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                           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, 2000

                 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 28, 2001 was $25,092,622 (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.

The number of Common Shares, $1.67 par value, of the registrant outstanding
on February 28, 2001 was 3,295,408.  See "Item 1. BUSINESS - Going Private
Transaction."

                      DOCUMENTS INCORPORATED BY REFERENCE

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

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<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; and (ix) other factors such as ongoing litigation matters.

ITEM 1.  BUSINESS

GOING PRIVATE TRANSACTION

     A special meeting of shareholders was held on March 5, 2001.  Three
proposals which constitute a going private transaction were approved at the
meeting.  Together these proposals constitute the "Recapitalization Plan."
The Recapitalization Plan consists of the following components:

     -  authorization and creation of Class A Common Shares;

     -  authorization and designation of the rights, preferences, privileges
        and restrictions granted to and imposed on the Series A Preferred
        Shares, Series B Preferred Shares and Series C Preferred Shares;

     -  amendments to the Company's Articles of Association providing for the
        repurchase of capital shares above market price and the payment of
        cash in lieu of issuing fractional shares;

     -  repurchase all Common Shares owned by W. Brent LaGere and Mark T.
        Paden for $10.00 per share, after which Mr. LaGere will purchase
        500,661 Class A Common Shares, and Mr. Paden will purchase 125,165
        Class A Common Shares for $10.00 per share;

     -  repurchase up to approximately 410,000 Common Shares owned by the
        Chandler (U.S.A.), Inc. 401(k) Thrift Plan (the "Thrift Plan") for
        $10.00 per share, after which the Thrift Plan will purchase a like
        number of the Company's Series A Preferred Shares for its participants
        for $10.00 per share;

     -  repurchase approximately 1,245,000 Common Shares owned by certain
        management and key shareholders (the "Continuing Shareholders"), other
        than Messrs. LaGere and Paden, for $10.00 per share, after which the
        Continuing Shareholders, other than Messrs. LaGere and Paden, will
        purchase approximately 485,000 Series B Preferred Shares and 760,000
        Series C Preferred Shares for $10.00 per share; and

     -  consummation of a 1-for-1,000,000 reverse stock split of the Company's
        Common Shares by reducing the number of authorized Common Shares from
        10,000,000 shares to ten shares and making a cash payment of $10.00
        per pre-split Common Share in lieu of the issuance of resulting
        fractional shares. The reverse stock split will be effective
        immediately following the completion of each component of the
        Recapitalization Plan listed above.  Following the reverse stock
        split, all other holders of Common Shares (the "Disinterested
        Shareholders") will no longer be shareholders of the Company.

     The Company intends to file a Form 15 with the Securities and Exchange
Commission ("SEC") to terminate the Company's Exchange Act registration once
the Recapitalization Plan is consummated.  As a result, the Common Shares will
no longer be registered with the SEC under Section 12(g) of the Exchange Act.
Thus, the Company will no longer be required to file reports with the SEC.

<PAGE>
                                                                       PAGE 2
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
190 at December 31, 2000, 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 "B+ (Very Good)" 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."

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, 2000,
NAICO insured 640 school districts including 497 school districts in Oklahoma
and 99 school districts in Texas.  The coverages offered include workers
compensation, automobile liability, automobile physical damage, general
liability, property and school board legal liability.

<PAGE>
                                                                       PAGE 3

     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, 2000, NAICO insured 229 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.  During 1999, NAICO began offering fully insured accident and
health coverage primarily to Oklahoma employers, and discontinued the excess
portion of the program.  NAICO discontinued the fully insured portion of the
program in 2000.

     The following table shows gross premiums earned and net premiums earned
by insurance program for the years 1998, 1999 and 2000.  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.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS."

<TABLE>
<CAPTION>
                                            GROSS PREMIUMS EARNED       NET PREMIUMS EARNED
                                         --------------------------  --------------------------
INSURANCE PROGRAMS                         1998     1999     2000      1998     1999     2000
---------------------------------------- -------- -------- --------  -------- -------- --------
                                                             (In thousands)
<S>                                      <C>      <C>      <C>       <C>      <C>      <C>

Standard property and casualty.......... $ 76,458 $ 99,512 $139,051  $ 41,662 $ 71,676 $ 89,517
Political subdivisions .................   25,091   29,994   34,353    13,073   17,415   16,853
Surety bonds ...........................   11,915   13,660   13,691     9,938   10,896   10,033
Group accident and health ..............    6,104    9,164    3,425     4,646    8,261    3,221
Other (1) ..............................    6,503      183      278       745       79      239
                                         -------- -------- --------  -------- -------- --------
TOTAL .................................. $126,071 $152,513 $190,798  $ 70,064 $108,327 $119,863
                                         ======== ======== ========  ======== ======== ========
-----------------------
<FN>

(1)  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>

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.

<TABLE>
<CAPTION>

                                                               YEAR ENDED DECEMBER 31,
                                                    --------------------------------------------
                                                      1996     1997     1998     1999     2000
                                                    -------- -------- -------- -------- --------
<S>                                                 <C>      <C>      <C>      <C>      <C>
Workers compensation ..............................      48%      47%      28%      36%      35%
Other liability ...................................      10%      13%      20%      18%      22%
Automobile liability ..............................      20%      16%      20%      18%      19%
Automobile physical damage ........................       8%       6%       7%       6%       9%
Surety ............................................      11%      12%      14%      10%       8%
Accident and health ...............................       -%       3%       7%       8%       3%
Property ..........................................       2%       2%       3%       3%       3%
Inland marine .....................................       1%       1%       1%       1%       1%
                                                    -------- -------- -------- -------- --------
     Total ........................................     100%     100%     100%     100%     100%
                                                    ======== ======== ======== ======== ========
</TABLE>

<PAGE>
                                                                       PAGE 4
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 1998, 1999 and 2000,
the gross written premiums in this program were $2.8 million, $2.8 million
and $2.5 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.

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, 2001 reinsurance programs.  At the present
time, NAICO expects to renew the reinsurance programs that renew on April 1 or
July 1, 2001, 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.

<PAGE>
                                                                       PAGE 5

     Under the 1998 workers compensation reinsurance program, the combined net
retention for the Company and its subsidiaries was 70% of the first $10,000 of
loss per occurrence.  The combined net retention for 1999 increased to 85% of
the first $10,000 of loss per occurrence plus 75% of $490,000 excess of
$10,000 of loss per occurrence for its workers compensation business.  The
increase resulted from the rescission of certain reinsurance treaties which
had been in effect since the beginning of 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.  Effective
October 1, 2000, NAICO purchased quota share reinsurance which reduced the
Company's combined net retention to 68% of the first $10,000 of loss per
occurrence plus 60% of $90,000 excess of $10,000 of loss per occurrence.

     Under the 1998 and 1999 casualty reinsurance programs, the combined net
retention was $250,000 of loss per occurrence.  Effective January 1, 2000, the
combined net retention was reduced to $100,000 of loss per occurrence.
Effective October 1, 2000, NAICO purchased quota share reinsurance which
reduced the Company's combined net retention to 80% of the first $100,000 of
loss per occurrence.

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

     Under the 1998, 1999 and 2000 property reinsurance program, NAICO
retained 30% of the first $500,000 of risk for each loss per location.
Effective January 1, 2001, NAICO retains 33% of the first $1,515,152 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 1998, 1999 and 2000
automobile physical damage reinsurance program, NAICO retained 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.  Effective January
1, 2001, NAICO retains the first $500,000 of loss per occurrence, plus 5% of
amounts exceeding $500,000 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 6

     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, 2000.



