these shares.  The appellate court heard oral arguments on
November 15, 1999.  The Company cannot predict when the appellate court will
rule on the appeal.

     While the Company believes that it is likely that the Company and its
affiliates will ultimately prevail as to all material claims asserted in the
CenTra litigation, should the CenTra litigation be modified, reversed or
decided adversely to the Company, such event could have a material adverse
effect on the Company.

<PAGE>
                                                                         PAGE 33

YEAR 2000 READINESS DISCLOSURES

YEAR 2000 UPDATE

     Through the first two months of the year 2000, the Company had not
experienced any significant problems or disruptions related to Year 2000
Problems (as described below).  The Company is currently not aware of any
significant disruptions experienced by its customers, vendors and service
providers that would materially affect their ability to do business with the
Company.  While it is possible that certain Year 2000 Problems may exist but
have not yet materialized, the Company does not currently expect any Year 2000
Problems to be encountered for the remainder of the year 2000 that would have a
material adverse effect on the operating results of the Company.

YEAR 2000 READINESS OVERVIEW

     Computer software, hardware, microprocessor chips and other computer
equipment use two digits to identify a particular year, and therefore may not
recognize the number "00" or may recognize it as a year prior to 1999.  Unless
computer equipment and software programs are modified to correct these data
recognition problems (the "Year 2000 Problems"), errors could result.  These
errors could cause damage to personal property and disrupt business practices
and functions.  In addition to potential problems from computer systems,
potential problems could arise from equipment with embedded chips, such as
vaults, elevators, aircraft and other systems not generally classified as
information technology systems.

     The Company is heavily dependent upon complex information technology
computer systems for its operations.  The Company has taken action to attempt
to identify the nature and extent of the work required to assess and remediate
Year 2000 Problems with respect to its systems, products and infrastructures,
including non-information technology systems, none of which are considered
critical to operations.  The Company began work in 1995 to prepare its
financial, information and other computer-based systems for the year 2000,
including updating existing legacy systems, and such work is complete at this
time.  The Company estimates that it has spent $350,000 updating these systems
to address Year 2000 Problems, and such costs were expensed as they were
incurred, primarily in 1996 and 1997.

     During the fourth quarter of 1998, the Company retained an independent
consultant to prepare a plan for testing its information technology systems.
In late 1998, the Company determined that the testing would be performed by
its employees, and this testing was completed during the first half of 1999.
During the fourth quarter of 1998, the Company incurred approximately $150,000
in additional expenses to evaluate its information systems and in preparation
of plans to test its information systems.

     The Company incurred additional costs of approximately $125,000 to complete
its testing during the first six months of 1999.  These costs  included the use
of internal employees, cost of external software to enhance testing efforts and
computer rental costs.  These costs were expensed during 1999 as incurred.  The
Company could incur costs in the future if additional efforts are needed to
perform modifications to the Company's information technology systems.  The
Company has established a contingency plan for all critical business operations.
The contingency plan includes possible manual operations and the implementation
of alternative information processing procedures.

     The Company believes, based on the information currently available, that
the most reasonably likely worst case scenarios resulting from Year 2000
Problems include:

     -  Legal risks arising from failure of NAICO or L&W to provide contracted
        services, deal with claims on a timely basis, provide pertinent data to
        those dependent upon the data and similar risks;
     -  Increased operational costs due to manual processing, data corruption
        or disaster recovery;
     -  Inability to bill or invoice;
     -  Lost revenue resulting from the inability to render accurate billings
        and from the inability to efficiently market insurance products;
     -  Increased legal and accounting expenses;
     -  Fines and associated expenses resulting from inability to comply with
        regulatory requirements; and
     -  Failure of management controls.

     Any previously mentioned Year 2000 Problems could have a material adverse
effect on the Company, including the financial condition of the Company's
subsidiaries and their ability to pay dividends or other payments to the
Company and its subsidiaries.

<PAGE>
                                                                         PAGE 34

     It is possible that the credit or operating ability of agents, reinsurers
and others with whom the Company maintains commercial relationships may be
adversely affected by one or more unforeseen circumstances caused by Year 2000
Problems.  However, the Company does not have control over these third parties
and, as a result, it cannot currently determine to what extent future operating
results may be adversely affected by the failure of these third parties to
successfully address their Year 2000 Problems.  However, the Company has
developed plans to attempt to minimize identified third-party exposures.  The
Company has requested information from its major vendors and service providers
to assess their year 2000 readiness.  The Company cannot predict the adverse
impact, if any, of Year 2000 Problems upon parties with whom it does business.

     The Company continues to study the complex issues related to insurance
coverage for losses arising from the myriad potential fact situations connected
with Year 2000 Problems and NAICO's liability to its insureds.  The Company
believes that the coverages NAICO provides do not extend to the types of losses
which are most likely to occur as a result of Year 2000 Problems, and  NAICO
has made no provisions for loss reserves based on potential Year 2000 Problems.
NAICO expects to utilize coverage exclusion endorsements based on the individual
underwriting of commercial accounts, and it has adopted endorsements to its
policies based on forms provided and filed for approval with various regulatory
authorities by Insurance Services Office, Inc., an insurance services company
which  provides regulatory research and filing support to insurance companies.
Use of these special endorsements is governed by the law and regulatory
policies of states in which NAICO is authorized to do business.

     It is possible that future court interpretations of policy language based
on specific facts, or legislation mandating coverage, could result in coverage
for losses attributable to Year 2000 Problems.  Such decisions or legislation
could have a material adverse impact on the Company.  It is also possible that
NAICO may incur expenses defending claims for which it is ultimately determined
there is no insurance coverage.

CERTAIN TAX MATTERS

     During 1998, the IRS conducted an examination of the 1995 U.S. Federal
income tax return of Chandler Barbados.  The IRS completed the examination in
the third quarter of 1998, and there were no proposed adjustments to tax
liabilities.

ACCOUNTING STANDARD ISSUED BUT NOT YET ADOPTED

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards  ("SFAS") No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.  SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities.  It requires that the Company recognize all derivatives as either
assets or liabilities in the statement of financial condition and measure those
instruments at fair value.  The accounting for changes in the fair value of a
derivative depends on the intended use of the derivative and the resulting
designation.  The Company will adopt SFAS No. 133 when required.  The
Company's management does not expect that adoption of SFAS No. 133 will have a
material impact on the Company's consolidated financial condition or results of
operations.

FORWARD-LOOKING STATEMENTS

     Some of the statements made in this Form 10-K report, as well as statements
made by the Company in periodic press releases, oral statements made by the
Company's officials to analysts and shareholders in the course of presentations
about the Company and conference calls following earnings releases, constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995.  Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
the forward-looking statements.  Such factors include, among other things,
(i) general economic and business conditions; (ii) interest rate changes;
(iii) competition and regulatory environment in which the Company operates;
(iv) claims frequency; (v) claims severity; (vi) the number of new and renewal
policy applications submitted by the Company's agents; (vii) the ability of the
Company to obtain adequate reinsurance in amounts and at rates that will not
adversely affect its competitive position; (viii) the ability of NAICO to
maintain favorable insurance company ratings; (ix) the ability of the Company
and its third party providers, agents and reinsurers to adequately address year
2000 issues; and (x) other factors including the ongoing litigation matters
involving a significant concentration of ownership of the Company's common
stock.

<PAGE>
                                                                         PAGE 35

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company's consolidated balance sheets include a certain amount of
assets and liabilities whose fair values are subject to market risk.  Due to
the Company's significant investment in fixed-maturity investments, interest
rate risk represents the largest market risk factor affecting the Company's
consolidated financial position.  Increases and decreases in prevailing
interest rates generally translate into decreases and increases in fair values
of those instruments.  Additionally, fair values of interest rate sensitive
instruments may be affected by the credit worthiness of the issuer, prepayment
options, relative values of alternative investments, liquidity of the instrument
and other general market conditions.

     As of December 31,1999, substantially all of the investments of Chandler
Barbados and NAICO were in fixed-maturity investments (rated Aa3 or AA- or
better by Moody's Investors Service, Inc. or Standard & Poor's, respectively),
interest-bearing money market accounts and a collateralized repurchase
agreement.  The Company does not hold any investments classified as trading
account assets or derivative financial instruments.

     The table below summarizes the estimated effects of hypothetical increases
and decreases in interest rates on the Company's fixed-maturity investment
portfolio.  It is assumed that the changes occur immediately and uniformly,
with no effect given to any steps that management might take to counteract
that change.  The hypothetical changes in market interest rates reflect what
could be deemed best and worst case scenarios.  The fair values shown in the
following table are based on contractual maturities.  Significant variations in
market interest rates could produce changes in the timing of repayments due to
prepayment options available.  The fair value of such instruments could be
affected and, therefore, actual results might differ from those reflected in
the following table:
<TABLE>
<CAPTION>

                                                                                         Estimated
                                                              Hypothetical           fair value after
                                                                change in              hypothetical
                                      Fair value at           interest rate              change in
                                       December 31,         (bp=basis points)          interest rate
                                  ---------------------   ----------------------   ---------------------
                                     1998       1999      (Dollars in thousands)      1998      1999
                                  ---------- ----------                            ---------- ----------
<S>                               <C>        <C>          <C>                      <C>        <C>
Fixed-maturity investments (1)... $  97,074  $ 109,748    100 bp increase.......   $  93,731  $ 106,457
                                                          200 bp increase.......      90,581    103,340
                                                          100 bp decrease.......     100,627    113,228
                                                          200 bp decrease.......     104,406    116,910
---------------------------------
<FN>
(1)   The fair value at December 31, 1998 excludes short-term investments with a fair value of $13.3 million
      as management does not feel that these investments are exposed to significant interest rate risk due to
      their maturity dates.  The Company did not hold any short-term investments at December 31, 1999.

</TABLE>

     The table above illustrates, for example, that an instantaneous 200 basis
point increase in market interest rates at December 31, 1999 would reduce the
estimated fair value of the Company's fixed-maturity investments by
approximately $6.4 million at that date.

     The Company is obligated for senior debentures that have a maturity date
of July 16, 2014.  The debentures have a fixed interest rate of 8.75% and are
redeemable on or after July 16, 2009 without penalty or premium.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Item 14 (a) 1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None

<PAGE>
                                                                         PAGE 36

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

     A brief description of each director and executive officer of the Company
is provided below.  Directors hold office until the next annual meeting of
shareholders or until their respective successors are duly elected and
qualified.  Executive officers are elected by the Board of Directors at its
annual meeting and hold office until its next annual meeting or until their
respective successors are duly elected and qualified.  The current directors
and executive officers of the Company are as follows:

<TABLE>
<CAPTION>

NAME              AGE    POSITION
----------------  ---    -------------------------------------------------------
<S>               <C>    <C>
W. Brent LaGere   54     Chairman of the Board, Chief Executive Officer,
                         President, Executive Committee Chairman,
                         Investment Committee Member and Director.

Mark T. Paden     43     Executive Vice President, Chief Financial Officer,
                         Executive Committee Member,
                         Investment Committee Member and Director.

Brenda B. Watson  59     Executive Vice President, Executive Committee Member
                         and Director.

Richard L. Evans  53     Vice President and Director.

Steven R. Butler  42     Vice President - Administration.

Mark C. Hart      44     Vice President - Accounting and Treasurer.

James M. Jacoby   65     Audit Committee Member, Option and Compensation
                         Committee Chairman and Director.

Paul A. Maestri   69     Executive Committee Member, Audit Committee Member,
                         Option and Compensation Committee Member and Director.

Robert L. Rice    65     Audit Committee Chairman, Executive Committee Member,
                         Investment Committee Member, Option and
                         Compensation Committee Member and Director.

Larry A. Davis    58     Director.

W. Scott Martin   49     Director.
</TABLE>

   W. BRENT LAGERE has been Chairman of the Board of the Company since
September 1983, Chief Executive Officer since March 1986 and President since
May 1997.  Since October 1988 he has served in officer and director capacities
for various subsidiaries of the Company pursuant to an employment contract
with Chandler USA.  Since 1971 he has served in various capacities with L&W.

   MARK T. PADEN has served as Executive Vice President of the Company since
May 1998, was Vice President - Finance of the Company from August 1987 through
May 1998  and has been a director since May 1992.  Since February 1987,
Mr. Paden has been an employee of L&W and/or Chandler USA.  In May 1998,
Mr. Paden was elected Executive Vice President and Chief Operating Officer for
Chandler USA, NAICO and L&W.  Mr. Paden has served as Chief Financial Officer
of NAICO since January 1988 and of L&W since May 1987, and also served as
Vice President - Finance of NAICO from January 1988 through May 1998 and of
L&W from May 1987 through May 1998.  Mr. Paden has also been a director of
Chandler USA since July 1988, NAICO since November 1992 and L&W since
October 1992.

   BRENDA B. WATSON has been Executive Vice President of the Company since
October 1988, was a Vice President of the Company for three years prior thereto,
and has been a director of the Company since September 1985.  Since October
1988, she has served in officer and director capacities for various subsidiaries
of the Company pursuant to an employment contract with Chandler USA.

<PAGE>
                                                                         PAGE 37

   RICHARD L. EVANS has been a director of the Company since September 1983.
He has been a Vice President of the Company since August 1986, and since May
1989, he has been an employee of Chandler USA.  Mr. Evans has served L&W since
1979 in various capacities.  Mr. Evans has also been a director of Chandler USA
since May 1990.

   STEVEN R. BUTLER has served as Vice President-Administration of the Company
since January 1987, and also serves as a director, the President and Treasurer
of CIM Barbados.  He is also a director and the Financial Director of CIM, and
is a director and serves as President of Chandler Barbados.  The Company began
handling its own and Chandler Barbados' operations and administrative affairs
through CIM and CIM Barbados, respectively, in 1990.  From 1984 through 1989,
Mr. Butler served as Financial Director of Insurance Management Services, Ltd.
and, beginning in 1988, of its affiliate Insurance Risk Management Services,
Ltd., which performed substantially all of the administrative management
functions of the Company and Chandler Barbados, respectively, through
March 1990.

   MARK C. HART has served as Vice President - Accounting and Treasurer of the
Company since May 1998.  Since May 1988, Mr. Hart has been an employee of NAICO
and/or Chandler USA.  In May 1998, Mr. Hart was elected Vice President -
Finance and Treasurer of Chandler USA, NAICO and L&W.  Mr. Hart has been a Vice
President of Chandler USA since March 1994.

   JAMES M. JACOBY has been a director since October 1993.  He has been a
director of NAICO since August 1990.  He has been an insurance agent for more
than five years and was formerly employed by NAICO from June 1990 to March 1991.
Mr. Jacoby retired in September 1994 from Alexander and Alexander, Inc. where he
was a Vice President with the Omaha, Nebraska office, and is currently employed
by Constructor's Bonding & Insurance in Omaha, Nebraska where he is involved in
servicing insurance accounts.

   PAUL A. MAESTRI has been a director of the Company since October 1985.
Since February 1990 Mr. Maestri has engaged in personal investment activities.
From 1980 to February 1990 Mr. Maestri was a director and the President and
Chief Executive Officer of P.A.M. Transport, Inc.  He has also been a director
of L&W since December 1993, NAICO since May 1997 and CIM since May 1998.

   ROBERT L. RICE has been in private practice as a certified public accountant
for more than five years and a director of the Company since May 1987.
Mr. Rice has also been a director of Chandler USA since June 1993, L&W since
May 1997 and CIM since May 1998.

   LARRY A. DAVIS has been a director of the Company since August 1997.
Mr. Davis has also been a director of Chandler Barbados and CIM Barbados since
December 1992.  Since July 1998,  Mr. Davis has been Manager of Neweol
Investments Limited, Luxembourg Branch, a Canadian corporation wholly owned by
The Loewen Group of Burnaby, British Columbia, Canada.  From September 1996 to
July 1998, Mr. Davis was Vice President with Loewen Financial Corporation, a
Barbados corporation wholly owned by The Loewen Group.  From September 1993 to
September 1996, Mr. Davis provided business consulting services and served as
a director for several Barbados corporations.  Mr. Davis was Chairman and Chief
Executive Officer of Caribbean Commercial Bank, a Barbados corporation, from
September 1988 to September 1993.

   W. SCOTT MARTIN was appointed to serve as a director at the Company's
November 10, 1999 board meeting, subject to his qualification and acceptance by
the Cayman Islands Monetary Authority which was received on January 17, 2000.
Mr. Martin has been President of the Tulsa Loan Production Office with First
Bank & Trust Company in Wagoner, Oklahoma since 1994.  Mr. Martin also serves
as a director of First Bank & Trust in Wagoner, Oklahoma, First Bank of
Chandler in Chandler, Oklahoma, First National Bank in Burkburnett, Texas and
The Bank of Union in Union City, Oklahoma.

     The Company learned on November 9, 1999, that M.J. Moroun, Norman E.
Harned and Ronald W. Lech had resigned as directors of the Company.  Messrs.
Moroun and Harned resigned effective November 2, 1999 and Mr. Lech resigned
effective November 8, 1999.  All three resignations were formally accepted by
the Company's board of directors on November 10, 1999.  Messrs. Moroun, Harned
and Lech are current or former directors and officers of CenTra, Inc.  At its
November 10, 1999 meeting, the Company's board of directors voted to reduce its
total membership from 11 to 9 and appointed W. Scott Martin to serve as a
director, subject to his qualification and acceptance by the Cayman Islands
Monetary Authority.

<PAGE>
                                                                         PAGE 38

     In the civil proceeding CenTra, Inc. v. Chandler Insurance Company, Ltd.,
et. al, Case No. CIV-92-1301-M, in the U.S. District Court for the Western
District of Oklahoma, judgment was entered in favor of CenTra and against
Messrs. LaGere, Paden, Evans, Rice, Ms. Watson and two former directors in the
amount of $1.00 each, finding a violation of Section 10(b) of the Securities
Exchange Act of 1934 and a violation of Section 11(a) of the Securities Act of
1933 based upon a failure by the Company and certain of its officers and
directors to disclose the applicability of the Nebraska Insurance Holding
Company Act to purchasers of stock of the Company in a public offering.  The
judgments are currently being appealed.  See Note 11 to Consolidated Financial
Statements.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

     Based solely upon a review of Forms 3, 4 and 5, any amendments thereto
furnished to the Company pursuant to the rules of the Securities and Exchange
Commission, or written representations from certain reporting persons presented
to the Company, all such reports required to be filed by reporting persons have
been filed in a timely fashion during the fiscal year ended December 31, 1999.

ITEM 11.  EXECUTIVE COMPENSATION

     The following table sets forth the compensation paid or to be paid by the
Company or any of its subsidiaries as well as certain other compensation paid
or accrued, during the years indicated, to the Chairman and Chief Executive
Officer and the four other highest paid executive officers of the Company (the
"Named Executives") for such period in all capacities in which they served.

<TABLE>
<CAPTION>

                                                                  SUMMARY COMPENSATION TABLE
                                                                    ANNUAL COMPENSATION (1)
                                                --------------------------------------------------------------
                                                                                    OTHER ANNUAL   ALL OTHER
                                                             SALARY       BONUS     COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION                       YEAR         ($)        ($)(2)       ($)(3)       ($)(4)
----------------------------------------------- --------  ------------  ----------  ------------ -------------
<S>                                             <C>       <C>           <C>         <C>          <C>
W. Brent LaGere                                   1999    $   404,228   $       -        N/A     $    38,349
   Chairman of the Board, CEO and President       1998        397,361           -        N/A          36,596
   of Chandler USA, NAICO and L&W                 1997        389,340           -        N/A          37,471

Mark T. Paden                                     1999        231,188           -        N/A           5,000
   Executive Vice President, COO & CFO            1998        209,300           -        N/A           4,900
   of Chandler USA, NAICO and L&W                 1997        178,637           -        N/A           4,975

Brenda B. Watson                                  1999        225,437     112,500        N/A           8,600
   Executive Vice President of NAICO              1998        221,607           -        N/A           8,100
   and L&W                                        1997        216,882           -        N/A           8,475

Richard L. Evans                                  1999        224,735           -        N/A           6,400
   Vice President - Claims of Chandler USA,       1998        218,190           -        N/A           6,200
   NAICO and L&W                                  1997        211,873           -        N/A           6,275

Steven R. Butler                                  1999        137,252      16,419        N/A               -
   President of CIM and CIM Barbados              1998        133,252      16,272        N/A               -
                                                  1997        127,514      12,850        N/A               -
------------------------------------------------
<FN>

(1)  Amounts shown include cash and non-cash compensation earned and received by the Named Executives as well
     as amounts earned but deferred at their election.