<TABLE>
<CAPTION>
                                                                           CEDED REINSURANCE
                                                                NET           PREMIUMS FOR        A.M.
                                                            REINSURANCE      THE YEAR ENDED     BEST CO.
NAME OF REINSURER                                         RECOVERABLE (1)  DECEMBER 31, 2000    RATING
--------------------------------------------------------- ---------------  ------------------  ----------
                                                                      (Dollars in thousands)
<S>                                                       <C>              <C>                 <C>
Swiss Reinsurance America Corporation ................... $       25,917   $          26,857      A++
GE Reinsurance Corporation ..............................         16,513              18,253      A++
SCOR Reinsurance Company ................................          8,232               9,904      A+
Red River Reinsurance, Ltd. .............................          4,104               6,072      -(2)
PMA Capital Insurance Company ...........................          3,782               4,735      A
                                                          ---------------  ------------------  ----------
     Top five reinsurers ................................ $       58,548   $          65,821
                                                          ===============  ==================
     All reinsurers ..................................... $       75,369   $          83,674
                                                          ===============  ==================
Percentage of total represented by top five reinsurers...            78%                 79%

---------------------------------------------------------
<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, 2000.

(2)  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, 2000, Red River's reinsurance recoverables were
     collateralized by cash and investments with a fair value of $3.3 million deposited in a trust account for the benefit
     of NAICO and by premiums payable to Red River of approximately $1.2 million.

</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, 2000.  NAICO is currently engaged in arbitration
in order to enforce the terms of the reinsurance treaties.

     Reliance Insurance Company ("Reliance") reinsured NAICO for certain
workers compensation risks during 1998 and 1999.  During the fourth quarter
of 1999, NAICO agreed to rescind two reinsurance treaties which had been in
effect since January 1, 1999.  At December 31, 2000, NAICO had reinsurance
recoverables from Reliance for paid and unpaid losses relating to the 1998
treaties of approximately $2.3 million.  Reliance was placed under regulatory
supervision in Pennsylvania during January 2001.

     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 1998, NAICO incurred charges of $50,000 in
uncollectible reinsurance recoverables from unaffiliated reinsurers.  NAICO
did not incur any charges for uncollectible reinsurance recoverables from
unaffiliated reinsurers in 1999 or 2000.

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").

<PAGE>
                                                                       PAGE 7

     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,
                                          ------------------------------------------------------
                                             1996       1997       1998       1999       2000
                                          ---------- ---------- ---------- ---------- ----------
                                                          (Dollars in thousands)
<S>                                       <C>        <C>        <C>        <C>        <C>
Workers compensation (1):
     Net premiums earned ................ $  42,813  $  44,954  $  19,651  $  39,329  $  41,876
     Loss ratio .........................       53%        66%        71%        69%        65%
Other liability:
     Net premiums earned ................ $   8,656  $  12,209  $  14,045  $  19,799  $  26,008
     Loss ratio .........................       60%        49%        70%        67%        55%
Automobile liability:
     Net premiums earned ................ $  17,581  $  15,593  $  14,139  $  19,030  $  22,534
     Loss ratio .........................       98%        89%        75%        82%        76%
Automobile physical damage:
     Net premiums earned ................ $   6,788  $   5,726  $   4,702  $   7,039  $  11,434
     Loss ratio .........................       74%        60%        85%       104%        85%
Surety:
     Net premiums earned ................ $  10,123  $  11,256  $  10,101  $  11,122  $  10,326
     Loss ratio .........................       -1%         9%        16%         8%        31%
Property:
     Net premiums earned ................ $   1,467  $   1,912  $   2,332  $   2,972  $   3,377
     Loss ratio .........................      114%        74%       136%       203%       179%
Accident and health:
     Net premiums earned ................ $     564  $   2,529  $   4,646  $   8,261  $   3,221
     Loss ratio .........................       56%        43%        91%       103%       160%
Inland marine:
     Net premiums earned ................ $   1,294  $     500  $     448  $     775  $   1,087
     Loss ratio .........................      115%       195%       123%       138%       142%
Total (1):
     Net premiums earned ................ $  89,286  $  94,679  $  70,064  $ 108,327  $ 119,863
     Loss ratio .........................       60%        61%        68%        74%        70%
     Underwriting expense ratio (2) .....       46%        39%        37%        33%        34%
                                          ---------- ---------- ---------- ---------- ----------
     Combined ratio (2) .................      106%       100%       105%       107%       104%
                                          ========== ========== ========== ========== ==========
-----------------------------------------
<FN>

(1)  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.

(2)  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.

</TABLE>

<PAGE>
                                                                       PAGE 8

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 $4.4 million and $4.8 million at December 31, 1999 and 2000,
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 9

     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,
                                                    ------------------------------------------------------
                                                       1996       1997       1998       1999       2000
                                                    ---------- ---------- ---------- ---------- ----------
                                                                    (Dollars in thousands)
<S>                                                 <C>        <C>        <C>        <C>        <C>
Net balance before provision for uncollectible
     reinsurance at beginning of year ............. $  81,388  $  64,430  $  62,890  $  51,194  $  60,327
                                                    ---------- ---------- ---------- ---------- ----------
Net losses and loss adjustment expenses
     incurred related to:
          Current year ............................    53,314     53,704     42,724     74,997     78,551
          Prior years .............................        77      3,808      5,155      4,819      5,684
                                                    ---------- ---------- ---------- ---------- ----------
               Total ..............................    53,391     57,512     47,879     79,816     84,235
                                                    ---------- ---------- ---------- ---------- ----------
Net paid losses and loss adjustment expenses
     related to:
          Current year ............................   (23,836)   (22,214)   (23,152)   (37,806)   (40,836)
          Prior years .............................   (46,513)   (36,838)   (36,423)   (32,877)   (43,478)
                                                    ---------- ---------- ---------- ---------- ----------
               Total ..............................   (70,349)   (59,052)   (59,575)   (70,683)   (84,314)
                                                    ---------- ---------- ---------- ---------- ----------
Net balance before provision for uncollectible
     reinsurance at end of year ...................    64,430     62,890     51,194     60,327     60,248
Adjustments to reinsurance recoverables on
     unpaid losses for uncollectible reinsurance...       777      1,163        745        594        538
                                                    ---------- ---------- ---------- ---------- ----------
Net balance at end of year ........................ $  65,207  $  64,053  $  51,939  $  60,921  $  60,786
                                                    ========== ========== ========== ========== ==========
</TABLE>

     The following table represents the development of net balance sheet
reserves for 1991 through 2000.  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 nine 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 1994 for
claims that occurred in 1991 will be included in the cumulative deficiency
amount for years 1991, 1992, 1993 and 1994.  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 10