(2)  All Named Executives are eligible to participate in bonus plans based upon premium production and/or profitability.

(3)  The Company provides various perquisites to certain employees including the Named Executives.  In each case, the value
     of the perquisites provided to each Named Executive did not exceed ten percent of such Named Executive's annual salary
     and bonus.

(4)  The amounts shown under this column represent contributions by the Company's U.S. subsidiaries to a 401(k) plan
     ($3,475 for each of the Named Executives in 1997 and $3,600 in 1998 and 1999), and the premiums paid or to be paid by
     the Company's U.S. subsidiaries under life insurance arrangements with the Named Executives.  A portion of the premiums
     ($24,300, $23,400 and $25,700 in 1997, 1998 and 1999, respectively) were paid under split dollar life insurance plans.
     Under these plans, the Company's U.S. subsidiaries pay the premiums for life insurance issued to the Named Executive.
     Repayment of the premiums is secured by the death benefit or the cash surrender value of the policy, if any, if the
     Named Executive cancels and surrenders the policy.
</TABLE>
<PAGE>
                                                                         PAGE 39

OPTIONS EXERCISED AND HOLDINGS

     No options were granted to or exercised by the Named Executives during
1999 and there were no unexercised options held by the Named Executives as of
December 31, 1999.

DIRECTOR COMPENSATION

     Messrs. Jacoby, Maestri, Rice, Davis and Martin -- the Company's outside
directors -- receive an annual retainer of $6,000 and $1,000 for each meeting.
These outside directors are compensated at the rate of $1,000 per day for time
spent on board-related activities.  During 1999, Messrs. Maestri, Jacoby and
Davis received total director compensation from the Company and its
subsidiaries of $30,750, $29,500 and $25,500, respectively, including
compensation for time spent in connection with certain litigation.   See
Note 11 to Consolidated Financial Statements.

     During the second quarter of 1998, the Company's directors approved the
Directors' Stock Option and Stock Grant Plan (the "Directors' Plan").  The
Directors' Plan provides that the non-employee directors of the Company,
other than Norman Harned, Ronald Lech and M.J. Moroun, are eligible for
grants of stock options and stock grants in  accordance with the terms of
the Directors' Plan.  Messrs. Harned, Lech and Moroun resigned as directors
of the Company during November 1999.  Options and stock grants may not be
granted under the plan for more than 260,000 shares of common stock of the
Company, but this number may be adjusted to reflect, if deemed appropriate by
the board of directors, any stock dividend, stock split, share combination,
recapitalization or the like, of or by the Company.  The exercise price of
the stock options shall generally be equal to the average closing price of
common stock of the Company for the 30 calendar days preceding the date the
options are granted.  The option period begins on the effective date of the
option grant and terminates on the tenth anniversary of that date.

     The aggregate number of shares of stock awarded to an eligible director
as a stock grant shall total 20,000 shares of common stock of the Company.
The award shall be divided into two equal installments.  The first installment
of 10,000 shares shall automatically be awarded as of the first regular board
meeting after an eligible director completes ten continuous years of service
on the  board.  The second installment of 10,000 shares will automatically be
awarded  as of the first anniversary of the initial stock grant, regardless of
whether the director is still a member of the board.  During the second quarter
of 1998, a total of 40,000 shares valued at $250,000 were awarded to two
directors, and this amount is included in general and administrative expenses
in the Company's consolidated statements of operations.  During the third
quarter of 1998, the Company issued 20,000 of the 40,000 shares to the two
directors as required under the plan from the Company's stock held by
subsidiary.  During the second quarter of 1999, the Company issued the
remaining 20,000 shares to the two directors from the Company's stock held by
subsidiary.  The difference between the average reacquisition cost of the
shares issued and the share price at the date of the stock grant was credited
to paid-in surplus.

     Each eligible director shall automatically be granted options to purchase
1,500 shares of common stock of the Company as of the first regular board
meeting in each year the director serves on the board.  Each eligible director
shall also automatically be granted options to purchase 30,000 shares of common
stock of the Company effective as of the first regular board meeting after the
director completes ten continuous years of service on the board.  During the
second quarter of 1998, options for 66,000 shares were awarded with an exercise
price of $5.92 per share, which resulted in approximately $22,000 of
compensation expense which is included in general and administrative expenses
in the Company's consolidated statements of operations.  During the first
quarter of 1999, options for 6,000 shares were awarded with an exercise price
of $8.06 per share.  As the exercise price of the options exceeded the market
value at the date of grant, the Company did not recognize any compensation
expense for the options issued in 1999.  As of December 31, 1999, options for
72,000 shares were outstanding.  The options require shareholder approval prior
to being exercised.

EMPLOYMENT AGREEMENTS

     Chandler USA has an employment agreement with W. Brent LaGere, Chairman of
the Board and Chief Executive Officer of the Company and its subsidiaries.
Under this agreement, Mr. LaGere's base compensation is established at not less
than $250,000 per year.  In the event that Mr. LaGere is terminated without
cause, as defined in the agreement, he is entitled to receive his base
compensation for the remainder of the term of the agreement, but in no event
for more than 60 months.  The agreement will terminate upon Mr. LaGere
attaining age 70, unless earlier terminated by Chandler USA for cause.  In
addition to his base compensation, Mr. LaGere is eligible to receive certain
benefits and to participate in certain incentive bonus plans offered by
Chandler USA and its subsidiaries.

<PAGE>
                                                                         PAGE 40

     Chandler USA has an employment agreement with Brenda B. Watson, a director
and executive officer of the Company and L&W, and an executive officer of NAICO.
Under this agreement, Ms. Watson's base compensation is established at not less
than $125,000 per year.  The agreement terminates on December 31, 2003, unless
earlier terminated by Chandler USA for cause, as defined in the agreement.  In
the event that Ms. Watson is terminated without cause, she is entitled to
receive her base compensation through the termination date.  In addition to her
base compensation, Ms. Watson is eligible to receive certain benefits and to
participate in certain incentive bonus plans offered by Chandler USA and its
subsidiaries.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table lists the directors and executive officers of the
Company and provides information on their ownership of the Company's common
shares at February 29, 2000:
<TABLE>
<CAPTION>
                                                              BENEFICIAL OWNERSHIP
                                                     ---------------------------------------
NAME OF DIRECTOR OF EXECUTIVE OFFICER                 NUMBER OF SHARES (1)     PERCENT (2)
---------------------------------------------------- ----------------------  ---------------
<S>                                                  <C>                     <C>
W. Brent LaGere.....................................            476,965 (3)            10.8%
Brenda B. Watson....................................             53,566                 1.2%
Richard L. Evans....................................             59,522                 1.3%
Paul A. Maestri.....................................             20,000 (4)               *
James M. Jacoby.....................................                  - (5)               -
Robert L. Rice......................................             20,000 (4)               *
Mark T. Paden.......................................             28,810                   *
Larry A. Davis......................................                  - (5)               -
Mark C. Hart........................................              2,515                   *
W. Scott Martin.....................................             31,500                   *
Steven R. Butler....................................              3,200                   *
All directors and officers as a group (11 persons)              696,078                15.7%
----------------------------------------------------
*    Less than 1%
<FN>

(1)  Except as otherwise indicated, each person has the sole power to vote and dispose of all
     shares, and the sole power to exercise any options listed opposite his or her name.

(2)  These percentages are computed based on 4,428,033 shares of common stock outstanding
     including 1,142,625 common shares rescinded through litigation.  Elsewhere in this
     Form 10-K, references to the number or percentage of the Company's common shares that
     a person owns do not reflect common shares issuable under outstanding options, if any.

(3)  Includes (i) 348,390 common shares owned by the W. Brent LaGere Irrevocable Trust and
     (ii) 45,000 common shares owned by W&L Holding Corp. ("W&L Holding"), a corporation 49%
     of which is owned by the W. Brent LaGere Irrevocable Trust.  Mr. LaGere disclaims
     beneficial ownership of the shares held by W&L Holding and the trust.  The power to
     vote and dispose of the shares held by W&L Holding is shared with Benjamin T. Walkingstick,
     who also owns 49% of W&L Holding.  The business address of Mr. LaGere is 1010 Manvel
     Avenue, Chandler, Oklahoma, 74834.

(4)  These totals do not include 33,000 common shares issuable under outstanding options the
     exercisability of which is subject to approval by the Company's shareholders.

(5)  These totals do not include 3,000 shares issuable under outstanding options the
     exercisability of which is subject to approval by the Company's shareholders.

</TABLE>

<PAGE>
                                                                         PAGE 41

SHAREHOLDERS HOLDING OVER FIVE PERCENT

     Listed below are persons, other than those listed previously, who are
known by the Company to own beneficially more than 5% of the Company's common
shares as of February 29, 2000.  Except as otherwise indicated, each of the
persons named below has sole voting and investment power with respect to the
common shares beneficially owned.
<TABLE>
<CAPTION>
                                                               BENEFICIAL OWNERSHIP
                                                     ----------------------------------------
NAME OF SHAREHOLDER                                   NUMBER OF SHARES (1)     PERCENT (2)
---------------------------------------------------- ---------------------  -----------------
<S>                                                  <C>                    <C>
CenTra Group (CenTra, Ammex, and
   Messrs. M.J. Moroun, Lech and Harned, Agnes A.
   Moroun and Matthew T. Moroun)
   12225 Stephens Road, Warren, Michigan 48089.......      1,144,700  (3)              25.9%
Benjamin T. Walkingstick
   1001 Manvel Avenue, Chandler, Oklahoma 74834......        400,029  (4)               9.0%
Marvel List, Trustee of the W. Brent LaGere
   Irrevocable Trust
   420 Bennett Boulevard, Chandler, Oklahoma 74834...        398,077                    9.0%

-----------------------------------------------------
<FN>

(1)   Except as otherwise indicated, each person or group has the sole power to vote and
      dispose of all shares and the sole power to exercise any options listed opposite his
      or her name.

(2)   These percentages are computed based on 4,428,033 shares of common stock outstanding
      including 1,142,625 common shares rescinded through litigation.

(3)   The CenTra Group has filed a Schedule 13D with the Securities and Exchange Commission
      reporting collective beneficial ownership of 49.2% of the Company's common shares as of
      July 1992.  This percentage included certain common shares the CenTra Group contracted
      to acquire subject to regulatory approval and was calculated based on total outstanding
      shares of 7,509,058.  The beneficial ownership set forth above includes:  (i) 842,625
      common shares owned by CenTra; (ii) 275,000 common shares owned by Ammex, Inc. ("Ammex");
      (iii) 25,000 common shares owned by DuraRock Underwriters, Ltd. ("DuraRock"), which is
      owned by Matthew T. Moroun, M.J. Moroun's son; (iv) 250 common shares held by Mr. Harned;
      (v) 200 common shares held by Mr. Lech; and (vi) 1,625 common shares owned by Agnes A.
      Moroun, M.J. Moroun's sister.

      The Company includes the ownership of Messrs. Harned and Lech and Agnes A. Moroun in the
      beneficial ownership of the CenTra Group because of their present or former employment
      and other relationships with CenTra and M.J. Moroun and their involvement in CenTra's
      attempts to take control of the Company.  See "Possible Change of Control" and "Other
      Matters Regarding Beneficial Ownership" regarding the Company's assumptions about
      beneficial ownership and the presence of certain restrictions on the voting and
      disposition of the common shares beneficially owned by Messrs. M.J. Moroun, Harned, Lech,
      Agnes A. Moroun and Matthew T. Moroun.

      The business address of CenTra and Messrs. Moroun and Harned is 12225 Stephens Road,
      Warren, Michigan  48089.  The business address of Mr. Lech is 5301 Lauren Court,
      Bloomfield Hills, Michigan  48302-2941.

(4)   Includes 45,000 common shares owned by W&L Holding, a corporation 49% of which is owned
      by Mr. Walkingstick.  The power to vote and dispose of the shares held by W&L Holding is
      shared with the W. Brent LaGere Irrevocable Trust, which also owns 49% of W&L Holding.
</TABLE>

OTHER MATTERS REGARDING BENEFICIAL OWNERSHIP

     For purposes of this report, unless otherwise indicated, the Company has
assumed that the following persons are affiliates:  an entity's executive
officers and directors or its managing partners, persons holding more than 10%
of an entity, and those persons who are controlling, controlled by, or under
common control with such officers, directors, managing partners, or
shareholders.

     Statements of percentages of ownership are made based upon pertinent
reporting requirements and guidelines specifically applicable to this report on
Form 10-K.  Determination of voting power under the Company's Articles of
Association or applicable insurance holding company laws may be at variance
with the above stated percentages.

<PAGE>
                                                                         PAGE 42

     As to the beneficial ownership of its common shares, the Company has
assumed that beneficial ownership (voting and investment power) is shared among
CenTra, Can-Am Investments, Ltd. ("Can-Am"), Ammex, and Messrs. M.J. Moroun,
Harned, Lech, Agnes A. Moroun and Matthew T. Moroun.  CenTra, Can-Am, Ammex and
M.J. Moroun have filed a Schedule 13D acknowledging that they compose a group
formed to affect the management practices and policies of the Company.  M.J.
Moroun has represented that he is the controlling shareholder, Chairman and
President of CenTra and Ammex.  Mr. Lech was, until June 2, 1995, a director
and executive officer of CenTra and continues to receive regular periodic
payments from CenTra.  Mr. Harned is an executive officer of CenTra.  Messrs.
Harned and Lech are executive officers and directors of Can-Am.  Correspondence
provided to the Company and an amendment to the Schedule 13D described above
indicate that M.J. Moroun is the owner of all of the outstanding voting stock
of Can-Am.  The Company includes the ownership of Messrs. Harned, Lech, Agnes
A. Moroun and Matthew T. Moroun in the beneficial ownership of the CenTra Group
because of their present or former employment and other relationships with
CenTra and M.J. Moroun and their involvement in CenTra's attempts to take
control of the Company.  Each member of the group disclaims beneficial
ownership or control of the common shares held by any other group member.
They presumably would disclaim shared beneficial ownership with either Messrs.
Harned or Lech.

     CenTra and its affiliates face certain restrictions in the voting or
disposition of their common shares.  By resolution dated August 19, 1992, the
Company restricted the voting of common shares held by CenTra and its
affiliates, including Can-Am.  In addition, voting of these shares in a manner
which would constitute a direct or indirect exercise of control over NAICO is
restricted by Nebraska law.  The United States District Court for the District
of Nebraska ("Nebraska Court") has assumed jurisdiction over all shares owned
or controlled by M.J. Moroun and/or his affiliates.

     During December 1999, the Company acquired 1,989,200 shares of its own
stock in exchange for payment of $15,204,758 to CenTra and its affiliates
pursuant to a divestiture plan proposed by NAICO and approved by the Nebraska
Court.  All shares were canceled upon their return to the Company.  The
Nebraska Court had ordered CenTra to divest all shares of Chandler owned or
controlled by it or its affiliates.  An additional share block owned by CenTra
and affiliates consists of 1,142,625 shares which will be divested following a
ruling on CenTra's appeal of a judgment entered by an Oklahoma Federal Court in
April 1997.  That judgment requires CenTra to transfer the shares to the
Company in exchange for payment of $6,882,500.  Following the conclusion of the
appeal, the Nebraska Court will determine the method of divestiture of these
shares.  The appellate court heard oral arguments on November 15, 1999.  The
Company cannot predict when the appellate court will rule on the appeal.  See
Note 11 to Consolidated Financial Statements.

     During December 1999, CIM transferred the 524,475 shares of the Company's
common stock that it owned to the Company.  The shares were canceled by the
Company.

POSSIBLE CHANGE IN CONTROL

     Until July 1992, CenTra and its affiliates held 22.7% of the Company's
common shares.  In July 1992, M.J. Moroun attempted to obtain control of the
Company and acquired or contracted to acquire in open market and private
purchases 26.5% of the Company's common stock (which was later transferred to
Can-Am), bringing the total beneficial stock ownership of CenTra and its
affiliates to 49.2% as of July 1992.  To further their purposes, CenTra or its
affiliates or both initiated litigation in Oklahoma, Arkansas, Michigan, and an
administrative proceeding in Nebraska, the domicile of NAICO.  See Note 11 to
Consolidated Financial Statements and "BUSINESS--Taxation--United States
Taxation of Shareholders."

     In response to the threats posed by CenTra and its affiliates, the Company
and its subsidiaries vigorously asserted defenses and counterclaims where
appropriate in the litigation and successfully opposed the Form A application
of CenTra and its affiliates in the administrative hearings before the Nebraska
Department of Insurance (the "Department").  The Form A application sought the
Department's approval of M.J. Moroun's share purchases and attempted assertion
of control.  The ruling of the Department and a state district court were
affirmed by the Nebraska Supreme Court on December 1, 1995.  By resolution
dated August 19, 1992, the Company has restricted the voting of common shares
held by CenTra and its affiliates.  A U.S. District Court Judge for the
Nebraska Court ordered the divestiture of all CenTra shares and CenTra
delivered the shares to the registry of the Court.  The Nebraska Court adopted
a divestiture plan proposed by NAICO ("NAICO Plan").  The NAICO Plan includes
a proposal whereby the Company would acquire and cancel the shares of Chandler
Stock owned or acquired by the CenTra Group.  The NAICO plan has been partially
implemented resulting in the Company acquiring 1,989,200 shares of its own
stock in exchange for payment of $15,204,758.  1,142,625 shares remain with the
Nebraska Court subject to divestiture following the conclusion of an appeal of
a judgment regarding those shares in another court.  See Note 11 to
Consolidated Financial Statements.

<PAGE>
                                                                         PAGE 43

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     In June and November 1998, W. Brent LaGere purchased, on behalf of and for
the benefit of the Chandler (U.S.A.), Inc. 401(k) Thrift Plan (the "Plan")
52,000 and 80,000 shares, respectively, of the Company's common stock.  On
November 19, 1998, the Plan acquired these and other shares of the Company's
common stock at no profit to Mr. LaGere.

     Chandler USA leases a rural property from Davenport Farms, Inc.
("Davenport Farms"), a corporation owned by Messrs. LaGere, Evans and Paden.
Chandler USA has placed three mobile homes on the property, drilled a water
well connected to the mobile homes and made other smaller improvements to the
property.  Its personnel maintains these improvements.  These mobile homes and
the property provide hunting, fishing, lodging, dining and other outdoor
recreational activities for the entertainment of customers and business
associates of Chandler USA and/or its subsidiaries.  Chandler USA pays no rent
to Davenport Farms but reimburses it for one-half of the utilities and for
hunting supplies.  Chandler USA has also agreed to indemnify Davenport Farms
for claims arising out of its use of the property.  Chandler USA retains the
right to remove all structures located upon the property when the lease
terminates.  In 1997, 1998 and 1999, Chandler USA incurred approximately
$159,000, $217,000 and $202,000, respectively, in expenses associated with its
use of this property, including $9,000, $7,000 and $8,000 paid to Davenport
Farms for reimbursement of certain expenses, such as utility and similar
expenses, for the years 1997, 1998 and 1999, respectively.

     Prior to May 1, 1997, Benjamin T. Walkingstick was an employee of Chandler
USA pursuant to an employment agreement dated October 28, 1988 (the "Employment
Agreement") and served as an executive officer and director of the Company and
certain of it subsidiaries.  Effective May 1, 1997, Mr. Walkingstick resigned
these positions and ceased to be an employee of Chandler  USA.  He continues to
be a consultant to Chandler USA and its subsidiaries pursuant to the Employment
Agreement and continues to receive compensation based on an annual rate of
$323,291 under the Employment Agreement through October 2000 at which time he
reaches age 70.