<TABLE>
<CAPTION>
                                                                      DEVELOPMENT OF RESERVES
                                                                         AS OF DECEMBER 31,
                                 ---------------------------------------------------------------------------------------------------
                                    1991      1992     1993      1994      1995      1996      1997      1998      1999      2000
                                 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
                                                                            (In thousands)
<S>                              <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Net reserve for unpaid losses and
 loss adjustment expenses (1) ...$144,430  $119,963  $ 99,685  $ 98,592  $ 82,017  $ 65,207  $ 64,053  $ 51,939  $ 60,921  $ 60,786
Net paid (cumulative) as of
 One year later .................  78,323    61,417    49,798    45,943    46,513    36,837    36,423    32,876    43,477
 Two years later ................ 120,319    94,047    73,225    72,718    65,754    52,078    54,753    47,567
 Three years later .............. 144,900   109,885    90,909    85,006    72,206    60,858    63,795
 Four years later ............... 155,816   122,757    98,193    88,986    76,633    64,472
 Five years later ............... 165,357   127,725   100,117    92,128    78,600
 Six years later ................ 168,509   129,070   102,055    93,396
 Seven years later .............. 169,494   130,633   103,017
 Eight years later .............. 170,745   131,254
 Nine years later ............... 171,079

Net liability re-estimated as of (1)
 One year later ................. 160,938   125,202   100,804    98,160    82,094    69,015    69,208    56,758    66,605
 Two years later ................ 163,100   127,557   101,467    96,279    84,023    71,183    70,877    59,059
 Three years later .............. 166,807   129,449   101,539    98,549    84,277    70,962    72,949
 Four years later ............... 167,935   129,958   102,626    98,750    84,137    71,536
 Five years later ............... 169,143   131,109   103,275    99,165    84,742
 Six years later ................ 170,077   131,522   104,110    99,446
 Seven years later .............. 170,403   132,444   104,234
 Eight years later .............. 171,137   132,413
 Nine years later ............... 171,190

Net cumulative deficiency .......$(26,760) $(12,450) $ (4,549) $   (854) $ (2,725) $ (6,329) $ (8,896) $ (7,120) $ (5,684) $      -
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  $100,173
 Reclassification of pool liabilities ....  (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  $100,173
 Reinsurance recoverable .................   86,772    64,436    57,468    46,777    14,432    10,876    28,970    37,539    39,387
                                           --------- --------- --------- --------- --------- --------- --------- --------- ---------
 Net liability - end of year (1) ......... $119,963  $ 99,685  $ 98,592  $ 82,017  $ 65,207  $ 64,053  $ 51,939  $ 60,921  $ 60,786
                                           ========= ========= ========= ========= ========= ========= ========= ========= =========
 Gross re-estimated liability - latest ... $208,314  $160,704  $154,395  $131,656  $ 92,408  $ 87,970  $ 97,492  $116,145
 Re-estimated recoverable - latest .......   75,901    56,470    54,949    46,914    20,872    15,021    38,433    49,540
                                           --------- --------- --------- --------- --------- --------- --------- ---------
 Net re-estimated liability - latest (1).. $132,413  $104,234  $ 99,446  $ 84,742  $ 71,536  $ 72,949  $ 59,059  $ 66,605
                                           ========= ========= ========= ========= ========= ========= ========= =========
 Gross cumulative (deficiency) redundancy. $ (1,579) $  3,417  $  1,665  $ (2,862) $(12,769) $(13,041) $(16,583) $(17,685)
                                           ========= ========= ========= ========= ========= ========= ========= =========
--------------------------------------------
<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 cash and 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 11
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 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.

     As of December 31, 2000, all of the investments of Chandler Barbados and
of NAICO were in fixed-maturity investments (rated A1 or A+ 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 $25.7 million of Chandler Barbados' portfolio at
December 31, 2000.  The remainder is managed by the Investment Committee of
the Company's Board of Directors.  Approximately $85.7 million of NAICO's
investment portfolio at December 31, 2000 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.

DEBENTURES

     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, 2000, the subsidiaries of the Company organized under the
laws of the United States had approximately  424 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.

<PAGE>
                                                                       PAGE 12

     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.  However, NAICO was able to increase its pricing for most
coverages during 2000.

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 insurance laws of Oklahoma (the "Oklahoma Insurance
Code").  The Oklahoma Insurance Code 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 Oklahoma Insurance Code 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.

<PAGE>
                                                                       PAGE 13

     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.  The Company has obtained approval from the Monetary Authority for
the changes occurring as a result of the Recapitalization Plan.

     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 Oklahoma Insurance Code.  Prior to May 19, 2000, NAICO was domiciled
in Nebraska.  The Oklahoma 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
Oklahoma 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 Oklahoma, 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 Oklahoma 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.  The
Oklahoma Department of Insurance has approved the change of control resulting
from the Recapitalization Plan.

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 Oklahoma regulate the payment of shareholder dividends and other
payments by NAICO to Chandler USA.  Under applicable Oklahoma 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
Oklahoma 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; or (ii) 10%
of NAICO's statutory policyholders' surplus as of the preceding calendar year
end, not to exceed NAICO's statutory earned surplus.

<PAGE>
                                                                       PAGE 14

     As of December 31, 2000, NAICO had statutory earned surplus of $15.9
million.  Applying the Oklahoma statutory limits described above, the maximum
shareholder dividend NAICO may pay in 2001 without the approval of the
Oklahoma Department of Insurance is $4.9 million.  In 2000, NAICO paid
shareholder dividends totaling $2.5 million to Chandler USA.  NAICO paid a
shareholder dividend of $6.0 million to Chandler USA during 1998.  On January
31, 2001, the Oklahoma  Department of Insurance approved the payment of an
extraordinary dividend by NAICO of up to $8.0 million to Chandler USA.

     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.

     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 4.4:1 and 5.2:1 at December 31, 1999 and 2000, respectively.  Therefore,
NAICO's capital exceeds the level that would trigger regulatory attention
pursuant to the risk-based capital requirement.

<PAGE>
                                                                       PAGE 15

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 2000, management
believes that NAICO had three 2000 ratios that would have been outside of the
"usual values."

     NAICO's "surplus aid to policyholders' surplus" ratio for 2000 was 18%
compared to a usual value of less than 15%.  This was due to an increase in
ceding commissions during 2000 resulting from the purchase of additional quota
share reinsurance in the fourth quarter of 2000.

     NAICO's "investment yield" as calculated using the IRIS formula was 3.16%
during 2000 compared to a usual value of greater than 4.50% and less than
10.00%.  NAICO maintains a high-quality investment portfolio, approximately 8%
of which was invested in tax-exempt bonds as of December 31, 2000.  Tax-exempt
bonds generally have a lower pre-tax yield than taxable bonds.  During 2000,
NAICO incurred $1,365,000 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.

     NAICO's "estimated current reserve deficiency to policyholders' surplus"
was 33% at December 31, 2000 compared to a usual value of less than 25%.  The
primary factors that affected this ratio were the changes in NAICO's net
retention during 1998, 1999 and 2000, and increases in premium rates during
2000.  NAICO purchased additional reinsurance during 2000 for its workers
compensation and casualty lines of business which substantially reduced the
per occurrence retention for these lines of business.  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 Oklahoma 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", the recognition of
a net deferred tax asset subject to an admissibility test and new criteria for
the aging of premiums receivable.  If Codification had been in effect at
December 31, 2000, NAICO's statutory surplus would have increased by
approximately $3.5 million.

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.

<PAGE>
                                                                       PAGE 16

     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.

     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."

     As of January 1, 2000, 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.  During
November 2000, the Company acquired the remaining common shares of the Company
owned by the Moroun Group pursuant to a divestiture plan, and the shares were
canceled.  See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- Other Matters Regarding Beneficial Ownership."  Assuming that the Moroun
Group is considered to own the value and voting power of shares that it owned
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.

<PAGE>
                                                                       PAGE 17

     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 1998, 1999 and 2000.

     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 1998, 1999
and 2000.

     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.

<PAGE>
                                                                       PAGE 18

     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.

     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).

     RECAPITALIZATION PLAN.  The receipt of cash by a Disinterested
Shareholder pursuant to the Recapitalization Plan will be a taxable
transaction for federal income tax purposes.  The Disinterested Shareholders
will have their entire stock interest in the Company redeemed and the Company
believes that the Disinterested Shareholders generally will recognize gain or
loss equal to the difference between the cash received and the shareholder's
adjusted tax basis in the surrendered Common Shares.  The gain or loss
recognized generally will be capital gain or loss if the Common Shares are
held as a capital asset.  Any such capital gain or loss will be long-term
capital gain or loss if the shareholder's holding period for the Common Shares
exceeds one year as of the effective date of the Recapitalization Plan.
Disinterested Shareholders are urged to consult with their own advisor
concerning the tax consequences resulting to them from the Recapitalization
Plan.  Because the Thrift Plan is a tax-exempt entity, it will not incur
United States Federal income tax pursuant to the Recapitalization Plan.

     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.

<PAGE>
                                                                       PAGE 19
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 four office
buildings with approximately 127,000 square feet of usable space in Chandler,
Oklahoma.  The Company's subsidiaries also lease approximately 3,300 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."

GOING PRIVATE LITIGATION

     On June 5 and 6, 2000, three civil lawsuits were filed against the
Company, its indirect subsidiary Chandler USA, and all of the Company's
directors.  All three suits have now been consolidated into a single
proceeding.  The suit alleges that the plans announced on June 1, 2000 to
take the Company private are detrimental to the Disinterested Shareholders.
Each suit also requests that it be certified as a class action and that the
court enter a temporary restraining order to prevent completion of the
announced plan.  The suit also alleges that all defendants have breached and
are breaching fiduciary duties owed to the plaintiffs and other shareholders.
The plaintiffs have been granted leave to amend their petitions but have not
yet amended them.  As a result, the Company has not yet responded to the
lawsuit but plans to file timely responses denying the allegations.  On June
12, 2000, CenTra made similar allegations in an already pending lawsuit in
U.S. District Court for the District of Nebraska (the "Nebraska Court")
involving a court-ordered divestiture of the Company's shares owned by
CenTra.  CenTra requested that the court enjoin and restrain Mr. LaGere and
others from completing the announced plans.  On July 20, 2000, the Nebraska
Court denied CenTra's request.  On June 27, 2000, CenTra filed a similar
request in an already pending case in the U.S. District Court for the Western
District of Oklahoma (the "Oklahoma Court").  The Company has responded, but
the Oklahoma Court has not ruled.

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 the
quarter ended December 31, 2000.

     A special meeting of shareholders was held on March 5, 2001 in Ciudad
Acuna, Mexico.  Three proposals which constitute a going private transaction
were approved at the meeting.

<TABLE>
<CAPTION>
                                                        Total votes received             Disinterested votes received
                                                 ------------------------------------  ------------------------------------
Proposal                                            For       Against     Abstained       For       Against     Abstained
-----------------------------------------------  ---------  -----------  ------------  ---------  -----------  ------------
<S>                                              <C>        <C>          <C>           <C>        <C>          <C>

1.  To approve amendments to the Company's
    Memorandum of Association and Articles
    of Association                               2,659,478       75,755         3,637    639,442       75,755           630

2.  To approve repurchases of Common Shares
    held by certain management and key
    shareholders                                 2,658,573       76,659         3,637    638,537       76,659           630

3.  To approve a 1-for-1,000,000 reverse stock
    split of the Company's Common Shares         2,528,224      200,008        10,637    508,188      200,008         7,630

</TABLE>

     The affirmative vote of the holders of two-thirds of the Common Shares
which were present in person or by proxy and voted at the special meeting was
required to approve each of the stated proposals.  In addition, the
affirmative vote of a majority of Common Shares held by Disinterested
Shareholders which were present in person or by proxy and voted at the special
meeting was required to approve each of the stated proposals.

<PAGE>
                                                                       PAGE 20

                                     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.  See "Item 1. BUSINESS - Going Private Transaction."

     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, 1999.
<TABLE>
<CAPTION>
               2000          HIGH     LOW             1999          HIGH     LOW
        ------------------ -------- -------    ------------------ -------- -------
        <S>                <C>      <C>        <S>                <C>      <C>

        First Quarter .... $   8.50 $  6.50    First Quarter .... $  10.00 $  7.25
        Second Quarter ...     8.63    7.50    Second Quarter....     8.94    7.50
        Third Quarter ....     8.19    7.56    Third Quarter.....     8.13    7.25
        Fourth Quarter ...     8.94    7.50    Fourth Quarter....     8.63    7.25

</TABLE>

     The closing market price of the common shares on The Nasdaq Stock Market
on March 16, 2001 was $9.81 per share.

SHAREHOLDERS

     As of February 28, 2001, there were 134 shareholders of record and
approximately 281 beneficial holders of the Company's common shares, and the
number of common shares issued was 3,295,408 shares.  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 Oklahoma Department of Insurance, the Company is also subject
to regulation under the Oklahoma Insurance Code.  In addition to various
reporting requirements imposed on the Company, the Oklahoma Insurance Code
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
Oklahoma Department of Insurance regarding their current or proposed ownership
of such shares.  Noncompliance with the Oklahoma Insurance Code 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."

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.

<PAGE>
                                                                       PAGE 21

     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, 1999 and 2000, 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, 2000, 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 22

ITEM 6.  SELECTED FINANCIAL DATA (CONTINUED)

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                     --------------------------------------------------------------
                                                        1996         1997         1998         1999         2000
                                                     ----------   ----------   ----------   ----------   ----------
                                                     (Amounts in thousands except per share data and percentages)
<S>                                                  <C>          <C>          <C>          <C>          <C>
OPERATING DATA
Revenues
   Direct premiums written and assumed ............. $ 107,943    $ 123,088    $ 134,329    $ 169,635    $ 197,227
                                                     ==========   ==========   ==========   ==========   ==========
   Net premiums earned ............................. $  89,286    $  94,679    $  70,064    $ 108,327    $ 119,863
   Interest income, net ............................     7,199        7,253        6,467        5,594        6,109
   Realized investment gains, net ..................       140          764        1,163           55          180
   Fee for rescinded reinsurance treaties ..........         -            -            -       10,000            -
   Commissions, fees and other income ..............     3,620        2,528        1,952        1,730        1,600
                                                     ----------   ----------   ----------   ----------   ----------
Total revenues .....................................   100,245      105,224       79,646      125,706      127,752
                                                     ----------   ----------   ----------   ----------   ----------
Operating expenses
   Losses and loss adjustment expenses .............    53,391       57,512       47,879       79,816       84,235
   Policy acquisition costs ........................    32,123       28,145       17,033       28,681       29,388
   General and administrative expenses .............    14,038       13,116       12,710       12,029       14,628
   Interest expense ................................       146          463          936        1,531        2,275
   Litigation expenses, net ........................      (108)       4,772       (2,707)       1,133          654
                                                     ----------   ----------   ----------   ----------   ----------
Total operating expenses ...........................    99,590      104,008       75,851      123,190      131,180
                                                     ----------   ----------   ----------   ----------   ----------
Income (loss) before income taxes ..................       655        1,216        3,795        2,516       (3,428)
Federal income tax benefit (provision) of
   consolidated U.S. subsidiaries ..................       317       (2,281)        (353)        (365)       1,476
                                                     ----------   ----------   ----------   ----------   ----------
Net income (loss) .................................. $     972    $  (1,065)   $   3,442    $   2,151    $  (1,952)
                                                     ==========   ==========   ==========   ==========   ==========
Diluted earnings (loss) per common share ........... $    0.14    $   (0.16)   $    0.53    $    0.34    $   (0.46)
Diluted weighted average common shares outstanding..     6,942        6,687        6,438        6,347        4,281
Combined loss and underwriting expense ratio (1) ...      106%         100%         105%         107%         104%