     On September 18, 1997, Mr. Walkingstick and L&W entered into an agreement
providing that Mr. Walkingstick will produce insurance business only through
L&W as an independent contractor (the "Insurance Agreement").  Mr. Walkingstick
will receive one-half of all commissions upon any business he produces which
was not previously written by L&W and is liable for payment of all premiums due
upon such business.  The Insurance Agreement may be terminated by either party
at any time upon thirty days written notice.  Upon termination, the insurance
policy expirations or renewal rights (ownership) of the insurance business
produced by Mr. Walkingstick shall remain the property of  L&W.  Mr.
Walkingstick is required to maintain his own support staff.  Commissions paid
to Mr. Walkingstick under this arrangement were $10,832, $10,603 and $12,979
during 1997, 1998 and 1999, respectively.

     During 1997, L&W acquired 494,617 shares of the Company's common stock
from two former agents of NAICO and L&W as payment for debts owed to L&W and
NAICO.  L&W transferred those shares during 1997 to CIM.  During 1999, these
shares were transferred to the Company and were canceled.

     Chandler USA and its subsidiaries paid $66,130, $142,694 and $248,188 in
1997, 1998 and 1999, respectively, for services rendered by Gardere & Wynne,
L.L.P.  David G. McLane, a partner of Gardere & Wynne, L.L.P., served as
Secretary of NAICO during 1997 and 1998, and as Assistant Secretary during
1999.  Approximately $35,323 and $227,545 of the 1998 and 1999 amounts related
to the issuance of debentures by Chandler USA during 1999.

<PAGE>
                                                                         PAGE 44

     NAICO and Chandler Barbados engage in various reinsurance arrangements
from time to time.  The current financial effect of those arrangements is
described in Notes 12 and 13 to the Consolidated Financial Statements.
Chandler USA anticipates that NAICO and Chandler Barbados will in the future
continue to engage in similar reinsurance arrangements.

     ADVANCEMENT OF LITIGATION EXPENSES.  In the CenTra litigation, certain
officers of the Company and the Company's directors other than Messrs. M.J.
Moroun, Harned, Lech and Maestri were named as defendants.  In accordance with
its Articles of Association, the Company has advanced the litigation expenses
of these persons in exchange for undertakings to repay such expenses if those
persons are later determined to have breached the standard of conduct provided
in the Articles of Association.  The Company has paid expenses totaling
approximately $2.3 million as of  December 31, 1999.  A portion of these
expenses relate to claims which have been dismissed or which were decided in
favor of the officers and directors.  In addition, certain expenses may be
recovered from the Company's directors and officers liability insurer.  As a
result of various events in 1995, the Company recorded an $818,000 estimated
recovery of costs from its directors and officers liability insurer related to
a $1 million claim for reimbursable amounts previously paid that relate to
allowable defense and litigation costs for such parties.  In 1996, the Company
recorded an additional estimated recovery of $982,000.  The Company received a
payment for the 1995 claim during 1996 in the amount of $795,000.  In
connection with the Oklahoma Federal Court judgments, the Company recorded an
additional estimated recovery of $2.7 million from the Company's directors and
officers liability insurer.  The Company is entitled to a total of $5 million
under the applicable insurance policy.  Some amounts have been previously paid
without dispute and the Company is negotiating with the insurer for payment of
the policy balance.  The Company could recover the remaining policy limits or
could compromise its claim, and could incur significant costs in either case.
The estimated insurance recovery is based upon these variable factors.  Except
for the recovery of a portion of the litigation costs from the Company's
directors and officers liability insurer, no provision has been made in the
accompanying consolidated financial statements related to the advancement of
litigation expenses to certain defendants.  The special litigation committee's
of the Company and Chandler USA were delegated the authority of the board's of
directors to deal with all issues arising from the Oklahoma litigation
including the issue of officer and director indemnification.

     The Company believes that all transactions, including loans, with
directors, officers, or shareholders of the Company are and will continue to be
on terms no less favorable to the Company than could be obtained from
unaffiliated parties.

<PAGE>
                                                                         PAGE 45

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

  (a)  1.  FINANCIAL STATEMENTS.  The consolidated balance sheets of the
           Company and its subsidiaries as of December 31, 1998 and 1999,
           and the related consolidated statements of operations, comprehensive
           income, shareholders' equity and cash flows for each of the three
           years in the period ended December 31, 1999, together with the
           related notes thereto and the report of Deloitte & Touche,
           independent auditors on such financial statements as of December 31,
           1999 and for the three years then ended are filed as a part of this
           Form 10-K.  See accompanying Index on page F-1.

       2.  FINANCIAL STATEMENT SCHEDULES.  The financial statement schedules
           listed in the accompanying index to consolidated financial
           statements and schedules are filed as part of this Form 10-K.  All
           other schedules have been omitted since the required information is
           not applicable or is not present in amounts sufficient to require
           submission of the schedule or because the information is included in
           the consolidated financial statements or the notes thereon.

       3.  EXHIBITS.

           3.1  Memorandum of Association of the Company. (2)

           3.2  Articles of Association of the Company and amendments thereto.
                (2) (1)

           4.1  Specimen Certificate for common shares of the Company. (4)

          10.1  Non-Qualified Stock Option Plan, as amended, adopted at the
                Shareholder's Annual Meeting on January 19, 1987. (3)

          10.2  Form of Non-Qualified Stock Option Agreement. (1)
          10.3  Agreement for Placement of Insurance Business. (5)

          10.4  Directors' Stock Option and Stock Grant Plan. (6)

          21.1  Subsidiaries of the registrant.

          23.1  Deloitte & Touche consent.

          27.1  Financial Data Schedule (EDGAR version only)
----------------------------

           (1)  Previously filed as an exhibit to Registration No. 33-21381 on
                Form S-1 and incorporated herein by reference.

           (2)  Previously filed as an exhibit to Registration No. 33-5168 on
                Form S-1 and incorporated herein by reference.

           (3)  Previously filed as an exhibit to registrant's Annual Report on
                Form 10-K for the fiscal year ended December 31, 1987 and
                incorporated herein by reference.

           (4)  Previously filed as an exhibit to Registration No. 33-33540 on
                Form S-2 and incorporated herein by reference.

           (5)  Previously filed as an exhibit to registrant's Quarterly Report
                on Form 10-Q for the quarterly period ended September 30, 1997
                and incorporated herein by reference.

           (6)  Previously filed as an exhibit to registrant's Quarterly Report
                on Form 10-Q for the quarterly period ended June 30, 1998 and
                incorporated herein by reference.

           Copies of the foregoing exhibits filed with this Form 10-K or
           incorporated by reference are available from the Company upon
           written request and payment of a reasonable copying fee.

  (b)  Reports on Form 8-K.

     The Company filed two current reports on Form 8-K dated December 10, 1999
and December 17, 1999 responding to Item 5 of Form 8-K.

<PAGE>
                                                                         PAGE 46

                                   SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                              CHANDLER INSURANCE COMPANY, LTD.

Date: March 20, 2000          By:/s/ W. Brent LaGere
                              -------------------------------------------------
                                              W. Brent LaGere
                                      Chairman of the Board, President
                                        and Chief Executive Officer

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.

Date: March 20, 2000          /s/ W. Brent LaGere
                              -------------------------------------------------
                              W. Brent LaGere, Chairman of the Board,
                              Chief Executive Officer,
                              President and Director (Principal Executive
                              Officer)

Date: March 20, 2000          /s/ Mark T. Paden
                              -------------------------------------------------
                              Mark T. Paden, Executive Vice President,
                              Chief Financial Officer
                              and Director (Principal Financial Officer)

Date: March 20, 2000          /s/ Mark C. Hart
                              -------------------------------------------------
                              Mark C. Hart, Vice President - Accounting and
                              Treasurer
                              (Principal Accounting Officer)

Date: March 20, 2000          /s/ Brenda B. Watson
                              -------------------------------------------------
                              Brenda B. Watson, Executive Vice President and
                              Director


Date: March 20, 2000          /s/ Richard L. Evans
                              -------------------------------------------------
                              Richard L. Evans, Vice President and Director


Date: March 20, 2000          /s/ James M. Jacoby
                              -------------------------------------------------
                              James M. Jacoby, Director


Date: March 20, 2000          /s/ Robert L. Rice
                              -------------------------------------------------
                              Robert L. Rice, Director


<PAGE>
                                                                         PAGE 47

Date: March 20, 2000           /s/ Paul A. Maestri
                               ------------------------------------------------
                               Paul A. Maestri, Director


Date: March 20, 2000           /s/ Larry A. Davis
                               ------------------------------------------------
                               Larry A. Davis, Director


Date: March 20, 2000           /s/ W. Scott Martin
                               ------------------------------------------------
                               W. Scott Martin, Director
<PAGE>
                                                                        PAGE F-1


                        CHANDLER INSURANCE COMPANY, LTD.

            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<CAPTION>
                                                                                      PAGES
                                                                                ------------------
<S>                                                                             <C>
FINANCIAL STATEMENTS
Consolidated Balance Sheets as of December 31, 1998 and 1999...................        F-2

Consolidated Statements of Operations for the years ended
   December 31, 1997, 1998 and 1999............................................        F-3

Consolidated Statements of Comprehensive Income for the years ended
   December 31, 1997, 1998 and 1999............................................        F-4

Consolidated Statements of Cash Flows for the years ended
   December 31, 1997, 1998 and 1999............................................        F-5

Consolidated Statements of Shareholders' Equity for the years ended
   December 31, 1997, 1998 and 1999............................................        F-6

Notes to Consolidated Financial Statements.....................................  F-7 through F-27

Independent Auditors' Report on Consolidated Financial Statements
   and Financial Statement Schedules...........................................        F-28

SCHEDULES

  I   Summary of Investments - Other Than Investments in Related Parties.......        F-29

  II  Condensed Financial Information of Registrant............................  F-30 through F-32

  III Supplementary Insurance Information......................................        F-33

  IV  Reinsurance..............................................................        F-34

  V   Valuation and Qualifying Accounts........................................        F-35

  VI  Supplemental Information (for property-casualty insurance underwriters)..        F-36

</TABLE>

<PAGE>
                                                                        PAGE F-2

                         CHANDLER INSURANCE COMPANY, LTD.
                           CONSOLIDATED BALANCE SHEETS
                   (Amounts in thousands except share amounts)

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                               ------------------------
                                                                                  1998          1999
                                                                               ----------    ----------
<S>                                                                            <C>           <C>
ASSETS
Investments
   Fixed maturities available for sale, at fair value......................... $ 109,055     $ 108,709
   Fixed maturities held to maturity, at amortized cost (fair value
      $1,332 and $1,039 in 1998 and 1999, respectively).......................     1,183           984
   Equity securities available for sale, at fair value........................       191           306
                                                                               ----------    ----------
      Total investments.......................................................   110,429       109,999
Cash and cash equivalents.....................................................    10,383         8,456
Premiums receivable, less allowance for non-collection
   of $200 and $263 at 1998 and 1999, respectively............................    28,479        47,721
Reinsurance recoverable on paid losses, less allowance for
   non-collection of $275 at 1998 and 1999....................................     2,760         3,281
Reinsurance recoverable on unpaid losses, less allowance for
   non-collection of $330 and $302 at 1998 and 1999, respectively.............    28,970        37,539
Prepaid reinsurance premiums..................................................    22,448        19,960
Deferred policy acquisition costs.............................................     2,381         6,488
Property and equipment, net...................................................     8,124        10,765
Licenses, net.................................................................     4,194         4,044
Excess of cost over net assets acquired, net..................................     4,604         3,955
Other assets..................................................................    13,253        16,912
                                                                               ----------    ----------
Total assets.................................................................. $ 236,025     $ 269,120
                                                                               ==========    ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
   Unpaid losses and loss adjustment expenses................................. $  80,909     $  98,460
   Unearned premiums..........................................................    50,647        67,769
   Policyholder deposits......................................................     4,936         5,135
   Notes payable..............................................................     9,410             -
   Accrued taxes and other payables...........................................     3,869         6,796
   Premiums payable...........................................................    10,961         7,312
   Litigation liabilities.....................................................    13,228         8,905
   Debentures.................................................................         -        24,000
                                                                               ----------    ----------
      Total liabilities.......................................................   173,960       218,377
                                                                               ----------    ----------
Shareholders' equity
   Common stock, $1.67 par value, 10,000,000 shares authorized, 6,941,708 and
      4,428,033 shares issued and outstanding in 1998 and 1999, respectively..    11,593         7,395
   Paid-in surplus............................................................    34,983        21,380
   Common stock to be issued (20,000 shares in 1998)..........................       125             -
   Capital redemption reserve.................................................       947           947
   Retained earnings..........................................................    28,328        30,479
   Less: Stock held by subsidiary, at cost (544,475 shares in 1998)...........    (2,905)            -
   Less: Stock rescinded through litigation (1,660,125 and 1,142,625 shares
      in 1998 and 1999, respectively).........................................   (11,799)       (6,883)
   Accumulated other comprehensive income (loss):
      Unrealized gain (loss) on investments available for sale,
         net of deferred income taxes.........................................       793        (2,575)
                                                                               ----------    ----------
      Total shareholders' equity..............................................    62,065        50,743
                                                                               ----------    ----------
Total liabilities and shareholders' equity.................................... $ 236,025     $ 269,120
                                                                               ==========    ==========

</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
                                                                        PAGE F-3

                         CHANDLER INSURANCE COMPANY, LTD.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   (Amounts in thousands except per share data)

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED DECEMBER 31,
                                                                               -------------------------------------
                                                                                  1997          1998         1999
                                                                               ----------    ----------   ----------
<S>                                                                            <C>           <C>         <C>
Premiums and other revenues
   Direct premiums written and assumed........................................ $ 123,088     $ 134,329    $ 169,635
   Reinsurance premiums ceded.................................................   (26,222)      (68,793)     (41,698)
                                                                               ----------    ----------   ----------
      Net premiums written and assumed........................................    96,866        65,536      127,937
   Decrease (increase) in unearned premiums...................................    (2,187)        4,528      (19,610)
                                                                               ----------    ----------   ----------
      Net premiums earned.....................................................    94,679        70,064      108,327

Interest income, net..........................................................     7,253         6,467        5,594
Realized investment gains, net................................................       764         1,163           55
Fee for rescinded reinsurance treaties........................................         -             -       10,000
Commissions, fees and other income............................................     2,528         1,952        1,730
                                                                               ----------    ----------   ----------
      Total premiums and other revenues.......................................   105,224        79,646      125,706
                                                                               ----------    ----------   ----------
Operating costs and expenses
   Losses and loss adjustment expenses........................................    57,512        47,879       79,816
   Policy acquisition costs...................................................    28,145        17,033       28,681
   General and administrative expenses........................................    13,116        12,710       12,029
   Interest expenses..........................................................       463           936        1,531
   Litigation expenses, net...................................................     4,772        (2,707)       1,133
                                                                               ----------    ----------   ----------
      Total operating costs and expenses......................................   104,008        75,851      123,190
                                                                               ----------    ----------   ----------
Income before income taxes....................................................     1,216         3,795        2,516
Federal income tax provision
   of consolidated U.S. subsidiaries..........................................    (2,281)         (353)        (365)
                                                                               ----------    ----------   ----------
   Net income (loss).......................................................... $  (1,065)    $   3,442    $   2,151
                                                                               ==========    ==========   ==========
Basic earnings (loss) per common share........................................ $   (0.16)    $    0.54    $    0.34
Diluted earnings (loss) per common share...................................... $   (0.16)    $    0.53    $    0.34

Basic weighted average common shares outstanding..............................     6,687         6,429        6,330
Diluted weighted average common shares outstanding............................     6,687         6,438        6,347
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>
                                                                        PAGE F-4

                         CHANDLER INSURANCE COMPANY, LTD.
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                           ------------------------------------
                                                                              1997         1998         1999
                                                                           ----------   ----------   ----------
<S>                                                                        <C>           <C>         <C>

Net income (loss)......................................................... $  (1,065)   $   3,442    $   2,151
                                                                           ----------   ----------   ----------
Other comprehensive income (loss), before income tax:
   Unrealized gains (losses) on securities:
      Unrealized holding gains (losses) arising during period.............     2,369        1,905       (4,568)
      Less: Reclassification adjustment for gains included in
         net income (loss)................................................      (764)      (1,163)         (55)
                                                                           ----------   ----------   ----------
Other comprehensive income (loss), before income tax......................     1,605          742       (4,623)
Income tax benefit (provision) related to items of other
   comprehensive income (loss)............................................      (466)        (202)       1,255
                                                                           ----------   ----------   ----------
Other comprehensive income (loss), net of income tax......................     1,139          540       (3,368)
                                                                           ----------   ----------   ----------
Comprehensive income (loss)............................................... $      74    $   3,982     $ (1,217)

                                                                           ==========   ==========   ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
                                                                        PAGE F-5

                         CHANDLER INSURANCE COMPANY, LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31,
                                                                           ------------------------------------
                                                                              1997         1998        1999
                                                                           ----------   ----------   ----------
<S>                                                                        <C>           <C>       <C>
OPERATING ACTIVITIES
   Net income (loss)...................................................... $  (1,065)   $   3,442    $   2,151
   Add (deduct):
      Adjustments to reconcile net income to cash provided by
         (applied to) operating activities:
         Realized investment gains, net...................................      (764)      (1,163)         (55)
         Net (gains) losses on sale of equipment..........................         3         (146)          69
         Amortization and depreciation....................................     2,214        2,458        2,361
         Provision for non-collection of premiums.........................        52          152          210
         Provision for non-collection of reinsurance recoverables.........       527           50            -
         Earned compensation - non-employee director stock option
            and stock-grant plan..........................................         -          272            -
      Net change in non-cash balances relating to operating activities:
         Premiums receivable..............................................    (1,794)        (552)     (19,452)
         Reinsurance recoverable on paid losses...........................       596         (160)        (671)
         Reinsurance recoverable on unpaid losses.........................     3,169      (17,676)      (8,419)
         Prepaid reinsurance premiums.....................................    (4,192)     (12,786)       2,488
         Deferred policy acquisition costs................................      (319)       2,931       (4,107)
         Other assets.....................................................    (2,456)        (562)        (767)
         Unpaid losses and loss adjustment expenses.......................    (4,710)       5,980       17,551
         Unearned premiums................................................     6,379        8,259       17,122
         Policyholder deposits............................................       814          106          199
         Accrued taxes and other payables.................................    (1,437)      (2,471)       2,927
         Premiums payable.................................................     2,106        6,407       (3,649)
         Litigation liabilities...........................................     4,819       (3,390)         776
                                                                           ----------   ----------   ----------
      Cash provided by (applied to) operating activities..................     3,942       (8,849)       8,734
                                                                           ----------   ----------   ----------
INVESTING ACTIVITIES
   Fixed maturities available for sale:
      Purchases...........................................................   (35,001)     (71,195)     (30,931)
      Sales...............................................................    22,232       47,957        4,159
      Maturities..........................................................    12,541       27,413       21,948
   Fixed maturities held to maturity:
      Maturities..........................................................       380          100          265
   Equity securities available for sale:
      Maturities..........................................................     2,459            -            -
   Cost of property and equipment purchased...............................      (893)      (3,470)      (3,920)
   Proceeds from sale of property and equipment...........................        45          337          121
                                                                           ----------   ----------   ----------
         Cash provided by (applied to) investing activities...............     1,763        1,142       (8,358)
                                                                           ----------   ----------   ----------

FINANCING ACTIVITIES
   Cost of common stock purchased by subsidiary...........................         -         (524)           -
   Payments to acquire stock under divestiture plan.......................         -            -      (15,204)
   Proceeds from notes payable & debentures...............................         -        8,548       24,000
   Payments on notes payable..............................................    (1,595)      (1,933)      (9,410)
   Debt issue costs.......................................................         -            -       (1,689)
                                                                           ----------   ----------   ----------
      Cash provided by (applied to) financing activities..................    (1,595)       6,091       (2,303)
                                                                           ----------   ----------   ----------
   Increase (decrease) in cash and cash equivalents during the period.....     4,110       (1,616)      (1,927)
   Cash and cash equivalents at beginning of period.......................     7,889       11,999       10,383
                                                                           ----------   ----------   ----------
   Cash and cash equivalents at end of period............................. $  11,999    $  10,383    $   8,456
                                                                           ==========   ==========   ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>
                                                                        PAGE F-6

                         CHANDLER INSURANCE COMPANY, LTD.
                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                    (Amounts in thousands except share amounts)