BALANCE SHEET DATA
Cash and investments ............................... $ 119,136    $ 125,063    $ 120,812    $ 118,455    $ 132,085
Total assets .......................................   206,827      210,790      236,025      269,120      282,669
Unpaid losses and loss adjustment expenses .........    79,639       74,929       80,909       98,460      100,173
Notes payable ......................................     4,391        2,796        9,410            -            -
Litigation liabilities .............................         -       16,618       13,228        8,905        2,436
Debentures .........................................         -            -            -       24,000       24,000
Total liabilities ..................................   134,280      152,455      173,960      218,377      230,581
Stock held by subsidiary, at cost ..................         -       (2,487)      (2,905)           -            -
Stock rescinded through litigation .................         -      (11,799)     (11,799)      (6,883)           -
Shareholders' equity ...............................    72,547       58,335       62,065       50,743       52,088
Book value per share (2) ...........................     10.45        12.19        13.05        15.45        15.76

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

<FN>

(1)  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."

(2)  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 23

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 2000.

     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 24

     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 $175 million, or 89%, of NAICO's direct written premiums in 2000
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 2000, the market value of the Company's
available for sale investments increased by $4.2 million due primarily to
lower 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.

<PAGE>
                                                                       PAGE 25

     Effective May 19, 2000, NAICO transferred its domicile from Nebraska to
Oklahoma.  NAICO's executive and administrative offices have been located in
Chandler, Oklahoma since its acquisition by the Company in January 1987.  As
an Oklahoma corporation, NAICO and any person controlling NAICO, directly or
indirectly, are subject to the insurance laws of Oklahoma including laws
concerning the change or acquisition of control and payment of shareholder
and policyholder dividends by NAICO.

     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 Oklahoma Insurance Code. The Oklahoma Insurance Code
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 Oklahoma Insurance Code contains special
reporting and prior approval requirements with respect to transactions among
affiliates.  The Oklahoma Insurance Code also imposes certain requirements
upon any person controlling or seeking to control an insurance company
domiciled in Oklahoma.  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 Oklahoma Insurance Code.  See "BUSINESS - Regulation."

     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.  However, NAICO was able to increase its pricing for most
coverages during 2000.

<PAGE>
                                                                       PAGE 26

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,
                                                -----------------------------------------
                                                   1998           1999           2000
                                                -----------    -----------    -----------
                                                         (Dollars in thousands)
<S>                                             <C>            <C>            <C>
INSURANCE PROGRAMS
-----------------------------------------------
STANDARD PROPERTY AND CASUALTY
     Net premiums earned ...................... $   41,662     $   71,676     $   89,517
     Financial year loss ratio ................       75.4%          75.2%          72.1%
     Accident year loss ratio .................       69.0%          73.0%          69.0%
POLITICAL SUBDIVISIONS
     Net premiums earned ...................... $   13,073     $   17,415     $   16,853
     Financial year loss ratio ................       80.3%          97.0%          72.8%
     Accident year loss ratio .................       79.6%          87.9%          73.9%
SURETY BONDS
     Net premiums earned ...................... $    9,938     $   10,896     $   10,033
     Financial year loss ratio ................       15.8%           6.6%          31.7%
     Accident year loss ratio .................       18.6%          16.7%          12.6%
GROUP ACCIDENT AND HEALTH
     Net premiums earned ...................... $    4,646     $    8,261     $    3,221
     Financial year loss ratio ................       89.3%         104.0%         158.5%
     Accident year loss ratio .................      105.1%         107.7%          90.8%
OTHER
     Net premiums earned ...................... $      745     $       79     $      239
     Financial year loss ratio ................       32.3%       (383.0)%       (355.8)%
     Accident year loss ratio .................       36.7%        114.7%           42.9%
TOTAL
     Net premiums earned ...................... $   70,064     $ 108,327      $ 119,863
     Financial year loss ratio ................       68.3%         73.7%          70.3%
     Accident year loss ratio .................       65.8%         72.4%          65.5%

</TABLE>

<PAGE>
                                                                       PAGE 27

<TABLE>
<CAPTION>

                                                         YEAR ENDED DECEMBER 31,
                                                -----------------------------------------
                                                   1998           1999           2000
                                                -----------    -----------    -----------
                                                         (Dollars in thousands)
<S>                                             <C>            <C>            <C>
LINES OF INSURANCE
-----------------------------------------------
WORKERS COMPENSATION
     Net premiums earned ...................... $   19,651     $   39,329     $   41,876
     Financial year loss ratio ................       70.6%          69.4%          64.8%
     Accident year loss ratio .................       55.7%          71.7%          66.4%
OTHER LIABILITY
     Net premiums earned ...................... $   14,045     $   19,799     $   26,008
     Financial year loss ratio ................       70.1%          66.7%          55.0%
     Accident year loss ratio .................       70.5%          54.1%          48.5%
AUTOMOBILE LIABILITY
     Net premiums earned ...................... $   14,139     $   19,030     $   22,534
     Financial year loss ratio ................       75.0%          81.5%          75.9%
     Accident year loss ratio .................       74.6%          74.7%          75.9%
AUTOMOBILE PHYSICAL DAMAGE
     Net premiums earned ...................... $    4,702     $    7,039     $   11,434
     Financial year loss ratio ................       85.3%         104.0%          85.5%
     Accident year loss ratio .................       83.7%         105.2%          85.8%
SURETY
     Net premiums earned ...................... $   10,101     $   11,122     $   10,326
     Financial year loss ratio ................       15.9%           7.9%          30.6%
     Accident year loss ratio .................       19.2%          16.7%          13.0%
PROPERTY
     Net premiums earned ...................... $    2,332     $    2,972     $    3,377
     Financial year loss ratio ................      135.8%         202.7%         179.5%
     Accident year loss ratio .................      148.9%         204.4%         164.1%
ACCIDENT AND HEALTH
     Net premiums earned ...................... $    4,646     $    8,261     $    3,221
     Financial year loss ratio ................       90.9%         103.2%         160.0%
     Accident year loss ratio .................      104.3%         106.9%          90.8%
INLAND MARINE
     Net premiums earned ...................... $      448     $      775     $    1,087
     Financial year loss ratio ................      122.8%         138.1%         141.9%
     Accident year loss ratio .................      110.3%         140.0%         132.0%
TOTAL
     Net premiums earned ...................... $   70,064     $  108,327     $  119,863
     Financial year loss ratio ................       68.3%          73.7%          70.3%
     Accident year loss ratio .................       65.8%          72.4%          65.5%