<TABLE>
<CAPTION>

                                                                                              Stock     Accumulated
                                                   Common     Capital              Stock    rescinded      other        Total
                               Common  Paid-in   stock to be redemption Retained  held by    through   comprehensive shareholders'
                                stock  surplus     issued     reserve   earnings subsidiary litigation income (loss)    equity
                              -------- -------- ------------ ---------- -------- ---------- ---------- ------------- -------------
<S>                           <C>      <C>      <C>          <C>        <C>      <C>        <C>        <C>           <C>
Balance, January 1, 1997..... $11,593  $34,942  $         -  $     947  $25,951  $       -  $       -  $       (886) $    72,547

Net loss.....................       -        -            -          -   (1,065)         -          -             -       (1,065)

Stock acquired by subsidiary
  at cost (494,617 shares)...       -        -            -          -        -     (2,487)         -             -       (2,487)

Stock rescinded through liti-
  gation (1,660,125 shares)..       -        -            -          -        -          -    (11,799)            -      (11,799)

Change in unrealized gain on
  investments available for
  sale, net of income tax....       -        -            -          -        -          -          -         1,139        1,139
                              -------- -------- ------------ ---------- -------- ---------- ---------- ------------- ------------

Balance, December 31, 1997...  11,593   34,942            -        947   24,886     (2,487)   (11,799)          253       58,335

Net income...................       -        -            -          -    3,442          -          -             -        3,442

Stock acquired by subsidiary
  at cost (69,858 shares)....       -        -            -          -        -       (524)         -             -         (524)

Stock issued or to be issued for
  non-employee director stock
  option and stock grant
  plan (40,000 shares).......       -       41          125          -        -        106          -             -          272

Change in unrealized gain on
  investments available for
  sale, net of income tax....       -        -            -          -        -          -          -           540          540
                              -------- -------- ------------ ---------- -------- ---------- ---------- ------------- ------------

Balance, December 31, 1998...  11,593   34,983          125        947   28,328     (2,905)   (11,799)          793       62,065

Net income...................       -        -            -          -    2,151          -          -             -        2,151

Stock issued for non-employee
  director stock grant plan
  (20,000 shares)............       -       18         (125)         -        -        107          -             -            -

Stock acquired from subsidiary
  and retired (524,475
  shares)....................    (876)  (1,922)           -          -        -      2,798          -             -            -

Stock acquired pursuant to
  divestiture order and
  retired....................  (3,322) (11,699)           -          -        -          -       4,916            -      (10,105)

Change in unrealized loss on
  investments available for
  sale, net of income tax....       -        -            -          -        -          -           -       (3,368)      (3,368)

                              -------- -------- ------------ ---------- -------- ---------- ---------- ------------- ------------
Balance, December 31, 1999... $ 7,395  $21,380  $         -  $     947  $30,479  $       -  $  (6,883) $     (2,575) $    50,743
                              ======== ======== ============ ========== ======== ========== ========== ============= ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>
                                                                        PAGE F-7
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      DECEMBER 31, 1997, 1998 AND 1999

NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

  (A)  BASIS OF PRESENTATION

          Chandler Insurance Company, Ltd. ("Chandler" or the "Company") is an
     insurance company organized and domiciled in the Cayman Islands.  Operating
     revenues, expenses and identifiable assets are primarily from operations
     outside the Cayman Islands.  The Company's wholly owned subsidiaries are
     engaged in various property and casualty insurance and reinsurance
     operations.  The insurance products offered by the Company through its
     subsidiary, National American Insurance Company, include property and
     casualty insurance coverage primarily for businesses in various
     industries, political subdivisions, surety bonds for small contractors and
     group accident and health insurance in the United States of America
     ("U.S.").  A substantial part of the business is conducted through
     individual independent insurance agencies and underwriting managers,
     primarily in the Southwest and Midwest areas of the U.S.  One of the
     Company's subsidiaries, Chandler Insurance (Barbados), Ltd., principally
     reinsures risks underwritten by National American Insurance Company.  In
     addition, one of the Company's subsidiaries, LaGere and Walkingstick
     Insurance Agency, Inc., operates as an independent insurance agency based
     in Chandler, Oklahoma, and represents various insurance companies that
     provide a variety of property and casualty, life and accident and health
     coverages, and acts as a surplus lines broker specializing in risk
     management and brokering insurance for commercial enterprises.

          The consolidated financial statements have been prepared in
     accordance with United States of America generally accepted accounting
     principles ("U.S. GAAP") and are expressed in U.S. dollars.  The
     preparation of the financial statements requires management to make
     estimates and assumptions that affect the reported amounts of assets and
     liabilities and disclosure of contingent assets and liabilities at the
     date of the financial statements and the reported amounts of revenues and
     expenses during the reporting period.  Actual results could differ
     significantly from those estimates.

  (B)  PRINCIPLES OF CONSOLIDATION

          The consolidated financial statements include the accounts of the
     Company and all wholly owned subsidiaries.  The following represents the
     significant subsidiaries:

     -  Chandler Insurance (Barbados), Ltd. ("Chandler Barbados") and NAICO
        Indemnity (Cayman), Ltd. ("NAICO Indemnity"), wholly owned subsidiaries
        of the Company.

     -  Chandler (U.S.A.), Inc. ("Chandler USA"), a wholly owned subsidiary of
        Chandler Barbados.

     -  National American Insurance Company ("NAICO") and LaGere and
        Walkingstick Insurance Agency, Inc. ("L&W"), wholly owned subsidiaries
        of Chandler USA.

     All significant intercompany accounts and transactions have been
     eliminated in consolidation.

  (C)  IMPAIRMENT OF LONG-LIVED ASSETS

          The Company periodically evaluates the carrying value of long-lived
     assets to be held and used when changes in events and circumstances
     warrant such a review.  The carrying value of a long-lived asset is
     considered impaired when the separately identifiable anticipated
     undiscounted cash flow from such asset is less than its carrying value.
     In that event, a loss is recognized based on the amount by which the
     carrying value exceeds the fair value of the long-lived asset.  Fair value
     is determined primarily using the anticipated cash flows discounted at a
     rate commensurate with the risk involved.  Losses on long-lived assets to
     be disposed of are determined in a similar manner, except that fair values
     are reduced for disposal costs.

  (D)  REVENUE RECOGNITION

          Premiums are generally recognized as earned on a pro rata basis over
     the policy period, which is in proportion to the insurance protection
     provided. The portion of premiums that will be earned in the future are
     deferred and reported as unearned premiums.  Amounts recorded for ceded
     reinsurance premiums are reported as prepaid reinsurance premiums and
     amortized over the remaining contract period in proportion to the amount
     of the insurance protection provided.  Commission revenues are generally
     recognized when coverage is effective and premiums are billed.

<PAGE>
                                                                        PAGE F-8

  (E)  UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

          Losses and loss adjustment expenses are charged to income as incurred.
     The reserve for unpaid losses and loss adjustment expenses represents the
     accumulation of estimates for reported losses and includes provisions for
     losses incurred but not reported based on data available at this time. The
     methods of determining such estimates and establishing resulting reserves
     are periodically reviewed and updated, and adjustments therefrom are
     necessary to maintain an adequate reserve for unpaid losses and loss
     adjustment expenses.  As more fully explained in Note 3, such estimates are
     management's best estimates of the expected values.  The actual results may
     vary from these values because the evaluation of losses is inherently
     subjective and susceptible to significant changing factors.

  (F)  EARNINGS PER COMMON SHARE

          Basic earnings (loss) per common share is computed based upon net
     income (loss) divided  by the weighted average number of common shares
     outstanding during each period.  Diluted earnings (loss) per common share
     is computed based upon net income (loss) divided by the weighted average
     number of common shares outstanding during each period adjusted for the
     effect of dilutive potential common shares calculated using the treasury
     stock method.  Weighted average shares include 1,660,125 common shares
     which were rescinded through litigation during 1997 but were outstanding
     at December 31, 1997 and 1998 (1,142,625 were outstanding at December 31,
     1999), and exclude 494,617 and 544,475 shares held by a subsidiary of the
     Company at December 31, 1997 and 1998, respectively.  The numerator for
     basic and diluted earnings per share is equal to the net income (loss) for
     the respective period.

          The following table sets forth the computation of the denominator
     for basic and diluted earnings per share:

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                        --------------------------------
                                                           1997       1998       1999
                                                        ---------- ---------- ----------
                                                                 (In thousands)
     <S>                                                <C>        <C>        <C>
     Denominator for basic earnings (loss) per
        common share - weighted average shares.........     6,687      6,429      6,330
     Effect of dilutive securities-
        non-employee director stock options............         -          9         17
                                                        ---------- ---------- ----------
     Denominator for dilutive earnings (loss) per
        common share - adjusted weighted average
        shares and assumed conversions.................     6,687      6,438      6,347
                                                        ========== ========== ==========
</TABLE>

  (G)  DEFERRED POLICY ACQUISITION COSTS

          Policy acquisition costs that vary with and are primarily related to
     the acquisition of new and renewal business (such as premium taxes, agent
     commissions, commissions received from reinsurers and a portion of other
     underwriting expenses) are deferred and amortized over the terms of the
     policies.  Recoverability of such deferred costs is dependent on the
     related unearned premiums on the policies being more than expected claim
     losses.  The Company considers anticipated interest income in determining
     if a premium deficiency exists.  Certain policy acquisition costs, such
     as policyholder dividends, are expensed directly.  NAICO expensed $1.2
     million, $242,000 and $324,000 during 1997, 1998 and 1999, respectively,
     for dividends to policyholders primarily on participating workers
     compensation policies.  Gross written premiums for participating policies
     were $3.6 million, $2.3 million and $1.9 million in 1997, 1998 and 1999,
     respectively.

  (H)  PROPERTY AND EQUIPMENT

          Real estate and improvements and other property and equipment are
     stated at cost and depreciated using the straight-line method over their
     useful lives which range from 3 to 31 years.  Property and equipment
     consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                          1998       1999
                                                       ---------- ----------
                                                           (In thousands)
               <S>                                      <C>       <C>
               Real estate and improvements............ $  5,765  $   8,157
               Other property and equipment............   10,257     11,353
                                                        --------- ----------
                                                          16,022     19,510
               Accumulated depreciation................   (7,898)    (8,745)
                                                        --------- ----------
                                                        $  8,124  $  10,765
                                                        ========= ==========
</TABLE>

<PAGE>
                                                                        PAGE F-9

          Depreciation expense was approximately $872,000, $1,062,000 and
     $1,090,000 for 1997, 1998 and 1999, respectively.

  (I)  INTANGIBLE ASSETS

          The cost of insurance licenses acquired is amortized over 40 years
     using the straight-line method.  The excess of cost over net assets
     acquired is amortized by the straight-line method over 15-17 years.
     Intangible assets included the following at December 31:

<TABLE>
<CAPTION>
                                                          1998       1999
                                                       ---------- ----------
                                                           (In thousands)
           <S>                                         <C>        <C>

           Licenses................................... $   5,991  $   5,991
           Excess of cost over net assets acquired....    10,748     10,748
                                                       ---------- ----------
                                                          16,739     16,739
           Accumulated amortization...................    (7,941)    (8,740)
                                                       ---------- ----------
                                                       $   8,798  $   7,999
                                                       ========== ==========
</TABLE>

  (J)  POLICYHOLDER DEPOSITS

          NAICO requires certain policyholders to pay a deposit at inception of
     coverage to secure payment of future premiums and deductibles on claims
     incurred. It is expressly agreed between NAICO and the policyholder that
     the funds will be used by NAICO only in the event the policyholder fails
     to pay any premiums, deductibles or other charges when due.  NAICO has
     established a liability for these deposits in an amount equal to that due
     the policyholders based on insurance premiums reported as of the balance
     sheet date.

  (K)  INVESTMENTS

          At the time of purchase, investments in debt securities that the
     Company has the positive intent and ability to hold to maturity are
     classified as held to maturity and reported at amortized cost; all other
     debt securities are reported at fair value.  Investments classified as
     trading are actively and frequently bought and sold with the objective
     of generating income on short-term differences in price.  Realized and
     unrealized gains and losses on securities classified as trading account
     assets are recognized in current operations.  The Company has not
     classified any investments as trading account assets.  Securities not
     classified as held to maturity or trading are classified as available for
     sale, with the related unrealized gains and losses excluded from earnings
     and reported net of income tax as a component of other comprehensive
     income until realized. Realized gains and losses on sales of securities
     are based on the specific identification method.  Declines in the fair
     value of investment securities below their carrying value that are other
     than temporary are recognized in earnings.

  (L)  INCOME TAXES

          The Company uses an asset and liability approach for accounting for
     income taxes. Deferred income taxes are recognized for the tax
     consequences of temporary differences and carryforwards by applying
     enacted tax rates applicable to future years to differences between the
     financial statement amounts and the tax bases of existing assets and
     liabilities.  A valuation allowance is established if it is more likely
     than not that some portion of the deferred tax asset will not be realized.

  (M)  CASH AND CASH EQUIVALENTS

          For purposes of the consolidated statements of cash flows, the
     Company considers all highly liquid investments with original maturities
     of 14 days or less to be cash equivalents.  For cash and cash equivalents,
     the carrying amount is a reasonable estimate of fair value.

<PAGE>
                                                                       PAGE F-10
  (N)  SUPPLEMENTAL CASH FLOW INFORMATION

          Cash payments for interest and income taxes, and noncash investing
     activities were as follows:
<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                                  --------------------------------
                                                     1997       1998       1999
                                                  ---------- ---------- ----------
                                                           (In thousands)
     <S>                                          <C>        <C>        <C>
     Cash payments during the year for:
        Interest................................. $     818  $   1,307  $     549
        Income taxes.............................     1,855        170        857

</TABLE>

          In January 1997, NAICO received publicly traded common stock valued
     at approximately $2.2 million at the settlement date as a result of
     settling certain legal disputes with a former underwriting manager for a
     portion of the surety bond program.

          During 1997, NAICO received shares of common stock with a fair value
     of approximately $124,000 in connection with an unaffiliated entity's
     conversion to a for-profit corporation.

          During 1997, L&W acquired 494,617 shares of the Company's common
     stock from two former agents of NAICO and L&W as payment for debts owed
     to NAICO and L&W.  L&W transferred those shares during 1997 to Chandler
     Insurance Management, Ltd. ("CIM"), a wholly owned subsidiary of the
     Company who, in turn assumed debt of L&W to Chandler Barbados in the
     amount of approximately $2.5 million, the fair value of the shares.

          As a result of a jury verdict in April 1997, the Company recorded
     the rescission of certain common stock of the Company that it sold in
     1990 in return for a future payment of $5,099,133.  The rescission was
     recorded as a decrease to shareholders' equity in the amount of
     approximately $4,916,000 with the remaining amount included in
     litigation expense.  In December 1999, the Company paid the $5,099,133
     in exchange for the stock which was then canceled.  In the fourth
     quarter of 1997, the Company recorded the rescission of certain
     additional common stock of the Company pursuant to an order issued on
     March 10, 1998 in the amount of $6,882,500.  This amount is included in
     "Litigation liabilities" on the Company's consolidated balance sheets.
     See Note 11 for additional information.

  (O)  REINSURANCE

          Management believes all of the Company's reinsurance contracts with
     reinsurers meet the criteria for risk transfer and the revenue and cost
     recognition provisions in order to be accounted for as reinsurance.  As
     more fully explained in Note 12, reinsurance contracts do not relieve the
     Company from its obligation to policyholders.  In addition, failure of
     reinsurers to honor their obligations could result in losses to the
     Company.

  (P)  ACCOUNTING STANDARD ISSUED BUT NOT YET ADOPTED

          In June 1998, the Financial Accounting Standards Board ("FASB")
     issued Statement of Financial Accounting Standards ("SFAS") No. 133,
     ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.  SFAS No.
     133 establishes accounting and reporting standards for derivative
     instruments, including certain derivative instruments embedded in other
     contracts, and for hedging activities.  It requires that the Company
     recognize all derivatives as either assets or liabilities in the statement
     of financial condition and measure those instruments at fair value.  The
     accounting for changes in the fair value of a derivative depends on the
     intended use of the derivative and the resulting designation.  The Company
     will adopt SFAS No. 133 when required.  Management of the Company does not
     expect that adoption of SFAS No. 133 will  have a material impact on the
     Company's consolidated financial condition or results of operations.

<PAGE>
                                                                       PAGE F-11
NOTE 2. INVESTMENTS AND INTEREST INCOME

     Net interest income and realized investment gains are summarized in the
following table.  These amounts are net of investment expenses.

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                    --------------------------------
                                                       1997       1998       1999
                                                    ---------- ---------- ----------
                                                             (In thousands)
<S>                                                 <C>        <C>        <C>
Interest on fixed-maturity investments............. $   6,967 $    6,236  $   5,908
Interest on cash equivalents.......................       677        953        907
Investment expenses................................      (391)      (722)    (1,221)
                                                    ---------- ---------- ----------
   Interest income, net............................     7,253      6,467      5,594
                                                    ---------- ---------- ----------
Realized gains - fixed-maturity investments, net...       508      1,163         55
Realized gains - equities, net.....................       256          -          -
                                                    ---------- ---------- ----------
   Realized investment gains, net..................       764      1,163         55
                                                    ---------- ---------- ----------
                                                    $   8,017  $   7,630  $   5,649
                                                    ========== ========== ==========
</TABLE>

     Investment expenses include $72,000, $399,000 and $851,000 for the years
ended December 31, 1997, 1998 and 1999, respectively, in expense to subsidize
a premium finance program for certain insureds of NAICO with an unaffiliated
premium finance company.

     The amortized cost of fixed maturities or cost of equity securities, gross
unrealized gains or losses, fair value and carrying value of investments are as
follows:


<TABLE>
<CAPTION>
                                                        GROSS     GROSS
                                                     UNREALIZED UNREALIZED   FAIR      CARRYING
DECEMBER 31, 1998                            COST       GAINS     LOSSES     VALUE       VALUE
----------------------------------------- ---------- ---------- ---------- ---------- ----------
                                                              (In thousands)
<S>                                       <C>        <C>        <C>        <C>        <C>
FIXED MATURITIES AVAILABLE FOR SALE:
U.S. Treasury securities and obligations
   of U.S. government corporations
   and agencies.......................... $  55,018  $     273  $     (67) $  55,224  $  55,224
Debt securities issued by
   foreign governments...................     1,510          9          -      1,519      1,519
Obligations of states and political
   subdivisions..........................    12,178        318          -     12,496     12,496
Corporate obligations....................    31,333        348        (58)    31,623     31,623
Public utilities.........................     7,321        141        (18)     7,444      7,444
Mortgage-backed securities...............       725         24          -        749        749
                                          ---------- ---------- ---------- ---------- ----------
                                          $ 108,085  $   1,113  $    (143) $ 109,055  $ 109,055
                                          ========== ========== ========== ========== ==========

FIXED MATURITIES HELD TO MATURITY:
U.S. Treasury securities and obligations
   of U.S. government corporations
   and agencies.......................... $   1,183  $     149  $       -  $   1,332  $   1,183
                                          ========== ========== ========== ========== ==========
EQUITY SECURITIES AVAILABLE FOR SALE:
Corporate stock.......................... $       -  $     191  $       -  $     191  $     191
                                          ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
                                                                       PAGE F-12
<TABLE>
<CAPTION>
                                                        GROSS     GROSS
                                                     UNREALIZED UNREALIZED   FAIR      CARRYING
DECEMBER 31, 1999                            COST       GAINS     LOSSES     VALUE       VALUE
----------------------------------------- ---------- ---------- ---------- ---------- ----------
                                                              (In thousands)
<S>                                       <C>        <C>        <C>        <C>        <C>
FIXED MATURITIES AVIALABLE FOR SALE:
U.S. Treasury securities and obligations
   of U.S. government corporations
   and agencies.......................... $  55,818  $       7  $  (1,681) $  54,144  $  54,144
Debt securities issued by
   foreign governments...................     1,503          -         (5)     1,498      1,498
Obligations of states and political
   subdivisions..........................    10,188          -       (274)     9,914      9,914
Corporate obligations....................    37,063          -     (1,342)    35,721     35,721
Public utilities.........................     7,280          -       (482)     6,798      6,798
Mortgage-backed securities...............       624         12         (2)       634        634
                                          ---------- ---------- ---------- ---------- ----------
                                          $ 112,476  $      19  $  (3,786) $ 108,709  $ 108,709
                                          ========== ========== ========== ========== ==========

FIXED MATURITIES HELD TO MATURITY:
U.S. Treasury securities and obligations
   of U.S. government corporations
   and agencies.......................... $     984  $      55  $       -  $   1,039  $     984
                                          ========== ========== ========== ========== ==========
EQUITY SECURITIES AVAILABLE FOR SALE:
Corporate stock.......................... $       -  $     306  $       -  $     306  $     306
                                          ========== ========== ========== ========== ==========
</TABLE>

     Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.  The maturities of investments in fixed
maturities at December 31, 1999 are shown below:

<TABLE>
<CAPTION>
                                              AVAILABLE FOR SALE    HELD TO MATURITY
                                            --------------------- ---------------------
                                             AMORTIZED             AMORTIZED
                                               COST    FAIR VALUE    COST    FAIR VALUE
                                            ---------- ---------- ---------- ----------
                                                           (In thousands)
<S>                                         <C>        <C>        <C>        <C>
Due in one year or less.................... $  28,723  $  28,580  $       -  $       -
Due after one year through five years......    41,352     40,443        984      1,039
Due after five years through ten years.....    41,777     39,052          -          -
Due after ten years........................         -          -          -          -
                                            ---------- ---------- ---------- ----------
                                              111,852    108,075        984      1,039
Mortgage-backed securities.................       624        634          -          -
                                            ---------- ---------- ---------- ----------
                                            $ 112,476  $ 108,709  $     984  $   1,039
                                            ========== ========== ========== ==========
</TABLE>
     Realized gains and losses from sales of fixed maturities and equity
securities are shown below:

<TABLE>
<CAPTION>
                                             GROSS REALIZED GAINS  GROSS REALIZED LOSSES
                                             --------------------  ---------------------
                                                           (In thousands)
          <S>                                <C>                   <C>
          1997.............................. $               803   $                 39
          1998..............................               1,224                     61
          1999..............................                  67                     12
</TABLE>
     Chandler Barbados is required as a foreign reinsurer to secure reserves
for unpaid losses and loss adjustment expenses and unearned premiums for
NAICO's benefit.  Chandler Barbados secures such amounts with a trust
arrangement whereby securities are deposited into a trust account for NAICO's
benefit.  At December 31, 1998 and 1999, Chandler Barbados had cash and
investments with a carrying value of approximately $25.3 million and $24.1
million, respectively, deposited in a trust account for NAICO's benefit.

     NAICO is required by several states to deposit securities with state
regulators as a condition of doing business in those states.  As of December
31, 1998 and 1999, the carrying value of these deposits totaled approximately
$8.2 million and $7.2 million, respectively.

     At December 31, 1999, the total amount of cash and investments restricted
as a result of these arrangements was approximately $31.3 million.

<PAGE>
                                                                       PAGE F-13

NOTE 3. UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

     The Company provides a reserve for estimated losses (reported and
unreported) and loss adjustment expenses based on historical experience and
payment reporting patterns for the type of risk involved. These estimates are
based on data available at the time of the estimate and such estimates are
periodically reviewed by independent professional actuaries.  Inherent in
the estimates of the ultimate liability for unpaid claims are expected trends
in claim severity, claim frequency and other factors that may vary as claims
are settled.  The amount and uncertainty in the estimates are affected by such
factors as the amount of historical claims experience relative to the
development period for the type of risk, knowledge of the actual facts and
circumstances, and the amount of insurance risk retained.  The ultimate cost of
insurance claims can be adversely affected by increased costs such as medical
expenses, repair expenses, costs of providing legal defense for policyholders,
increased jury awards and court decisions and legislation that define and
expand insurance coverage subsequent to the time that the insurance policy was
priced and sold.  Salvage and subrogation recoverables are accrued using the
"case basis" method for large recoverables and statistical estimates based on
historical experience for smaller recoverables.  Recoverable amounts deducted
from the Company's net liability for unpaid losses and loss adjustment expenses
were approximately $5.3 million and $4.4 million at December 31, 1998 and 1999,
respectively.  Although such estimates are management's best estimates of the
expected values, the ultimate liability for unpaid claims may vary from these
values.  The Company does not discount the liability for unpaid losses and
loss adjustment expenses.

     The following table sets forth a reconciliation of the beginning and
ending unpaid losses and loss adjustment expenses which are net of reinsurance
deductions.
<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                                        --------------------------------
                                                                            1997       1998      1999
                                                                        ---------- ---------- ----------
                                                                                 (In thousands)
<S>                                                                     <C>        <C>        <C>
Net balance before provision for uncollectible reinsurance
   at beginning of year................................................ $  64,430  $  62,890  $  51,194
                                                                        ---------- ---------- ----------
Net losses and loss adjustment expenses incurred related to:
   Current year........................................................    53,704     42,724     74,997
   Prior years.........................................................     3,808      5,155      4,819
                                                                        ---------- ---------- ----------
      Total............................................................    57,512     47,879     79,816
                                                                        ---------- ---------- ----------
Net paid losses and loss adjustment expenses related to:
   Current year........................................................   (22,214)   (23,152)   (37,806)
   Prior years.........................................................   (36,838)   (36,423)   (32,877)
                                                                        ---------- ---------- ----------
      Total............................................................   (59,052)   (59,575)   (70,683)
                                                                        ---------- ---------- ----------
Balance before provision for uncollectible reinsurance at end of year..    62,890     51,194     60,327
Adjustments to reinsurance recoverables on
   unpaid losses for uncollectible reinsurance.........................     1,163        745        594
                                                                        ---------- ---------- ----------
Net balance at end of year............................................. $  64,053  $  51,939  $  60,921
                                                                        ========== ========== ==========
</TABLE>

     NAICO does not ordinarily insure against environmental matters as that
term is commonly used.  However, in some cases, regulatory filings made by
NAICO on behalf of an insured can make NAICO directly liable to the regulatory
authority for property damage which could include environmental pollution.  In
those cases, NAICO ordinarily has recourse against the insured or the surety
bond principal for amounts paid.  NAICO has insured certain trucking companies
and pest control operators that are required to provide proof of insurance
which in some cases assures payment for clean-up and remediation of damage
resulting from sudden and accidental release or discharge of contaminants or
other substances which may be classified as pollutants.  NAICO also provides
surety bonds for construction contractors that use or have control of such
substances and for contractors that remove and dispose of asbestos as a part
of their contractual obligations.  NAICO also insures independent oil and gas
producers that may purchase coverage for the escape of oil, saltwater, or other
substances which may be harmful to persons or property, but may not generally
be classified as pollutants.  NAICO maintains claims records which segregate
this type of risk for the purpose of evaluating environmental risk exposure.
Based upon the nature of such lines of business with insureds of NAICO, and
current data regarding the limited severity and infrequency of such matters,
it appears that potential environmental risks are not a significant portion of
claims reserves and therefore would not likely have a material impact, if any,
on the consolidated financial condition, results of operations or cash flows of
the Company.

<PAGE>
                                                                       PAGE F-14


NOTE 4. NOTES PAYABLE

     During 1996, Chandler USA borrowed $4.5 million from a bank for a three
year term.  During the fourth quarter of 1997, the related loan agreement was
amended to provide for additional borrowings up to $8.5 million and to revise
the term to five years with interest payable at a floating rate equal to 1%
over the prime rate published in the Wall Street Journal.  The principal
balance of the note was approximately $7,397,000 at December 31, 1998.
Proceeds from the note were used to repay amounts due to Chandler Barbados.
The bank note was collateralized by the shares of NAICO stock owned by Chandler
USA.  In July 1999, the note was repaid from the proceeds of a debenture
offering.  See Note 5.

     At December 31, 1998, Chandler USA had a note payable related to the
acquisition of Network Administrators, Inc., an inactive subsidiary of Chandler
USA, with a balance of $75,000.  The note had an interest rate of 7% per annum
and was repaid during 1999.

     In February 1998, Chandler USA entered into a five year loan agreement
with a bank having a principal amount of $2.3 million and an interest rate of
7.75% per annum.  Effective September 28, 1998, the interest rate was reduced
to 7.5% per annum.  The outstanding balance of the note was approximately
$1,938,000 at December 31, 1998.  The loan was collateralized by certain
equipment which was purchased with the proceeds of the loan.  The equipment
had previously been leased by Chandler USA.  In July, 1999, the note was repaid
from the proceeds of a debenture offering.  See Note 5.

NOTE 5. DEBENTURE OFFERING

     On July 16, 1999, Chandler USA completed a public offering of $24 million
principal amount of senior debentures with a maturity date of July 16, 2014.
The debentures were priced at $1,000 each with an interest rate of 8.75% and
are redeemable by Chandler USA on or after July 16, 2009 without penalty or
premium.  The proceeds to Chandler USA before expenses but after the
underwriter's discount were $23.16 million.  The proceeds of the offering were
used to repay existing bank debt, to repay amounts owed by Chandler USA to its
parent, Chandler Barbados, and for general corporate purposes.  Chandler USA
has capitalized $1.7 million related to debt issuance costs for the debentures.
These costs are being amortized as interest expense over the term of the
debentures.  Chandler USA's subsidiaries and affiliates are not obligated by
the debentures.  Accordingly, the debentures are effectively subordinated to
all existing and future liabilities and obligations of Chandler USA's existing
and future subsidiaries.  The indenture governing the debentures contains
certain restrictive covenants, including covenants that limit subsidiary debt,
issuance or sale of subsidiary stock, incurring of liens, sale-leaseback
transactions, mergers, consolidations and sales of assets.  At December 31,
1999, Chandler USA was in compliance with all covenants.

NOTE 6. SHAREHOLDERS' EQUITY

CAPITAL STOCK

     On May 7, 1988, the Company's shareholders authorized the issuance of up
to 3,000,000 preferred shares with a par value of $1.00. No preferred shares
have been issued as of December 31, 1999.

     The provisions of Article XI of the Company's Articles of Association,
which was adopted by the shareholders in 1988, prohibits business combinations
lacking approval of the Continuing Directors (those not affiliated with a 20%
or more shareholder) or 80% of the shareholders and may result in a
prohibition against voting such shares held by a shareholder acquiring 20% or
more of the common shares (and its affiliates and associates) if the Continuing
Directors deny approval.  In addition to the regulatory oversight of NAICO by
the Nebraska Department of Insurance, the Company is also subject to regulation
under the Nebraska Insurance Holding Company Systems Act (the "Holding Company
Act").  In addition to various reporting requirements imposed on the Company,
the Holding Company Act requires any person who seeks to acquire or exercise
control over NAICO (which is presumed to exist if any person owns 10% or more
of the Company's outstanding voting stock) to file and obtain approval of
certain applications with the Nebraska Department of Insurance regarding their
proposed ownership of such shares.

     In 1996, the Company acquired 567,350 shares of its stock previously held
by Chandler USA and retired the shares.  In accordance with the Companies Law
(1995 Revision) of the Cayman Islands, the Company established the capital
redemption reserve in the amount of $947,475 which is reflected as a separate
component of shareholders' equity in the consolidated balance sheets as of
December 31, 1998 and 1999.  The Companies Law no longer requires a capital
redemption reserve to be established when shares are retired.

<PAGE>
                                                                       PAGE F-15


     During December 1999, the Company acquired 1,989,200 shares of its own
stock in exchange for payment of $15,204,758 to CenTra and its affiliates
pursuant to a divestiture plan proposed by NAICO and approved by the Nebraska
Court.  All shares were canceled upon their return to the Company.  The
Nebraska Court had ordered CenTra to divest all shares of Chandler owned or
controlled by it or its affiliates.  An additional share block owned by CenTra
and affiliates consists of 1,142,625 shares which will be divested following
a ruling on CenTra's appeal of a judgment entered by an Oklahoma Federal Court
in April 1997.  That judgment requires CenTra to transfer the shares to the
Company in exchange for payment of $6,882,500.  Following the conclusion of
the appeal, the Nebraska Court will determine the method of divestiture of
these shares.  The appellate court heard oral argument on November 15, 1999.
The Company cannot predict when the appellate court will rule on the appeal.

     During December 1999, CIM transferred the 524,475 shares of the Company's
common stock that it owned to the Company.  The shares were canceled by the
Company.

     See Note 8 regarding possible taxation of certain income of the Company
to U.S. shareholders with certain ownership percentages.

STATUTORY FINANCIAL INFORMATION AND MINIMUM CAPITAL REQUIREMENTS

     Chandler, Chandler Barbados, NAICO Indemnity and NAICO are required to
file financial statements with insurance regulatory authorities.  Chandler and
NAICO Indemnity file financial statements with the Cayman Islands Monetary
Authority and Chandler Barbados files financial statements with the Supervisor
of Insurance in Barbados.  NAICO is required to file financial statements with
state regulatory authorities prepared on a statutory basis which differs from
U.S. GAAP.  Statutory net income (loss) and statutory capital and surplus of
NAICO are as follows:
<TABLE>
<CAPTION>
                                                1997         1998         1999
                                             ----------   ----------   ----------
                                                        (In thousands)
            <S>                              <C>          <C>          <C>
            Statutory net income (loss)..... $   6,737    $   6,877    $  (1,455)
            Statutory capital and surplus... $  45,283    $  45,327    $  44,638

</TABLE>
     Chandler, NAICO Indemnity and Chandler Barbados are also required to
maintain net worth subject to minimum requirements imposed by the applicable
regulatory authorities. Chandler and NAICO Indemnity are required to maintain a
net worth of the greater of (i) $120,000, or (ii) an amount equal to 20% of
their net premiums earned. Chandler Barbados must have assets exceeding
liabilities by (i) $125,000 where the premium income in the previous year did
not exceed $750,000; or (ii) 20% of the premium income for the preceding year
where the premium income exceeded $750,000 but did not exceed $5,000,000; or
(iii) the aggregate of $1,000,000 and 10% of the amount by which the premium
income in that fiscal year exceeded $5,000,000.

     The National Association of Insurance Commissioners has adopted risk-based
capital ("RBC") standards for domestic property and casualty insurance
companies.  The RBC standards are designed to assist insurance regulators in
analytically determining a level of capital and surplus that would be sufficient
to withstand reasonably foreseeable adverse events associated with underwriting
risk, investment risk, credit risk and loss reserve risk.  NAICO is subject to
the RBC standards.  Based on available information, management believes NAICO
complied with the RBC standards at December 31, 1998 and 1999.

     At periodic intervals, various insurance regulatory authorities routinely
examine the required statutory financial statements  of NAICO as part of their
legally prescribed oversight of the insurance industry.  Based on these
examinations, the regulators can direct such financial statements to be
adjusted in accordance with their findings.

DIVIDEND RESTRICTIONS

     As a holding company, the Company may receive cash through equity sales,
borrowings and dividends from its subsidiaries. Chandler Barbados and NAICO are
subject to regulations which restrict their ability to pay shareholder
dividends.  The payment of cash shareholder dividends by Chandler Barbados to
the Company is limited to its earned surplus (approximately $40.6 million at
December 31, 1999) and margin of solvency requirements.  The amount of cash
shareholder dividends that NAICO can pay to Chandler USA within any one year
without the approval of the Nebraska Department of Insurance is generally
limited to the greater of (i) statutory net income excluding realized capital
gains for the preceding year (statutory net income excluding realized capital
gains from the second and third preceding years, less any dividends paid, may
be carried forward), or (ii) 10% of statutory surplus as regards policyholders
as of the preceding December 31 with such amount not to exceed NAICO's
statutory earned surplus.  Based on this criteria the maximum shareholder
dividend NAICO may pay in 2000 without the approval of the Nebraska Department
of Insurance is approximately $4.9 million.  Prior to 1998, NAICO (during the
ownership by the Company) had not paid any cash shareholder dividends.  During
1998, NAICO paid a cash shareholder dividend of $6.0 million to Chandler USA.
In January 2000, NAICO paid a cash shareholder dividend of $1,250,000 to
Chandler USA.

<PAGE>
                                                                       PAGE F-16


     The future payment of shareholder dividends also depends upon the
earnings, financial position and cash requirements of the Company, as well as
regulatory limitations and such other factors as the board of directors may
deem relevant.  Chandler Barbados has not paid any cash shareholder dividends.

     NAICO is subject to regulations which restrict its ability to pay
dividends to policyholders.  The maximum amount of available policyholder
dividends is limited to statutory earned surplus (approximately $11.9 million
as of December 31, 1999).  NAICO paid approximately $423,000, $561,000 and
$465,000 in policyholder dividends during 1997, 1998 and 1999, respectively.

NOTE 7. STOCK OPTIONS AND WARRANTS

     The Company has a non-qualified stock option plan (the "Officers' Plan")
for which the Company has reserved an aggregate of 968,750 shares of its common
stock subject to adjustment for reorganizations, recapitalizations, stock
splits or similar events, for issuance upon exercise of options to be granted
under the Officers' Plan. Options are granted at a purchase price of the fair
market value as of the grant date. Shares of common stock subject to the
unexercised portions of any options granted under the Officers' Plan which
terminate or are canceled may again be subject to reissuance under the
Officers' Plan. Officers of the Company and its subsidiaries are eligible to
receive options under the Officers' Plan. The Officers' Plan is administered by
a committee of the Company's outside directors appointed by the board of
directors of the Company.  No stock options were outstanding under the
Officers' Plan from January 1, 1997 through December 31, 1999.

     During the second quarter of 1998 the Company's directors approved the
Directors' Stock Option and Stock Grant Plan (the "Directors' Plan").  The
Directors' Plan provides that the non-employee directors of the Company, other
than Norman Harned, Ronald Lech and M.J. Moroun, are eligible for grants of
stock options and stock grants in accordance with the terms of the Directors'
Plan.  Messrs. Harned, Lech and Moroun resigned as directors of the Company
during November 1999.  Options and stock grants may not be granted under the
Directors' Plan for more than 260,000 shares of common stock of the Company,
but this number may be adjusted to reflect, if deemed appropriate by the board
of directors, any stock dividend, stock split, share combination,
recapitalization or the like, of or by the Company.  The exercise price of the
stock options shall generally be equal to the average closing price of common
stock of the Company for the 30 calendar days preceding the date the options
are granted.  The option period begins on the effective date of the option
grant and terminates on the tenth anniversary of that date.

     The aggregate number of shares of stock awarded to an eligible director as
a stock grant shall total 20,000 shares of common stock of the Company.  The
award shall be divided into two equal installments.  The first installment of
10,000 shares shall automatically be awarded as of the first regular board
meeting after an eligible director completes ten continuous years of service
on the board.  The second installment of 10,000 shares shall automatically be
awarded as of the first anniversary of the initial stock grant, regardless of
whether the director is still a member of the board.  During the second
quarter of 1998, a total of 40,000 shares valued at $250,000, based upon a
weighted average grant-date fair value of $6.25 per share, were awarded to two
directors, and this amount is included in general and administrative expenses
in the Company's consolidated statements of operations.  During the third
quarter of 1998, the Company issued 20,000 of the 40,000 shares to the two
directors as required under the Directors' Plan from the Company's stock held
by subsidiary.  During the second quarter of 1999, the Company issued the
remaining 20,000 shares to the two directors from the Company's stock held by
subsidiary.  The difference between the average reacquisition cost of the
shares issued and the share price at the date of the stock grant was credited
to paid-in surplus.

     Each eligible director shall automatically be granted options to purchase
1,500 shares of common stock of the Company as of the first regular board
meeting in each year the director serves on the board.  Each eligible director
shall also automatically be granted options to purchase 30,000 shares of common
stock of the Company effective as of the first regular board meeting after the
director completes ten continuous years of service on the board. The options
require shareholder approval prior to being exercised.  During the second
quarter of 1998, options for 66,000 shares were granted with an exercise price
of $5.92 per share, which resulted in approximately $22,000 of compensation
expense which is included in general and administrative expenses in the
Company's consolidated statements of operations.  During the first quarter of
1999, options for 6,000 shares were awarded with an exercise price of $8.06
per share.  As the exercise price of the options exceeded the market value at
the date of grant, the Company did not recognize any compensation expense for
the options issued in 1999.  As of December 31, 1999, options for 72,000
shares were outstanding, none of which were exercisable.