</TABLE>

<PAGE>
                                                                       PAGE 28

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
------------------------------------------  -----------------------------  -----------------------------
                                               1998      1999      2000       1998      1999      2000
                                            --------- --------- ---------  --------- --------- ---------
                                                                   (In thousands)
<S>                                         <C>       <C>       <C>        <C>       <C>       <C>
Standard property and casualty............. $ 76,458  $ 99,512  $139,051   $ 41,662  $ 71,676  $ 89,517
Political subdivisions ....................   25,091    29,994    34,353     13,073    17,415    16,853
Surety bonds ..............................   11,915    13,660    13,691      9,938    10,896    10,033
Group accident and health .................    6,104     9,164     3,425      4,646     8,261     3,221
Other .....................................    6,503       183       278        745        79       239
                                            --------- --------- ---------  --------- --------- ---------
TOTAL ..................................... $126,071  $152,513  $190,798   $ 70,064  $108,327  $119,863
                                            ========= ========= =========  ========= ========= =========
</TABLE>

<TABLE>
<CAPTION>

LINES OF INSURANCE                              GROSS PREMIUMS EARNED           NET PREMIUMS EARNED
------------------------------------------  -----------------------------  -----------------------------
                                               1998      1999      2000       1998      1999      2000
                                            --------- --------- ---------  --------- --------- ---------
                                                                   (In thousands)
<S>                                         <C>       <C>       <C>        <C>       <C>       <C>
Workers compensation......................  $ 48,699  $ 51,106  $ 61,888   $ 19,651  $ 39,329  $ 41,876
Other liability ..........................    17,593    26,260    37,543     14,045    19,799    26,008
Automobile liability......................    20,005    22,701    31,427     14,139    19,030    22,534
Automobile physical damage................     6,307     8,081    13,224      4,702     7,039    11,434
Surety....................................    12,078    13,886    13,983     10,101    11,122    10,326
Property..................................    12,916    17,196    22,682      2,332     2,972     3,377
Accident and health.......................     6,111     9,164     3,425      4,646     8,261     3,221
Inland marine.............................     2,362     4,119     6,626        448       775     1,087
                                            --------- --------- ---------  --------- --------- ---------
TOTAL.....................................  $126,071  $152,513  $190,798   $ 70,064  $108,327  $119,863
                                            ========= ========= =========  ========= ========= =========

</TABLE>

     Gross premiums earned, before reductions for premiums ceded to
reinsurers, increased 8%, 21% and 25% in 1998, 1999 and 2000, respectively.
The increases are primarily attributable to increases in premium production
in Texas and Oklahoma, and to increases in premium rates during 2000.  Net
premiums earned, after such reductions, decreased 26% in 1998, increased 55%
in 1999 and increased 11% in 2000.  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.  The rescission of two reinsurance treaties increased net
premiums earned in 1999 by $19.6 million.  During 2000, NAICO purchased
additional reinsurance for its workers compensation and casualty lines of
business which reduced the Company's net retention for these lines of business
and also reduced net premiums earned.  Effective October 1, 2000, NAICO
purchased quota share reinsurance which reduced the Company's net retention
for its casualty and workers compensation lines of business.  The purchase of
the quota share reinsurance reduced net premiums earned by $4.9 million in 2000.

      Gross premiums earned in the standard property and casualty program
increased 22%, 30% and 40% in 1998, 1999 and 2000, respectively.  The
increases are primarily attributable to increases in premium production in
Texas and Oklahoma, and to increases in premium rates during 2000.  Net
premiums earned decreased 25% in 1998, increased 72% in 1999 and increased 25%
in 2000.  The reduction in net premiums earned in 1998 was due primarily to
the purchase of additional reinsurance in 1998.  The rescission of the
reinsurance treaties increased net premiums earned in 1999 by $17.3 million in
this program.  The increase in net premiums earned in 2000 was partially
offset by the purchase of quota share reinsurance which reduced net premiums
earned in 2000 by $4.2 million in this program.

     Gross premiums earned in the political subdivisions program increased
17%, 20% and 15% in 1998, 1999 and 2000, respectively, due primarily to
expansion of the school districts portion of the program in Texas and Missouri
during 1998 and 1999, and to rate increases in the school districts portion of
the program during 2000.  Net premiums earned decreased 13% in 1998, increased
33% in 1999 and decreased 3% in 2000.  The reduction in net premiums earned in
1998 was due primarily to the purchase of additional reinsurance in 1998.  The
rescission of the reinsurance treaties increased net premiums earned in 1999
by $2.3 million in this program.  The purchase of the quota share reinsurance
reduced net premiums earned in 2000 by $712,000 in this program.

<PAGE>
                                                                       PAGE 29

     Gross premiums earned in the surety bond program decreased 3% in 1998,
increased 15% in 1999 and increased less than 1% in 2000.  Approximately $1.3
million of the gross premiums earned in 2000 relates to a new program that is
100% reinsured by an unaffiliated reinsurer.  Excluding this new program,
gross premiums earned decreased $1.3 million in 2000.  NAICO discontinued this
new program effective January 1, 2001.  The decrease in 2000 was due primarily
to decreased written premium production in California.  Net premiums earned in
the surety bond program decreased 11% in 1998, increased 10% in 1999 and
decreased 8% in 2000.

     Gross premiums earned in the group accident and health program increased
81% and 50% in 1998 and 1999, respectively, and decreased 63% in 2000. Net
premiums earned increased 102% and 78% in 1998 and 1999, respectively, and
decreased 61% in 2000.  NAICO has discontinued this program.

     Other programs in the preceding table include premiums from the runoff of
various programs which are no longer offered by NAICO and 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.

NET INTEREST INCOME AND NET REALIZED INVESTMENT GAINS

     At December 31, 2000, the Company's investment portfolio consisted
primarily of fixed income U.S. Government, high-quality corporate and tax
exempt bonds, with approximately 10% 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.

     Net interest income decreased 11% and 13% in 1998 and 1999, respectively,
and increased 9% in 2000.  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 $1.0 million, $483,000 and $509,000 in 1998, 1999 and 2000,
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.  The increase in 2000 was due primarily to an increase in average
invested assets and an increase in the average net yield on the portfolio.
Net realized investment gains were $1.2 million, $55,000 and $180,000 in 1998,
1999 and 2000, respectively.

     The average net yield on the portfolio, including net realized investment
gains, was 6.1%, 4.7% and 4.8% in 1998, 1999 and 2000, respectively.  The
average net yield on the portfolio, excluding net realized investment gains,
was 5.2%, 4.7% and 4.7% for 1998, 1999 and 2000, 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, 2000 was approximately $14
million.  The average yield on the portfolio before deducting investment
expenses was 5.8%, 5.7% and 6.1% in 1998, 1999 and 2000, 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
23%, 11% and 8% for 1998, 1999 and 2000, respectively.  The majority of the
Company's income from commissions, fees and other income are from the
Company's subsidiary L&W.

<PAGE>
                                                                       PAGE 30

     L&W's brokerage commissions and fees before intercompany eliminations
were $8.5 million in 1998, $9.6 million in 1999 and $9.4 million in 2000.  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.

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 68.3%, 73.7% and 70.3% in 1998, 1999 and 2000,
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 $1.4 million,
$4.3 million and $2.9 million in 1998, 1999 and 2000, respectively, and
increased the respective loss ratios by 2.0, 4.9 and 2.4 percentage points
(excluding the effect of the reinsurance rescission in 1999).  The 1999 year
included $1.8 million in weather-related losses which resulted from the
tornadoes, strong winds and hail that caused significant damage in Oklahoma on
May 3, 1999.  The decrease in weather-related losses in 2000 was largely
offset by adverse loss experience in the group accident and health program and
higher than normal losses in the Company's surety bond program.