     The Company applies Accounting Principles Board Opinion 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES, and related interpretations in accounting for its
stock option plans, as permitted by SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION.  SFAS No. 123 requires disclosure of pro forma net income and
basic and diluted earnings per share as if the Company had adopted the fair
value provisions of SFAS No. 123.  Had compensation cost been determined based
on the fair value at  the grant date of the stock options granted to the
directors in accordance with SFAS No. 123, the Company's pro forma net income
for 1998 and 1999 would have been approximately $3,278,000 and $2,131,000,
respectively, and pro forma basic and diluted earnings per share for 1998 and
1999 would have been $0.51 and $0.34, respectively.

<PAGE>
                                                                       PAGE F-17

     The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model.  The weighted average grant-date fair value
per option granted during 1998 and 1999 under the Directors' Plan was $2.81 and
$3.32, respectively.  The following weighted-average assumptions were used in
the Black-Scholes option pricing model for the options granted in 1998 and 1999.
<TABLE>
<CAPTION>
                                                 1998         1999
                                              ----------   ----------
                <S>                           <C>          <C>
                Dividend yield................        -%           -%
                Volatility....................       39%          38%
                Risk-free interest rate.......     5.62%        5.30%

</TABLE>

NOTE 8. INCOME TAXES

     Chandler, Chandler Barbados and NAICO Indemnity have received tax
concessions from the respective Cayman Islands and Barbados governments for
all taxes levied on profits, income, gains and appreciation that are valid
through September 30, 2003, May 19, 2003 and March 10, 2012, respectively.
Accordingly, no income taxes have been provided.  The companies do not consider
themselves engaged in a trade or business within the United States and
therefore are not subject to United States Federal income taxes.  Should the
Internal Revenue Service ("IRS") determine that any of the companies are
engaged in a trade or business within the United States and has not filed a
federal income tax return, such company may be subject to federal income taxes
and may not be allowed any deductions or credits in determining its tax
liability.

     Under Section 953(c) of the Internal Revenue Code of 1986 as amended
(the "Code"), if U.S. persons indirectly own (i.e., through ownership of the
Company) 25% or more of the total combined voting power of all classes of
Chandler Barbados' stock entitled to vote or 25% or more of the total value of
Chandler Barbados' stock, then each such person is required to include in his
gross income a portion of any insurance income of Chandler Barbados attributable
to a policy of insurance or reinsurance with respect to which the person
(directly or indirectly) insured is a related person to a shareholder in
Chandler Barbados ("related person insurance income" or "RPII").  Under these
rules, all U.S. persons who own stock in the Company would generally be
required, subject to the exception discussed hereinafter, to include in their
gross incomes a portion of the RPII received by Chandler Barbados from NAICO.
However, related person insurance income of Chandler Barbados need not be
included in the income of a U.S. person who is not a "United States
shareholder," as defined in Section 951(b) of the Code, if, at all times
during Chandler Barbados' taxable year, less than 20% of the total combined
voting power of all classes of stock of Chandler Barbados and less than 20% of
the total value of Chandler Barbados is owned (directly or indirectly) by
persons who are (directly or indirectly) insured under any policy of insurance
or reinsurance issued by Chandler Barbados, or who are related persons to any
such person.

     During 1994, the IRS contended that Chandler Barbados did not qualify for
the exception to the inclusion of RPII for all U.S. persons who hold the
Company's stock, because the Company owns more than 20% of the voting power and
value of Chandler Barbados, and the Company is a related party to NAICO, which
purchases reinsurance from Chandler Barbados.  However, the Company believes,
and asserted to the IRS that U.S. persons who hold less than 5.5% of the stock
of the Company should not be required to include any RPII of Chandler Barbados
in their income.  The IRS has agreed with the Company's position on this issue,
and a formal closing agreement was executed in 1996.

<PAGE>
                                                                       PAGE F-18

     Chandler USA and its wholly owned subsidiaries file a consolidated U.S.
Federal income tax return. The income taxes reflected in the accompanying
consolidated statements of operations differ from those expected using U.S.
Federal enacted income tax rates as noted by the following:
<TABLE>
<CAPTION>
                                                          1997          1998          1999
                                                      ------------  ------------- ------------
                                                                    (In thousands)
<S>                                                   <C>           <C>           <C>
Computed income tax provision at 34%................. $       413   $      1,290  $       855
Increase (decrease) in income taxes resulting from:
   Expense (benefit) from income or loss not subject
      to U.S. Federal income tax.....................       1,384         (1,023)        (760)
   Amortization of licenses and other intangibles....         380            362          271
   Interest income on tax exempt securities..........         (32)          (298)        (140)
   Other, net........................................         136             22          139
                                                      ------------  ------------- ------------
Federal income tax provision......................... $     2,281   $        353  $       365
                                                      ============  ============= ============

</TABLE>

U.S. Federal income tax provision (benefit) consists of:

<TABLE>
<CAPTION>
                                                         CURRENT       DEFERRED      TOTAL
                                                      ------------  -------------- ------------
                                                                    (In thousands)
<S>                                                   <C>           <C>            <C>
1997................................................. $     2,389   $        (108) $     2,281
1998.................................................          52             301          353
1999.................................................       1,127            (762)         365

</TABLE>

     Deferred income tax provision (benefit) relating to temporary differences
includes the following components:

<TABLE>
<CAPTION>
                                                                1997        1998        1999
                                                             ----------  ----------  ----------
                                                                      (In thousands)

<S>                                                          <C>         <C>         <C>
Loss reserve discounts...................................... $     (97)  $     921   $    (500)
Unearned premiums...........................................       (58)        395      (1,168)
Deferred policy acquisition costs...........................         1      (1,209)      1,093
Reserve for uncollectible premiums receivable
   and reinsurance recoverables.............................       188          (9)        (63)
Depreciation and lease expense..............................      (164)        (60)        (46)
Other.......................................................        22         263         (78)
                                                             ----------  ----------  ----------
                                                             $    (108)  $     301   $    (762)
                                                             ==========  ==========  ==========
</TABLE>

     The tax effect of temporary differences between the consolidated financial
statement carrying amounts and tax bases of assets and liabilities that give
rise to significant portions of the net deferred tax assets, which are included
in other assets, at December 31, relate to the following:

<TABLE>
<CAPTION>
                                                                                   1998        1999
                                                                                ----------  ----------
                                                                                    (In thousands)
<S>                                                                             <C>         <C>
Deferred tax assets:
   Loss reserve discounts...................................................... $   2,832   $   3,410
   Unearned premiums...........................................................     1,430       2,598
   Reserve for uncollectible premiums receivable and reinsurance recoverables..       180         243
   Unrealized loss on investments available for sale...........................         -         886
   Net operating loss carryforwards - state....................................     1,670       1,774
   Other.......................................................................       253         263
   Valuation allowance.........................................................    (1,670)     (1,774)
                                                                                ----------  ----------
Total deferred tax assets......................................................     4,695       7,400
                                                                                ----------  ----------
Deferred tax liabilities:
   Deferred policy acquisition costs...........................................       (27)      1,066
   Depreciation and lease expense..............................................       693         646
   Unrealized gain on investments available for sale...........................       368           -
   Other.......................................................................       590         601
                                                                                ----------  ----------
Total deferred tax liabilities.................................................     1,624       2,313
                                                                                ----------  ----------
Net deferred tax assets........................................................ $   3,071   $   5,087
                                                                                ==========  ==========
</TABLE>

     At December 31, 1999, Chandler USA had net operating loss carryforwards
available for Oklahoma state tax purposes  totaling approximately $29.6 million
which expire in the years 2006 through 2015.  A valuation allowance has been
provided for the tax effect of the state net operating loss carryforwards since
realization of such amounts is not considered more likely than not.

<PAGE>
                                                                       PAGE F-19

NOTE 9. EMPLOYEE BENEFITS

     Chandler USA and its subsidiaries participate in a defined contribution
retirement plan established under Section 401(k) of the Code.  All full time
employees who have completed one year of service and attained age 21 may elect
to participate in the 401(k) plan.  Participants may contribute up to 15% of
compensation, not to exceed the statutory limitations which for 1999 was
$10,000.  Chandler USA matches 50% of the first $2,000, 40% of the next
$3,000, 30% of the next $3,000 and 25% of the remaining employee contributions
up to a maximum employer contribution of $3,600 per employee per year.  In
addition, Chandler USA may make additional annual contributions to the 401(k)
plan at its discretion.  Chandler USA's expense for 401(k) plan contributions
was $254,000, $259,000 and $276,000 for 1997, 1998 and 1999, respectively.

NOTE 10. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS

     The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS 107,
Disclosures About Fair Value of Financial Instruments.  The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies.  However, considerable
judgment is necessarily required in interpreting market data to develop the
estimates of fair value.  Accordingly, the estimates of fair values presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.  The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.

     A number of the Company's significant assets (including deferred policy
acquisition costs, property and equipment, reinsurance recoverables, prepaid
reinsurance premiums, licenses and excess of cost over net assets acquired)
and liabilities (including unpaid losses and loss adjustment expenses and
unearned premiums) are not considered financial instruments.  Based on the
short term nature or other relevant characteristics, the Company has concluded
that the carrying value of other assets and liabilities considered financial
instruments, such as cash equivalents, premiums receivable, policyholder
deposits, accrued taxes and other payables, notes payable and premiums payable,
approximates their fair value as of December 31, 1998 and 1999.  The estimated
fair values of the Company's fixed-maturity and equity security investments
are disclosed at Note 2.  At December 31, 1999, the Company maintained custody
of letters of credit from policyholders totaling $12.3 million, which is a
reasonable estimate of their fair value.

NOTE 11. LITIGATION

     The Company and certain of its subsidiaries and affiliates have been
involved in various matters of litigation with CenTra, Inc. ("CenTra") and
certain of its affiliates, officers and directors (the "CenTra Group") since
1992.  The CenTra Group has been a significant shareholder in the Company
owning 49.2% of the Company's stock in July 1992.  Three present or former
executive officers of CenTra, Norman E. Harned, Ronald W. Lech and M. J. Moroun
were directors of the Company until November 1999.

     On March 25, 1997, the U.S. District Court for the District of Nebraska
("Nebraska Court") ordered CenTra and certain of its affiliates to divest all
Chandler shares owned by them.  The CenTra defendants owned or controlled
3,133,450 Chandler shares.  The Nebraska Court approved a divestiture plan
submitted by NAICO (the "NAICO Plan") which called for the Company to acquire
and cancel the shares of Chandler stock owned by the CenTra Group.  During
December 1999, the Company acquired 1,989,200 shares of its stock in exchange
for payment of $15,204,758.  These shares were canceled upon acquisition by
the Company.  The Nebraska Court continues to hold 1,142,625 shares pending
the outcome of CenTra's appeal of a judgment by the U.S. District Court in
Oklahoma City, Oklahoma ("Oklahoma Court") regarding these shares.  Following
the conclusion of the appeal, the Nebraska Court will determine the method of
divestiture of these shares.  The Company cannot predict when the appellate
court will rule on the appeal.

     On April 1, 1997, the Oklahoma Court entered judgment in favor of NAICO
on CenTra's claims for alleged wrongful cancellation of CenTra's insurance with
NAICO and NAICO Indemnity in 1992.  The remaining issues were submitted to a
jury.  On April 22, 1997, the Oklahoma Court entered judgments on the jury
verdicts.  One judgment against the Company required the CenTra Group to return
stock it purchased in 1990 to the Company in return for a payment of $5,099,133
from the Company.  Payment was made and the stock was returned to the Company
and canceled in December 1999 as a part of the acquisition of shares described
previously.  Another judgment was against both the Company and Chandler
Barbados.  CenTra and an affiliate, Ammex, Inc., were awarded $6,882,500 in
connection with a 1988 stock purchase agreement.  On March 10, 1998, the
Oklahoma Court modified its judgment to require CenTra and its affiliates to
deliver 1,142,625 shares of Chandler stock they owned upon payment of the
$6,882,500 judgment which was entered in April 1997.  Both of these judgments
related to an alleged failure by the Company to adequately disclose the fact
that ownership of the Company's stock may be subject to regulation by the
Nebraska Department of Insurance under certain circumstances.

     Judgment was also entered in favor of CenTra and against certain officers
and/or directors of the Company on the securities claims relating to CenTra's
1990 stock purchases and the failure to disclose the application of Nebraska
insurance law, but the judgments were $1 against each individual defendant
on those claims.  On ten derivative claims brought by CenTra, the jury found
in CenTra's favor on three.  Certain officers were directed to repay to
Chandler USA bonuses received for the years 1988 and 1989 totaling $711,629 and
a total of $25,000 for personal use of corporate aircraft.  These amounts are
included in other assets in the accompanying consolidated balance sheets.  On
the remaining claim relating to the acquisition of certain insurance agencies
in 1988, the jury awarded $1 each against six officers and/or directors.

<PAGE>
                                                                       PAGE F-20

     Judgment was also entered in favor of NAICO and NAICO Indemnity on
counterclaims against CenTra for CenTra's failure to pay insurance premiums.
Judgment was for the amount of $788,625.  During 1998, the judgment was paid by
funds held by the Oklahoma Court aggregating, with interest, $820,185.
DuraRock Underwriters, Ltd. ("DuraRock"), an affiliate of CenTra, claimed
$725,000 was owed to it under certain reinsurance treaties.  That claim was
settled in January 2000 with NAICO and NAICO Indemnity paying $137,500 to
DuraRock.

     The Oklahoma Court's judgment also upheld a resolution adopted by the
Company's Board of Directors in August 1992 pursuant to Article XI of the
Company's Articles of Association preventing CenTra and its affiliates from
voting their Chandler stock.

     As a result of the Oklahoma Court judgments and subsequent decisions,
the Company recorded a net charge for the litigation matters during 1997
totaling approximately $1.4 million ($1.6 million including provision for
federal income tax).  The Company recorded the return of 1,660,125 shares of
the Company's stock in connection with the rescission judgments as a decrease
to shareholders' equity in the amount of approximately $12.0 million.  On
April 21, 1998, the Oklahoma Court denied the CenTra Group's request for costs
and attorney fees.  The CenTra Group did not appeal this decision within the
time permitted by applicable law.  Accordingly, the Company reduced the
previous 1997 net charge for litigation matters by $3.8 million during the
second quarter of 1998.

     On March 23, 1998, the CenTra Group filed a formal notice of intent to
appeal certain orders of the Oklahoma Court, and filed the initial appellate
brief on September 9, 1998.  The appeals are being considered by the U.S.
Court of Appeals for the 10th Circuit.  The CenTra Group's appeals are based
upon the Oklahoma Court's failure to award prejudgment interest, the Oklahoma
Court's refusal to permit the CenTra Group to amend certain pleadings to
assert new claims, the Oklahoma Court's modification of the judgment for
$6,882,500 to require CenTra to return shares of the Company's stock upon
payment of the judgment, and the Oklahoma Court's denial of attorney fees.
The Company believes the appeal of this issue is untimely and therefore barred
by law.  The Company elected not to appeal any of the judgments.  The
individual officers and directors against whom judgments were entered have all
filed appeals.

     The Company's board of directors appointed a committee of the board (the
"Committee") to deal with all matters arising from the Oklahoma litigation.
The members of the Committee are Messrs. Jacoby, Maestri and Davis, all of whom
are non-parties to the CenTra litigation.  The Committee is empowered by the
board to make decisions on behalf of the Company regarding issues relating to
litigation strategy, officer and director indemnification and claims made under
the Company's director and officer liability insurance policy (the "D&O
Insurer").  A similar committee composed of Chandler USA directors is
authorized to deal with those same issues regarding Chandler USA.

     In 1997, NAICO learned that several CenTra affiliates had filed two
lawsuits against NAICO, NAICO Indemnity and certain NAICO officers asserting
some of the same claims made and tried in the Oklahoma lawsuit described
previously.  Those claims were purportedly prosecuted by CenTra on its own
behalf and on behalf of its subsidiaries and were based upon alleged wrongful
cancellation of their insurance policies by NAICO and NAICO Indemnity.  The
Oklahoma Court entered a judgment against CenTra on these claims.  NAICO and
NAICO Indemnity contend that the Oklahoma Court's adjudication is conclusive
as to all claims.  The lawsuits have been consolidated and have been assigned
to the same judge who presided over the action in the Oklahoma Court.
Dispositive motions filed by NAICO, NAICO Indemnity and the other defendants
are currently under consideration by the Oklahoma Court.

     In the CenTra litigation, certain officers and directors of the Company
were named as defendants.  In accordance with its Articles of Association, the
Company has advanced the litigation expenses of these persons in exchange for
undertakings to repay such expenses if those persons are later determined to
have breached the standard of conduct provided in the Articles of Association.
The Company has paid expenses on behalf of these officers and directors
totaling approximately $2.3 million as of December 31, 1999.  A portion of
these expenses relate to claims which have been dismissed or which were decided
in favor of the officers and directors.  These expenses together with certain
other expenses may be recovered from the D&O Insurer.  As a result of various
events in 1995, 1996 and 1997, the Company recorded estimated recoveries of
costs from its D&O Insurer totaling $4,500,000 for reimbursable amounts
previously paid that relate to allowable defense and litigation costs for such
parties.  The Company received payment for a 1995 claim during 1996 in the
amount of $795,000.  The balance is included in other assets in the Company's
consolidated balance sheets.  The Company is entitled to a total of $5 million
under the applicable insurance policy to the extent it has advanced reimbursable
expenses.  The Company is negotiating with the insurer for payment of the policy
balance.  The Company could recover the remaining policy limits or could
compromise its claim, and could incur significant costs in either case.

     The ultimate outcome of the appeals of the various parties as described
above could have a material adverse effect on the Company and could negatively
impact future earnings.  The Company's management believes that adequate
financial resources are available to pay the judgments as they currently exist
or as they may be modified on appeal.  As a holding company, the Company may
receive cash through equity sales, borrowings and dividends from its
subsidiaries.  Chandler Barbados and NAICO are subject to various regulations
which restrict their ability to pay shareholder dividends.  A reduction in the
amount of invested assets, or an increase in borrowings resulting from
potential payments of these judgments would reduce investment earnings or
increase operating expenses in future periods.

<PAGE>
                                                                       PAGE F-21

     At the present time the Company is actively participating in court
proceedings and rights of appeal concerning these legal proceedings; therefore,
the Company is unable to predict the outcome of such litigation with certainty
or the effect of such ongoing litigation on future operations.  The Company is
also unable to predict the effect of the remaining divestiture order on the
rights, limitations or other regulation of ownership of the stock of any
existing or prospective holders of the Company's common stock, or the effect on
the market price of the Company's stock.

OTHER LITIGATION

     The Company and its subsidiaries are not parties to any other material
litigation other than as is routinely encountered in their respective
business activities.

NOTE 12. COMMITMENTS AND CONTINGENCIES

REINSURANCE

     In the ordinary course of business, NAICO and NAICO Indemnity cede
insurance to other insurers and reinsurers under various reinsurance treaties
that cover individual risks (facultative reinsurance) or entire classes of
business (treaty reinsurance).  Reinsurance provides greater diversification
of business written and also reduces NAICO's and NAICO Indemnity's exposure
arising from high limits of liability or from hazards of an unusual nature.
Amounts recoverable from reinsurers are estimated in a manner consistent with
the claim liability associated with the reinsured policy.

     NAICO has structured separate reinsurance programs for construction surety
bonds, property, workers compensation, casualty (including automobile liability
and physical damage, general liability, umbrella liability and related
professional liability) and group accident and health.  Chandler Barbados
reinsures NAICO for a portion of the risk on the construction surety bonds,
workers compensation and casualty reinsurance programs.  Effective October 1,
1999, the Company began reinsuring Chandler Barbados for a portion of the risk
that it assumes from NAICO.

     In July 1997, NAICO purchased additional reinsurance for the California
portion of the nonstandard private-passenger automobile program.  During the
first quarter of 1998, NAICO purchased additional reinsurance under its workers
compensation and casualty reinsurance programs that substantially reduced the
combined net retentions in these lines of business.  During the second quarter
of 1998, NAICO purchased additional reinsurance under its construction surety
bond reinsurance program.  The purchase of the additional reinsurance coverages
in 1997 and 1998 substantially reduced the per occurrence retention for NAICO's
workers compensation, casualty, surety bond and private-passenger automobile
lines of business, but resulted in significantly lower net premiums earned,
losses and loss adjustment expenses and policy acquisition costs.  The purchase
of additional reinsurance also resulted in an increase in reinsurance
recoverables on unpaid losses, prepaid reinsurance premiums and premiums payable
and a decrease in deferred policy acquisition costs.  During the fourth quarter
of 1999, NAICO agreed to rescind reinsurance treaties which covered a portion of
its workers compensation business and which had been in effect since January
1, 1999.

     In addition, NAICO purchases catastrophe protection to limit its retention
for single loss occurrences involving multiple policies and/or policyholders,
such as floods, winds and severe storms.  NAICO also purchases facultative
reinsurance when it writes a risk with limits of liability exceeding the maximum
limits of its treaties or when it otherwise considers such action appropriate.

     Treaty reinsurance may be ceded under treaties on both a pro rata or
proportional basis (where the reinsurer shares proportionately in premiums and
losses) and an excess of loss basis (where only losses above a specific amount
are reinsured).  The availability, costs and limits of reinsurance purchased
can vary from year to year based upon prevailing market conditions, reinsurers
underwriting results and NAICO's desired retention levels.  A majority of
NAICO's reinsurance programs renew on January 1, April 1 or July 1 of each
year.  NAICO renewed all January 1, 2000 reinsurance programs.  At the present
time, NAICO expects to renew the reinsurance programs that renew on April 1 and
July 1, 2000.

     In formulating its reinsurance programs, NAICO considers numerous factors,
the most important of which are the financial stability of the reinsurer,
including its ability to provide sufficient collateral if required, reinsurance
coverage offered and price.

     NAICO periodically reviews certain prospective single year reinsurance
treaties, subject to commutation provisions therein, to determine if it is
advantageous to assume the estimated loss exposure on expired insurance
policies covered by such treaties in exchange for return premiums.  Commutation
of such reinsurance treaties will be determined in future periods based on
timely review of all available data.  NAICO reviews the historical results for
reinsurance contracts with similar commutation provisions and accrues for such
commutations where a commutation election is considered probable, which
resulted in an increase in net premiums earned of $918,000 and $931,000 in 1997
and 1998, respectively, and a decrease in net premiums earned of $877,000 in
1999.

<PAGE>
                                                                       PAGE F-22


     Transamerica Occidental Life Insurance Company ("Transamerica") reinsured
NAICO for certain workers compensation risks during 1989, 1990 and 1991.
Beginning in 1996, Transamerica refused to pay NAICO for balances that it owed
under the reinsurance treaties.  Transamerica owed NAICO approximately $1.3
million for reinsurance recoverables on paid losses and loss adjustment
expenses as of December 31, 1999.  NAICO is seeking arbitration in order to
enforce the terms of the reinsurance treaties.

     Reinsurance contracts do not relieve an insurer from its obligation to
policyholders.  Failure of reinsurers to honor their obligations could result
in losses to the Company; consequently, allowances are established for amounts
deemed uncollectible.  NAICO charged $527,000 and $50,000 to policy acquisition
costs during 1997 and 1998, respectively, for estimated uncollectible
reinsurance recoverables from certain unaffiliated reinsurers.  NAICO did not
incur any charges for uncollectible reinsurance recoverables from unaffiliated
reinsurers in 1999.

     The effect of reinsurance on premiums written and earned was as follows:

<TABLE>
<CAPTION>
                                          1997                 1998                 1999
                                  -------------------- -------------------- --------------------
                                   WRITTEN     EARNED   WRITTEN     EARNED   WRITTEN     EARNED
                                  ---------  --------- ---------  --------- ---------  ---------
                                                          (In thousands)
<S>                               <C>        <C>       <C>        <C>       <C>        <C>
Direct........................... $123,014   $116,101  $134,436   $126,017  $169,449   $152,314
Assumed..........................       74        608      (107)        54       186        199
Ceded............................  (26,222)   (22,030)  (68,793)   (56,007)  (41,698)   (44,186)
                                  ---------  --------- ---------  --------- ---------  ---------
Net premiums..................... $ 96,866   $ 94,679  $ 65,536   $ 70,064  $127,937   $108,327
                                  =========  ========= =========  ========= =========  =========
</TABLE>
     Losses and loss adjustment expenses are reported net of the effect of
reinsurance recoveries and recoverables in the consolidated statements of
operations.  Ceded losses and loss adjustment expenses were $10.6 million,
$42.6 million and $59.0 million for 1997, 1998 and 1999, respectively.

SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK

     NAICO conducts its business through individual independent insurance
agencies and underwriting managers.  Certain of these underwriting managers
have provided collateral to NAICO to secure a portion of the premiums
receivable.  Substantially all of the principal shareholders of the
independent agencies and underwriting managers have provided personal
guarantees for payment of premiums to NAICO.  NAICO also requires certain
policyholders to pay a deposit at the time of inception of coverage to secure
payment of future premiums or other policy related obligations.  Receivables
under installment plans do not exceed the corresponding liability for unearned
premiums.  Total consolidated premiums receivable at December 31, 1998 and 1999
were $28.5 million and $47.7 million, respectively.  The 1999 amount includes
$12.9 million related to the rescission of the reinsurance treaties.  This
amount was collected in January 2000.  Receivables for deductibles, in most
cases, are secured by cash deposits and letters of credit.  At December 31,
1999, the Company maintained custody of such letters of credit securing these
and other transactions totaling approximately $12.3 million, which is a
reasonable estimate of their fair value.  These letters of credit are not
reflected in the accompanying consolidated financial statements.  There were
no unaffiliated independent insurance agents that produced 10% or more of
NAICO's direct written and assumed premiums during 1997, 1998 or 1999.

     NAICO's largest underwriting manager was responsible for underwriting
$12.3 million and $4.0 million of NAICO's direct written and assumed premiums
for the California and Arizona portions of the nonstandard private-passenger
automobile program in 1997 and 1998, respectively.  The program underwritten
by this underwriting manager was discontinued in 1998.  NAICO's bail bond
underwriting manager was responsible for gross written premiums of $2.6
million, $2.8 million and $2.8 million during 1997, 1998 and 1999,
respectively.

     Approximately $8.7 million, or 14% of the Company's reinsurance
recoverables and prepaid reinsurance premiums at December 31, 1999 are
collateralized by premiums payable to the reinsurers, securities pledged in
trust or letters of credit for the benefit of NAICO.  The Company believes
the above value of such collateral is a reasonable estimate of their fair
value.  NAICO's reinsurance contracts include provisions for offsets against
premiums owed to the reinsurers.

<PAGE>
                                                                       PAGE F-23


     The following table sets forth certain information related to NAICO's
five largest reinsurers (excluding Chandler Barbados) determined on the basis
of net reinsurance recoverables as of December 31, 1999.
<TABLE>
<CAPTION>
                                                                              CEDED
                                                              NET          REINSURANCE
                                                          REINSURANCE     PREMIUMS FOR      A.M.
                                                          RECOVERABLE    THE YEAR ENDED   BEST CO.
NAME OF REINSURER                                             (1)      DECEMBER 31, 1999   RATING
--------------------------------------------------------  -----------  -----------------  --------
                                                                (Dollars in thousands)
<S>                                                       <C>          <C>                <C>
First Excess and Reinsurance Corporation................  $   16,528   $         10,709      A
Swiss Reinsurance America Corporation...................      10,801             12,909      A+
SCOR Reinsurance Company................................       8,544              9,479      A+
Reliance Insurance Company (2)..........................       5,253             (5,484)     A-
Red River Reinsurance, Ltd..............................       2,193              3,629      -(3)
                                                          -----------  -----------------
Top five reinsurers.....................................  $   43,319   $         31,242
                                                          ===========  =================
     All reinsurers.....................................  $   60,780   $         41,698
                                                          ===========  =================
Percentage of total represented by top five reinsurers..         71%                75%

--------------------------------------------------------
<FN>
(1)  Includes losses and loss adjustment expenses paid and outstanding, unpaid losses and loss
     adjustment expenses and prepaid reinsurance premiums recoverable from reinsurers as of
     December 31, 1999.

(2)  Excludes premiums receivable of $12.9 million as of December 31, 1999 related to the
     rescission of two reinsurance treaties.  NAICO collected this amount during January 2000.

(3)  Red River Reinsurance, Ltd. ("Red River") is required to secure its reinsurance obligations
     by depositing acceptable securities in trust for NAICO's benefit.  At December 31, 1999,
     Red River's reinsurance recoverables were collateralized by cash and investments with a
     fair value of $1.9 million deposited in a trust account for the benefit of NAICO and
     premiums payable to Red River of approximately $400,000.

</TABLE>

      NAICO loaned funds to certain agents which are secured by the agent's
stock in Red River.  The outstanding loan balances at December 31, 1999 consist
of 21 individual loans totaling approximately $650,000 ($977,000 at December
31, 1998) and are included in other assets in the accompanying consolidated
balance sheets.

OTHER

     See Note 11 regarding contingencies relating to litigation matters.

     Chandler USA has an employment agreement with W. Brent LaGere, Chairman of
the Board and Chief Executive Officer of the Company and its subsidiaries.
Under this agreement, Mr. LaGere's base compensation is established at not less
than $250,000 per year.  In the event that Mr. LaGere is terminated without
cause, as defined in the agreement, he is entitled to receive his base
compensation for the remainder of the term of the agreement, but in no event
for more than 60 months.  The agreement will terminate upon Mr. LaGere
attaining age 70, unless earlier terminated by Chandler USA for cause.  In
addition to his base compensation, Mr. LaGere is eligible to receive certain
benefits and to participate in certain incentive bonus plans offered by
Chandler USA and its subsidiaries.

     Chandler USA has an employment agreement with Brenda B. Watson, a director
and executive officer of the Company and L&W, and an executive officer of NAICO.
Under this agreement, Ms. Watson's base compensation is established at not less
than $125,000 per year.  The agreement terminates on December 31, 2003, unless
earlier terminated by Chandler USA for cause, as defined in the agreement.  In
the event that Ms. Watson is terminated without cause, she is entitled to
receive her base compensation through the termination date.  In addition to her
base compensation, Ms. Watson is eligible to receive certain benefits and to
participate in certain incentive bonus plans offered by Chandler USA and its
subsidiaries.

     In addition, certain executives are eligible to participate in bonus plans
based upon premium production and/or profitability.

     NAICO is subject to a variety of assessments related to insurance
activities, including those by state guaranty funds and workers compensation
second-injury funds.  The amounts and timing of such assessments are beyond the
control of NAICO.  NAICO provides for these charges on a current basis by
applying historical factors to premiums earned.  Actual results may vary from
these values and adjustments therefrom are necessary to maintain an adequate
reserve for these assessments.  The reserve for unpaid assessments was
approximately $851,000 and $667,000 at December 31, 1998 and 1999, respectively.
In certain cases, NAICO is permitted to recover a portion of its assessments
generally as a reduction to premium taxes paid to certain states.  NAICO has
recorded receivables in the amount that it expects to recover of approximately
$54,000 and $67,000 at December 31,  1998 and 1999, respectively.

<PAGE>
                                                                       PAGE F-24


     At December 31, 1999, the Company's subsidiaries were committed under
noncancellable operating leases for certain equipment and office space.
Rental payments under these leases were $1.1 million, $535,000 and $487,000
in 1997, 1998 and 1999, respectively.  Future minimum lease payments are as
follows:
<TABLE>
<CAPTION>
                                                  (In thousands)
                               <S>                <C>

                               2000.............. $         384
                               2001..............           266
                               2002..............           143
                               2003..............            91
                               2004..............             -
                                                  --------------
                                                  $         884
                                                  ==============
</TABLE>

NOTE 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     NAICO and NAICO Indemnity provided insurance coverage and risk management
services for CenTra and certain of its affiliates (see Note 11).  All such
policies were canceled effective September 5, 1992 or expired as of September
30, 1992.  As of December 31, 1997, the unpaid premiums and other amounts due
from CenTra to the Company's subsidiaries were $788,625,  as reflected by the
April 22, 1997 jury verdicts.  During 1998, the judgment was paid by funds held
by the Oklahoma Court aggregating, with interest, $820,185.  DuraRock, a CenTra
affiliate, claimed $725,000 was owed to it by NAICO and NAICO Indemnity under
certain reinsurance treaties.  In January 2000, the parties agreed to settle
the matter and NAICO and NAICO Indemnity agreed to pay DuraRock a total of
$137,500, which was recorded in the fourth quarter of 1999.  Liberty Bell
Agency, Inc. ("Liberty Bell"), an affiliate of CenTra, has administered claims
under the CenTra insurance program. NAICO and NAICO Indemnity reimburse Liberty
Bell for their share of claim payments, but are not obligated for DuraRock's
share.

     DuraRock reinsured NAICO and NAICO Indemnity for substantially all CenTra
risks underwritten by them.  As a part of a settlement of certain related
litigation, National Union Fire Insurance Company of Pittsburgh ("National
Union") agreed to assume the reinsurance obligations of DuraRock effective
March 31, 1993.  Reinsurance recoverables from National Union totaled
approximately $1.5 million and $755,000 as of December 31, 1998 and 1999,
respectively.  The reduction in reinsurance recoverables as well as to the
corresponding liabilities for unpaid losses and loss adjustment expenses is
based upon information provided by Liberty Bell and National Union.  Although
NAICO's and NAICO Indemnity's risks are fully reinsured, they are ultimately
liable as the policy-issuing company.  If National Union does not meet its
obligations, such failure could adversely affect NAICO and the Company (see
Notes 11 and 12).

OTHER

     See Note 11 regarding advancement of litigation expenses to certain
officers and directors of the Company in the CenTra litigation.

     Chandler USA leases and has made certain improvements to a rural property
in which certain directors and/or officers of the Company own interests.  Under
the lease, no cash rental is paid, but a subsidiary of Chandler USA drilled a
water well on the property and maintains certain structures it regularly uses.
This property provides recreational activities for the entertainment of
customers and business associates of the Company's U.S. subsidiaries.  Chandler
USA incurred approximately $159,000, $217,000 and  $202,000 in expenses
associated with its use of this property during 1997, 1998 and 1999,
respectively, including $9,000, $7,000 and $8,000 paid to Davenport Farms for
reimbursement of certain expenses, such as utility and similar expenses, for
the years 1997, 1998 and 1999, respectively.

     The Company believes that all transactions, including loans with
directors, officers, or shareholders of the Company, are and will continue to
be on terms no less favorable to the Company than could be obtained from
unaffiliated parties.

NOTE 14. SEGMENT INFORMATION

     The Company has two reportable operating segments:  property and casualty
insurance and agency.  The segments are managed separately due to the
differences in the nature of the insurance products and services sold.

<PAGE>
                                                                       PAGE F-25

     The property and casualty segment accounted for 91.6%, 89.6% and 92.4% of
1997, 1998 and 1999 consolidated revenues before intersegment eliminations,
respectively.  The insurance products are underwritten by NAICO and are
marketed through independent insurance agencies, including L&W.  NAICO
underwrites various lines of property and casualty insurance, including surety
bonds and workers compensation insurance.  NAICO's main areas of concentration
include the construction, manufacturing, oil and gas, wholesale, service and
retail industries along with political subdivisions.  The property and casualty
segment operates primarily in Oklahoma and Texas, and other surrounding states.
Oklahoma accounted for approximately 55%, 55% and 48% of gross written premiums
in 1997, 1998 and 1999, respectively,  while Texas accounted for approximately
18%, 28% and 37% of gross written premiums during the same years.  Management
evaluates the property and casualty segment's performance on the basis of
growth in gross written premiums and income before income taxes.

     The agency segment accounted for 8.1%, 10.0% and 7.2% of 1997, 1998 and
1999 consolidated revenues before intersegment eliminations, respectively.  L&W
is appointed by insurers to solicit applications for policies of insurance,
primarily in Oklahoma.  L&W represents personal and commercial lines insurance
companies, and markets property and casualty, individual and group life,
medical and disability income coverages.  Major target classes of business are
political subdivisions, healthcare facilities, transportation companies,
manufacturers, contractors, oil & gas, retailers, wholesalers and service
organizations.  A large portion of certain classes of  business produced by L&W
is placed with NAICO.  L&W also acts as a surplus lines broker specializing in
risk management and brokering insurance for commercial enterprises.  L&W acts
as the underwriter for a significant portion of NAICO's construction surety
bond program.  L&W places direct agency business as well as business from other
agents with specialty insurance companies.  Management evaluates the agency
segment's performance on the basis of commission income generated and income
before income taxes.

     The Company accounts for intercompany sales and transactions as if they
were to third parties and attempts to set fees  consistent with those that
would apply in arm's length transactions with a nonaffiliate.  There can be no
assurance the rates charged reflect those that would have been agreed upon
following an arm's length negotiation.

     The following table presents a summary of the Company's operating segments
for the years ended December 31:
<TABLE>
<CAPTION>
                                                                          PROPERTY
                                                                            AND           ALL      INTERSEGMENT    REPORTED
                                                             AGENCY       CASUALTY       OTHER     ELIMINATIONS    BALANCES
                                                          ------------  ------------  -----------  ------------  ------------
                                                                                     (In thousands)
<S>                                                       <C>           <C>           <C>          <C>           <C>
1997
Revenues from external customers......................... $     1,763   $    95,224   $      220   $         -   $    97,207
Intersegment revenues....................................       7,277           201          138        (7,616)            -
Interest income, net.....................................          56         7,186           11             -         7,253
Interest expense.........................................           1           462            -             -           463
Segment profit (loss) before income taxes (1)............         167         6,874       (5,778)          (47)        1,216
Segment assets...........................................       6,177       217,092        2,656       (15,135)      210,790
Depreciation and amortization............................         121         1,031        1,062             -         2,214

1998
Revenues from external customers......................... $     1,561   $    70,223   $      232   $         -   $    72,016
Intersegment revenues....................................       7,088           197          150        (7,435)            -
Interest income, net.....................................          55         6,412            -             -         6,467
Interest expense.........................................           2           934            -             -           936
Segment profit (loss) before income taxes (1)............         227         2,075        1,510           (17)        3,795
Segment assets...........................................       5,323       243,180        4,227       (16,705)      236,025
Depreciation and amortization............................         107         1,355          996             -         2,458

1999
Revenues from external customers......................... $     1,495   $   118,288   $      274   $         -   $   120,057
Intersegment revenues....................................       8,171           178          163        (8,512)            -
Interest income, net.....................................          32         5,561            1             -         5,594
Interest expense.........................................           2         1,529            -             -         1,531
Segment profit (loss) before income taxes (1)............         119         4,138       (1,725)          (16)        2,516
Segment assets...........................................       4,604       273,584          468        (9,536)      269,120
Depreciation and amortization............................          83         1,614          664             -         2,361
--------------------------------------------------
<FN>
(1)  Includes net realized investment gains.
</TABLE>

<PAGE>
                                                                       PAGE F-26

     Net premiums earned and losses and loss adjustment expenses within the
property and casualty segment can be identified to Company designated insurance
programs.  The Company's chief operating decision makers review net premiums
earned and losses and loss adjustment expenses in assessing the performance of
an insurance program.  In addition, the Company's chief operating decision
makers consider many other factors such as the lines of business offered within
an insurance program and the states in which the insurance programs are
offered.  Certain discrete financial information is not readily available by
insurance program, including assets, interest income, and investment gains or
losses, allocated to each insurance program.  The Company does not consider
its insurance programs to be reportable segments, however, the following
supplemental information pertaining to each insurance program's net premiums
earned and losses and loss adjustment expenses is presented for the property
and casualty segment.
<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                      --------------------------------------------
INSURANCE PROGRAM                                                          1997           1998           1999
--------------------------------------------------------------------- -------------- -------------- --------------
                                                                                     (In thousands)
<S>                                                                   <C>            <C>            <C>
NET PREMIUMS EARNED
Standard property and casualty....................................... $      55,527  $      41,662  $      71,676
Political subdivisions...............................................        14,945         13,073         17,415
Surety bonds.........................................................        11,117          9,938         10,896
Group accident and health............................................         2,303          4,646          8,261
Nonstandard private-passenger automobile.............................         8,841            482              4
Other................................................................         1,946            263             75
                                                                      -------------- -------------- --------------
                                                                      $      94,679  $      70,064  $     108,327
                                                                      ============== ============== ==============

LOSSES AND LOSS ADJUSTMENT EXPENSES
Standard property and casualty....................................... $      37,253  $      31,419  $      53,916
Political subdivisions...............................................         8,490         10,502         16,893
Surety bonds.........................................................           952          1,569            721
Group accident and health............................................           998          4,149          8,589
Nonstandard private-passenger automobile.............................         6,386           (182)          (408)
Other................................................................         3,433            422            105
                                                                      -------------- -------------- --------------
                                                                      $      57,512  $      47,879  $      79,816
                                                                      ============== ============== ==============
</TABLE>

     The following table shows the detail of intersegment eliminations for
segment assets shown in the previous table:

<TABLE>
<CAPTION>
                                                                            1997           1998           1999
                                                                       -------------- -------------- --------------
                                                                                      (In thousands)
<S>                                                                    <C>            <C>            <C>
Segment asset eliminations
   Investment in subsidiaries......................................... $         475  $         475  $       5,675
   Other consolidating adjustments....................................        14,660         16,230          3,861
                                                                       -------------- -------------- --------------
                                                                       $      15,135  $      16,705  $       9,536
                                                                       ============== ============== ==============
</TABLE>

<PAGE>
                                                                       PAGE F-27


NOTE 15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The Company's quarterly results of operations (unaudited) for 1998 and
1999 are as follows:

<TABLE>
<CAPTION>
                                                                                                                BASIC AND
                                                                                               NET           DILUTED EARNINGS
                                                                            TOTAL             INCOME           (LOSS) PER
                                                                           REVENUES           (LOSS)          COMMON SHARE
                                                                       ----------------  ------------------  ----------------
                                                                              (In thousands except per share amounts)
<S>                                                                    <C>               <C>                 <C>
1998
----------------------------------------------------------------------
     First quarter.................................................... $        18,550   $             974   $          0.15
     Second quarter...................................................          19,853               1,031              0.16
     Third quarter....................................................          20,248                 605              0.09
     Fourth quarter...................................................          20,995                 832              0.13
1999
----------------------------------------------------------------------
     First quarter.................................................... $        22,918   $             525   $          0.08
     Second quarter...................................................          22,387              (1,155)            (0.18)
     Third quarter....................................................          24,242                (323)            (0.05)
     Fourth quarter...................................................          56,159               3,104              0.51

</TABLE>

     In the second quarter of 1998, the Company reduced the previous 1997 net
charge for litigation matters by $3.8 million due to the Oklahoma Court's
denial of the CenTra Group's request for costs and attorney fees.