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.
When the sum of the anticipated losses, loss adjustment expenses and
unamortized policy acquisition costs exceeds the related unearned premiums,
including anticipated investment income, a provision for the indicated
deficiency is recorded.

     The following table sets forth the Company's policy acquisition costs for
each of the three years ended December 31, 1998, 1999 and 2000:

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31,
                                             -----------------------------------
                                                1998        1999        2000
                                             ----------  ----------  -----------
                                                       (In thousands)
<S>                                          <C>         <C>         <C>
Commissions expense......................... $  15,478   $  20,542   $   22,785
Other premium related assessments ..........       928       1,214          989
Premium taxes ..............................     3,144       3,179        4,487
Excise taxes ...............................       161         237          351
Dividends to policyholders .................       242         324          190
Other expense ..............................       151         205          176
                                             ----------  ----------  -----------
Total direct expenses ......................    20,104      25,701       28,978
Indirect underwriting expenses .............    13,858      16,354       17,483
Commissions received from reinsurers .......   (19,860)     (9,267)     (20,057)
Adjustment for deferred acquisition costs ..     2,931      (4,107)       2,984
                                             ----------  ----------  -----------
Net policy acquisition costs ............... $  17,033   $  28,681   $   29,388
                                             ==========  ==========  ===========
</TABLE>

<PAGE>
                                                                       PAGE 31

     Total gross direct and indirect expenses as a percentage of direct
written and assumed premiums were 25.3%, 24.8% and   23.6% in 1998, 1999 and
2000, respectively.  For these periods, commission expense as a percentage of
gross written and assumed premiums was 11.5%, 12.1% and 11.6%.  Indirect
underwriting expenses were 10.3%, 9.6% and 8.9% of total direct written and
assumed premiums in 1998, 1999 and 2000, 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.  Premium
taxes increased $1.3 million in 2000 due to the increase in written premiums
and to a refund of $392,000 which was received in 1999 for premium taxes paid
in a prior year.

     Commissions received from reinsurers was reduced by $9.7 million during
1999 due 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.  Ceding commissions during 2000 included $5.0 million for
the purchase of the quota share reinsurance in the fourth quarter of 2000.
Net policy acquisition costs decreased $2.2 million in 2000 due to the
purchase of the quota share reinsurance, net of the adjustment for deferred
acquisition costs.

GENERAL AND ADMINISTRATIVE EXPENSES

     General and administrative expenses were 9.9%, 7.8% and 7.6% of gross
premiums earned and commissions, fees and other income (excluding the fee
related to the rescission of the reinsurance treaties) in 1998, 1999 and
2000, respectively.  During 2000, the Company incurred expenses related to
the going private transaction of approximately $847,000.  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.

     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 and $177,000 is included in general and
administrative expenses in 1998 and 2000, respectively.

INTEREST EXPENSE

     Interest expense increased 102%, 64% and 49% in 1998, 1999 and 2000,
respectively.  The increase in 1998 was primarily due to increased levels of
bank debt.  The increases in 1999 and 2000 were 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 a credit of
approximately $2.7 million in 1998, and were an expense of approximately $1.1
million and $654,000 in 1999 and 2000, respectively.  During the second
quarter of 1998, the 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.  Accordingly, the Company reduced the previous 1997 net charge
for CenTra litigation matters by approximately $3.8 million during the second
quarter of 1998.  Increased or renewed activity could result in greater
litigation expenses in the future.

     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 proceedings, 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 settling this
matter.

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

<PAGE>
                                                                       PAGE 32

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
income before income taxes reported by the consolidated U.S. subsidiaries.

NET INCOME (LOSS)

     As a result of the factors described above, the Company reported a net
loss of $1,952,000 in 2000 compared to net income of $2,151,000 in 1999 and
$3,442,000 in 1998.  Net litigation expenses related to legal proceedings
involving the CenTra Group reduced net income by $630,000 in 2000 and $1.1
million in 1999 compared to an increase of  $2.9 million in 1998.

     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 other comprehensive income until realized.

     During 1998, the Company used $8.8 million in cash from operations due
primarily to the purchase of additional reinsurance described previously.
During 1999 and 2000, the Company provided $8.7 million and $19.3 million,
respectively, in cash from operations.

     Cash flows from investing activities were primarily the result of normal
purchases and sales of investment securities.  Net realized investment gains
before income taxes were $1,163,000, $55,000 and $180,000 during 1998, 1999
and 2000, respectively, from the sale of investments.  The Company received
proceeds of $48.0 million, $4.2 million and $16.2 million during 1998, 1999
and 2000, 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 3.9 years
and 4.3 years at December 31, 1999 and 2000, respectively.

<PAGE>
                                                                       PAGE 33

     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, 2000, the total amount of cash and investments restricted for Chandler
Barbados and NAICO as a result of these arrangements was $26.9 million and
$5.9 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.  In March 1998, Chandler USA
borrowed an additional $6.2 million under an existing loan agreement with a
bank.  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.  In November 2000, the Company paid
approximately $6.9 million to acquire 1,142,625 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 the Nebraska
Court.

     The Company will finance the Recapitalization Plan through (i) a $2.4
million sale of Class A Common Shares to Messrs. LaGere and Paden, (ii) up to
an $11.8 million intercompany loan from Chandler Barbados, and (iii) proceeds
of approximately $735,000 from the exercise of outstanding options.  Chandler
USA will loan up to $11.8 million to Chandler Barbados.  Up to $8.0 million of
Chandler USA's intercompany loan to Chandler Barbados will be from a dividend
declared by NAICO and approximately $3.8 million will be from a sale and
leaseback transaction for certain equipment owned by Chandler USA.  Management
believes that the use of the intercompany loan will not impair the financial
position of the Company or its subsidiaries.

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.

     The Nebraska Court had previously ordered CenTra to divest all shares of
Chandler stock owned or controlled by it or its affiliates.  During December
1999, the Company acquired 1,989,200 shares of its stock in exchange for
payment of $15,204,758 to the CenTra Group and affiliates.  During November
2000, the Company acquired the remaining 1,142,625 of its common shares in
exchange for payment of $6,882,500 to the CenTra Group and affiliates pursuant
to a ruling of the Oklahoma Court in April 1997, which was upheld by the 10th
Circuit Court of Appeals in September 2000.  The Nebraska Court determined the
method of divestiture of these shares and gave effect to the Oklahoma Court
judgment ordering the repurchase of the shares which resulted in the above
payments.  Based on the April 1997 judgment and subsequent actions by the
Oklahoma Court, the Company previously recorded the return of 1,660,125 shares
as a decrease to shareholders' equity during 1997.  Following the execution of
the judgment of the Nebraska Court, the CenTra Group filed pleadings in the
Oklahoma Court claiming entitlement to post-judgment interest on the amounts
the Company was ordered to pay in exchange for the transfer of the shares.
CenTra claims that it is entitled to post-judgment interest amounting to
approximately $2.5 million.  The Company vigorously opposes this claim and the
issue is now pending before the Oklahoma Court.  The Oklahoma Court has asked
for briefs and may hear argument but has not scheduled a date for decision of
these issues.  The Oklahoma Court currently has under consideration
dispositive motions regarding a claim made by CenTra affiliates based upon
alleged wrongful cancellation of certain insurance policies by NAICO and NAICO
Indemnity, subsidiaries of the Company.

<PAGE>
                                                                       PAGE 34
     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 decided adversely to the
Company, such event could have a material adverse effect on the Company.