     During the second quarter of 1999, the Company experienced significant
weather-related losses totaling $2.8 million before income taxes (or $1.8
million after income taxes).  The tornadoes, strong winds and hail that caused
significant damage in Oklahoma on May 3, 1999 accounted for approximately $1.8
million or 66% of the weather-related losses in the second quarter.

     Weather-related losses also increased during the third quarter of 1999,
totaling $803,000 before income taxes (or $530,000 after income taxes).

     During the fourth quarter of 1999, NAICO agreed to rescind certain
reinsurance treaties under its workers compensation reinsurance program
effective January 1, 1999.  The rescission of the reinsurance treaties
increased total revenues by $29.6 million during the fourth quarter, and
increased net income after income taxes by approximately $3.8 million during
the fourth quarter.

                            *   *   *   *   *   *   *

<PAGE>
                                                                       PAGE F-28


INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Shareholders of
Chandler Insurance Company, Ltd.:

We have audited the accompanying consolidated balance sheets of Chandler
Insurance Company, Ltd. and subsidiaries (the "Company") as of December
31, 1999 and 1998, and the related consolidated statements of operations,
comprehensive income,  shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1999 (all expressed in United
States dollars).  Our audits also included the financial statement schedules
listed in the Index at Item 14.  These financial statements and financial
statement schedules are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Chandler Insurance Company, Ltd.
and subsidiaries at December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with accounting principles generally accepted
in the United States of America.  Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.

As discussed in Note 11 to the consolidated financial statements, the Company
is involved in various legal proceedings, the outcome of which is uncertain.



/s/ Deloitte & Touche
DELOITTE & TOUCHE
Grand Cayman, Cayman Islands
February 11, 2000

<PAGE>
                                                                       PAGE F-29

                                                                    SCHEDULE I


                CHANDLER INSURANCE COMPANY, LTD. AND SUBSIDIARIES

                          SUMMARY OF INVESTMENTS - OTHER
                       THAN INVESTMENTS IN RELATED PARTIES
                             AS OF DECEMBER 31, 1999

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                         AMOUNT AT WHICH
                                                                                                          SHOWN IN THE
TYPE OF INVESTMENT                                                            COST          FAIR VALUE    BALANCE SHEET
---------------------------------------------------------------------- ------------------ -------------- ---------------
<S>                                                                    <C>                <C>            <C>
FIXED MATURITIES AVAILABLE FOR SALE:
U.S. Treasury securities and obligations of U.S.
   government corporations and agencies............................... $          55,818  $      54,144  $       54,144
Debt securities issued by foreign governments.........................             1,503          1,498           1,498
Obligations of states and political subdivisions......................            10,188          9,914           9,914
Corporate obligations.................................................            37,063         35,721          35,721
Public utilities......................................................             7,280          6,798           6,798
Mortgage-backed securities............................................               624            634             634
                                                                       ------------------ -------------- ---------------
                                                                                 112,476        108,709         108,709
FIXED MATURITIES HELD TO MATURITY:
U.S. Treasury securities and obligations of U.S.
   government corporations and agencies...............................               984          1,039             984

EQUITY SECURITIES AVAILABLE FOR SALE:
Corporate stock.......................................................                 -            306             306
                                                                       ------------------ -------------- ---------------
   Total investments.................................................. $         113,460  $     110,054  $      109,999
                                                                       ================== ============== ===============
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-30

                                                                    SCHEDULE II

                CHANDLER INSURANCE COMPANY, LTD. AND SUBSIDIARIES

                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                         CHANDLER INSURANCE COMPANY, LTD.
                              (PARENT COMPANY ONLY)

                                 BALANCE SHEETS

                      (In thousands except share amounts)
<TABLE>
<CAPTION>

                                                                                                 DECEMBER 31,
                                                                                      ---------------------------------
                                                                                            1998            1999
                                                                                      ---------------- ----------------
<S>                                                                                   <C>              <C>
ASSETS

Cash and cash equivalents ........................................................... $            15  $            73
Premiums receivable..................................................................              10            2,476
Deferred policy acquisition costs....................................................               -              838
Investment in subsidiaries, net......................................................          75,268           59,223
                                                                                      ---------------- ----------------
Total assets......................................................................... $        75,293  $        62,610
                                                                                      ================ ================

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
   Unpaid losses and loss adjustment expenses........................................ $             -  $           561
   Unearned premiums.................................................................               -            2,401
   Litigation liabilities............................................................          13,228            8,905
                                                                                      ---------------- ----------------
Total liabilities....................................................................          13,228           11,867
                                                                                      ---------------- ----------------
Shareholders' equity
   Common stock, $1.67 par value, 10,000,000 shares authorized;
      6,941,708 and 4,428,033 shares issued and outstanding in 1998
         and 1999, respectively......................................................          11,593            7,395
   Paid-in surplus...................................................................          34,983           21,380
   Common stock to be issued (20,000 shares in 1998).................................             125                -
   Capital redemption reserve........................................................             947              947
   Retained earnings.................................................................          28,328           30,479
   Less: Stock held by subsidiary, at cost (544,475 shares in 1998)..................          (2,905)               -
   Less: Stock rescinded through litigation (1,660,125 and 1,142,625 shares
      in 1998 and 1999, respectively)................................................         (11,799)          (6,883)
   Accumulated other comprehensive income (loss):
      Unrealized gain (loss) on investments available for sale, net of
         deferred income taxes.......................................................             793           (2,575)
                                                                                      ---------------- ----------------
Total shareholders' equity...........................................................          62,065           50,743
                                                                                      ---------------- ----------------
Total liabilities and shareholders' equity........................................... $        75,293  $        62,610
                                                                                      ================ ================
</TABLE>
SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-31


                                                                    SCHEDULE II

                CHANDLER INSURANCE COMPANY, LTD. AND SUBSIDIARIES

                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                        CHANDLER INSURANCE COMPANY, LTD.
                             (PARENT COMPANY ONLY)

                            STATEMENTS OF OPERATIONS

                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                      --------------------------------------------
                                                                           1997           1998           1999
                                                                      -------------- -------------- --------------
<S>                                                                   <C>            <C>            <C>
Premiums and other revenues
   Net premiums earned............................................... $           -  $          37  $       1,655
   Interest income, net..............................................             -              -              1
                                                                      -------------- -------------- --------------
      Total premiums and other revenues..............................             -             37          1,656
                                                                      -------------- -------------- --------------
Operating costs and expenses
   Losses and loss adjustment expenses...............................             -             22            671
   Policy acquisition costs..........................................             -              6            584
   General and administrative expenses...............................             -            272              -
   Litigation expenses, net..........................................         4,819         (3,390)           777
                                                                      -------------- -------------- --------------
      Total operating costs and expenses.............................         4,819         (3,090)         2,032
                                                                      -------------- -------------- --------------
Income (loss) before equity in net income of subsidiaries............        (4,819)         3,127           (376)
Equity in net income of subsidiaries.................................         3,754            315          2,527
                                                                      -------------- -------------- --------------
Net income (loss).................................................... $      (1,065) $       3,442  $       2,151
                                                                      ============== ============== ==============

</TABLE>
SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-32


                                                                    SCHEDULE II

                CHANDLER INSURANCE COMPANY, LTD. AND SUBSIDIARIES

                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                        CHANDLER INSURANCE COMPANY, LTD.
                             (PARENT COMPANY ONLY)

                            STATEMENTS OF CASH FLOWS

                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                      --------------------------------------------
                                                                           1997           1998           1999
                                                                      -------------- -------------- --------------
<S>                                                                   <C>            <C>            <C>
OPERATING ACTIVITIES
   Net income (loss)................................................. $      (1,065) $       3,442  $       2,151
   Adjustments to reconcile net income (loss) to cash
      provided by (applied to) operating activities:
      Earned compensation: non-employee director stock option
         and stock grant plan........................................             -            272              -
      Net income of subsidiaries not distributed to parent...........        (3,754)          (315)        (2,527)
   Net change in non-cash balances relating to operating activities:
      Premiums receivable............................................             -            (10)        (2,466)
      Deferred acquisition costs.....................................             -              -           (838)
      Unpaid losses and loss adjustment expenses.....................             -              -            561
      Unearned premiums..............................................             -              -          2,401
      Litigation liabilities.........................................         4,819         (3,390)           776
                                                                      -------------- -------------- --------------
      Cash provided by (applied to) operating activities.............             -             (1)            58
                                                                      -------------- -------------- --------------
FINANCING ACTIVITIES
   Proceeds from borrowing from subsidiary...........................             -              -         15,204
   Payments to acquire stock under divestiture plan..................             -              -        (15,204)
                                                                      -------------- -------------- --------------
      Cash provided by financing activities..........................             -              -              -
                                                                      -------------- -------------- --------------
Increase (decrease) in cash and cash equivalents.....................             -             (1)            58
Cash and cash equivalents at beginning of year.......................            16             16             15
                                                                      -------------- -------------- --------------
Cash and cash equivalents at end of year............................. $          16  $          15  $          73
                                                                      ============== ============== ==============
</TABLE>

SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-33

                                                                    SCHEDULE III

                CHANDLER INSURANCE COMPANY, LTD. AND SUBSIDIARIES

                       SUPPLEMENTARY INSURANCE INFORMATION

                                 (In thousands)

<TABLE>
<CAPTION>
                                     FUTURE
                                     POLICY                                                      AMORTI-
                                    BENEFITS,           OTHER                                    ZATION OF               NET
                          DEFERRED   LOSSES,            POLICY                        CLAIMS,    DEFERRED              PREMIUMS
                           POLICY    CLAIMS           CLAIMS AND             NET     LOSSES AND   POLICY      OTHER    WRITTEN
                        ACQUISITION AND LOSS UNEARNED  BENEFITS   PREMIUM  INTEREST  SETTLEMENT ACQUISITION OPERATING    AND
                           COSTS    EXPENSES PREMIUMS   PAYABLE   REVENUE   INCOME    EXPENSES     COSTS    EXPENSES   ASSUMED
                        ----------- -------- -------- ---------- --------- --------- ---------- ----------- --------- ---------
<S>                     <C>         <C>      <C>      <C>        <C>      <C>       <C>         <C>         <C>       <C>
YEAR ENDED
DECEMBER 31, 1997
Property and casualty.. $    5,312  $74,929  $42,388  $   4,830  $ 94,679  $  7,186  $  57,512  $   21,064  $ 10,309  $ 96,866
Agency.................          -        -        -          -         -        56          -       7,081     1,896         -
Other..................          -        -        -          -         -        11          -           -     6,146         -
                        ----------- -------- -------- ---------- --------- --------- ---------- ----------- --------- ---------
Total.................. $    5,312  $74,929  $42,388  $   4,830  $ 94,679  $  7,253  $  57,512  $   28,145  $ 18,351  $ 96,866
                        =========== ======== ======== ========== ========= ========= ========== =========== ========= =========

YEAR ENDED
DECEMBER 31, 1998
Property and casualty.. $    2,381  $80,909  $50,647  $   4,936  $ 70,064  $  6,411  $ 47,879   $   10,099  $ 10,510  $ 65,536
Agency.................          -        -        -          -         -        55          -       6,934     1,540         -
Other..................          -        -        -          -         -         1          -           -    (1,111)        -
                        ----------- -------- -------- ---------- --------- --------- ---------- ----------- --------- ---------
Total.................. $    2,381  $80,909  $50,647  $   4,936  $ 70,064  $  6,467  $ 47,879   $   17,033  $ 10,939  $ 65,536
                        =========== ======== ======== ========== ========= ========= ========== =========== ========= =========

YEAR ENDED
DECEMBER 31, 1999
Property and casualty.. $    6,488  $98,460  $67,769  $   5,135  $108,327  $  5,561  $  79,816  $   20,617  $ 11,000  $127,937
Agency.................          -        -        -          -         -        32          -       8,064     1,514         -
Other..................          -        -        -          -         -         1          -           -     2,179         -
                        ----------- -------- -------- ---------- --------- --------- ---------- ----------- --------- ---------
Total.................. $    6,488  $98,460  $67,769  $   5,135  $108,327  $  5,594  $  79,816  $   28,681  $ 14,693  $127,937
                        =========== ======== ======== ========== ========= ========= ========== =========== ========= =========

</TABLE>
SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-34

                                                                    SCHEDULE IV

                CHANDLER INSURANCE COMPANY, LTD. AND SUBSIDIARIES

                                  REINSURANCE

                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                            ASSUMED                    PERCENTAGE
                                                                             CEDED TO        FROM                       OF AMOUNT
                                                                 GROSS         OTHER         OTHER          NET          ASSUMED
                                                                 AMOUNT      COMPANIES     COMPANIES       AMOUNT        TO NET
                                                               -----------  ------------  ------------  ------------  ------------
<S>                                                            <C>          <C>           <C>           <C>           <C>
Year ended December 31, 1997
   Property and casualty...................................... $  123,014   $   (26,222)  $        74   $    96,866        0.08 %
                                                               ===========  ============  ============  ============  ===========
Year ended December 31, 1998
   Property and casualty...................................... $  134,436   $   (68,793)  $      (107)  $    65,536       (0.16)%
                                                               ===========  ============  ============  ============  ===========
Year ended December 31, 1999
   Property and casualty...................................... $  169,449   $   (41,698)  $       186   $   127,937        0.15 %
                                                               ===========  ============  ============  ============  ===========

</TABLE>

SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-35


                                                                    SCHEDULE V

                CHANDLER INSURANCE COMPANY, LTD. AND SUBSIDIARIES


                         VALUATION AND QUALIFYING ACCOUNTS


                                   (In thousands)

<TABLE>
<CAPTION>
                                                          BALANCE AT       PROVISION                            BALANCE
                                                          BEGINNING           FOR                                AT END
                                                          OF PERIOD      NON-COLLECTION      WRITE-OFFS         OF PERIOD
                                                      ----------------  ----------------  ----------------  ----------------
<S>                                                   <C>               <C>               <C>               <C>
Allowance for non-collection of
   premiums receivable:

      1997........................................... $           177   $            52   $          (114)  $           115
                                                      ================  ================  ================  ================
      1998........................................... $           115   $           152   $           (67)  $           200
                                                      ================  ================  ================  ================
      1999........................................... $           200   $           210   $          (147)  $           263
                                                      ================  ================  ================  ================
Allowance for non-collection of reinsurance
   recoverables on paid and unpaid losses:


      1997........................................... $           491   $           527   $          (353)  $           665
                                                      ================  ================  ================  ================
      1998........................................... $           665   $            50   $          (110)  $           605
                                                      ================  ================  ================  ================
      1999........................................... $           605   $             -   $           (28)  $           577
                                                      ================  ================  ================  ================
</TABLE>

SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-36

                                                                    SCHEDULE VI

                CHANDLER INSURANCE COMPANY, LTD. AND SUBSIDIARIES

                             SUPPLEMENTAL INFORMATION

                  (FOR PROPERTY-CASUALTY INSURANCE UNDERWRITERS)

                                 (In thousands)


<TABLE>
<CAPTION>
                                                                DISCOUNT      PAID LOSSES AND
                                                                DEDUCTED      LOSS ADJUSTMENT
                                                              FROM RESERVES      EXPENSES
                                                             ---------------  ---------------
<S>                                                          <C>              <C>
Year ended December 31, 1997
   Property-casualty........................................ $            -   $       59,052
                                                             ===============  ===============
Year ended December 31, 1998
   Property-casualty........................................ $            -   $       59,575
                                                             ===============  ===============
Year ended December 31, 1999
   Property-casualty........................................ $            -   $       70,683
                                                             ===============  ===============

</TABLE>

SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                      PAGE F-37

                                                                    EXHIBIT 21.1

                CHANDLER INSURANCE COMPANY, LTD. AND SUBSIDIARIES

                         SUBSIDIARIES OF THE REGISTRANT



1.  Chandler Insurance (Barbados), Ltd., a Barbados company ("Chandler
    Barbados") that is a wholly owned subsidiary of the Company.


2.  Chandler (U.S.A.), Inc., an Oklahoma corporation ("Chandler USA") that
    is a wholly owned subsidiary of Chandler Barbados.


3.  LaGere & Walkingstick Insurance Agency, Inc., an Oklahoma corporation
    ("L&W") that is a wholly owned subsidiary of Chandler USA.


4.  National American Insurance Company, a Nebraska corporation ("NAICO") that
    is a wholly owned subsidiary of Chandler USA.


5.  Network Administrators, Inc., a Texas corporation ("Network") that is a
    wholly owned subsidiary of Chandler USA.


6.  NAICO Indemnity (Cayman), Ltd., a Cayman Islands company ("NAICO
    Indemnity") that is a wholly owned subsidiary of the Company.


7.  Chandler Insurance Management, Ltd., a Cayman Islands company ("CIM") that
    is a wholly owned subsidiary of the Company.


8.  Chandler Insurance Management (Barbados), Ltd., a Barbados company ("CIM
    Barbados") that is a wholly owned subsidiary of the Company.


9.  Windsor Acquisition Corporation, an Oklahoma corporation ("Windsor") that
    is a wholly owned subsidiary of Chandler Barbados.

<PAGE>
                                                                       PAGE F-38


                                                                    EXHIBIT 23.1








INDEPENDENT AUDITORS' CONSENT


We consent to the incorporation by reference in Post-Effective Amendment No. 3
to Form S-2 on Form S-8 Registration Statement No. 33-28436 of Chandler
Insurance Company, Ltd. of our report dated February 11, 2000 (which expresses
an unqualified opinion and includes an explanatory paragraph relating to
litigation discussed in Note 11) appearing in the Annual Report on Form 10-K of
Chandler Insurance Company, Ltd. for the year ended December 31, 1999.


/s/ Deloitte & Touche
DELOITTE & TOUCHE
Grand Cayman, Cayman Islands
March 20, 2000