YEAR 2000 READINESS DISCLOSURES

     Through 2000, the Company has not experienced any significant problems or
disruptions related to year 2000 problems.  The Company is 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 expect any year 2000 problems
to be encountered in the future that would have a material adverse effect on
the operating results of the Company.

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, as amended,
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 effective
January 1, 2001.  The adoption of SFAS No. 133 will not have a material impact
on the Company's consolidated financial condition, results of operations or
cash flows since the Company has no derivative instruments.

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, 2000, substantially all of the investments of Chandler
Barbados and NAICO were in fixed-maturity investments (rated A1 or A+ 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.

<PAGE>
                                                                       PAGE 35

     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
                                  ---------------------   ----------------------   ---------------------
                                     1999       2000      (Dollars in thousands)      1999       2000
                                  ---------- ----------                            ---------- ----------
<S>                               <C>        <C>          <C>                      <C>        <C>

Fixed-maturity investments (1)... $ 109,748  $ 112,636    100 bp increase.......   $ 106,457  $ 108,659
                                                          200 bp increase.......     103,340    104,881
                                                          100 bp decrease.......     113,228    116,867
                                                          200 bp decrease.......     116,910    121,328
---------------------------------
<FN>
(1)  The fair value at December 31, 2000 excludes short-term investments with a fair value of $5.5 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, 2000 would reduce the
estimated fair value of the Company's fixed-maturity investments by
approximately $7.8 million at that date.

     Chandler USA 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.  At December
31, 2000, the fair value of Chandler USA's debentures was estimated to be
$21.6 million based on quoted market prices.

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     55    Chairman of the Board, Chief Executive Officer,
                          President, Executive Committee Chairman, Investment
                          Committee Member and Director.

Mark T. Paden       44    Executive Vice President, Chief Financial Officer,
                          Executive Committee Member, Investment Committee
                          Member and Director.

Brenda B. Watson    60    Executive Vice President, Executive Committee Member
                          and Director.

Richard L. Evans    54    Vice President and Director.

Steven R. Butler    43    Vice President - Administration.

Mark C. Hart        45    Vice President - Accounting and Treasurer.

James M. Jacoby     66    Audit Committee Member, Option and Compensation
                          Committee Chairman and Director.

Paul A. Maestri     70    Executive Committee Member, Audit Committee Member,
                          Option and Compensation Committee Member and Director.

Robert L. Rice      66    Audit Committee Chairman, Executive Committee Member,
                          Investment Committee Member, Option and Compensation
                          Committee Member and Director.

W. Scott Martin     50    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, CIM since May 1998 and NAICO since March 2000.

     W. SCOTT 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.  Mr. Martin has been a
director of the Company since November 1999.  Mr. Martin has also been a
director of Chandler USA and NAICO since March 2000.

     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.  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, 2000.

<PAGE>
                                                                       PAGE 38

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                                   2000    $   414,922   $ 150,000        N/A      $    39,525
  Chairman of the Board, CEO and President        1999        404,228           -        N/A           38,349
  of Chandler USA, NAICO and L&W                  1998        397,361           -        N/A           36,596

Mark T. Paden                                     2000        238,865     150,000        N/A            5,225
  Executive Vice President, COO and CFO           1999        231,188           -        N/A            5,000
  of Chandler USA, NAICO and L&W                  1998        209,300           -        N/A            4,900

Brenda B. Watson                                  2000        230,987      84,936        N/A            9,725
  Executive Vice President of NAICO               1999        225,437     112,719        N/A            8,600
  and L&W                                         1998        221,607           -        N/A            8,100

Richard L. Evans                                  2000        232,219           -        N/A            6,525
  Senior Vice President - Claims of Chandler      1999        224,735           -        N/A            6,400
  USA, NAICO and L&W                              1998        218,190           -        N/A            6,200

Steven R. Butler                                  2000        146,449      11,327        N/A                -
  President of CIM and CIM Barbados               1999        138,532      16,419        N/A                -
                                                  1998        133,252      16,272        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
     ($3,725 for each of the Named Executives), 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 ($23,400, $25,700 and
     $27,100 in 1998, 1999 and 2000, 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>

OPTIONS EXERCISED AND HOLDINGS

     No options were granted to or exercised by the Named Executives during
2000 and there were no unexercised options held by the Named Executives as of
December 31, 2000.

DIRECTOR COMPENSATION

     Messrs. Jacoby, Maestri, Rice 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 2000, Messrs. Jacoby,
Maestri, Rice and Martin received total director compensation from the Company
and its subsidiaries of $41,250, $44,250, $52,000 and $21,500, respectively,
including compensation for time spent in connection with certain litigation
and the Recapitalization Plan.

<PAGE>
                                                                       PAGE 39

     During 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 are eligible for grants of
stock options and stock grants in accordance with the terms of the Directors'
Plan.  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 1998, a total of
40,000 shares valued at $250,000 were awarded to two directors and during
2000, 20,000 shares valued at $165,000 were awarded to one director.  These
amounts are included in general and administrative expenses in the Company's
consolidated statements of operations.

     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 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 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.  During 2000, options for 7,500 shares were awarded with an exercise
price of $8.13 per share, and options for 30,000 shares were awarded with an
exercise price of $7.85 per share, which resulted in approximately $12,000 of
compensation expense.  As of December 31, 2000, options for 109,500 shares
were outstanding.

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.

     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.

<PAGE>
                                                                       PAGE 40

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth the number of Common Shares of the Company
beneficially owned as of February 28, 2001 by (i) each director, (ii) the
Company's Chairman and Chief Executive Officer and each of the Company's four
other most highly compensated executive officers for services rendered for the
fiscal year ended December 31, 2000 and (iii) all current directors and
executive officers as a group:
<TABLE>
<CAPTION>
                                                                BENEFICIAL OWNERSHIP
                                                       ---------------------------------------
NAME OF DIRECTOR OR EXECUTIVE OFFICER                   NUMBER OF SHARES (1)     PERCENT (2)
------------------------------------------------------ ----------------------  ---------------
<S>                                                    <C>                     <C>
W. Brent LaGere ......................................        449,778   (3)              13.6%
Brenda B. Watson .....................................         53,566   (4)               1.6%
Richard L. Evans .....................................         59,522                     1.8%
Paul A. Maestri ......................................         54,500   (5)               1.6%
James M. Jacoby ......................................         54,500   (6)               1.6%
Robert L. Rice .......................................         54,500   (5)               1.6%
Mark T. Paden ........................................         28,810                       *
W. Scott Martin ......................................         33,000   (7)               1.0%
Steven R. Butler .....................................          3,200                       *
All directors and officers as a group (10 persons) ...        794,904   (8)              23.3%
------------------------------------------------------
*   Less than 1%

<FN>

(1)  The rules of the SEC provide that, for the purposes hereof, a person is considered the
     "beneficial owner" of shares with respect to which the person, directly or indirectly, has
     or shares the voting or investment power, irrespective of his economic interest in the
     shares.  Unless otherwise noted, each person identified possesses sole voting and
     investment power over the shares listed, subject to community property laws.

(2)  Based on 3,295,408 common shares outstanding on February 28, 2001.  Common Shares subject
     to options that are exercisable within 60 days of February 28, 2001, are deemed
     beneficially owned by the person holding such options for the purposes of calculating the
     percentage of ownership of such person but are not treated as outstanding for the purpose
     of computing the percentage of any other person.

(3)  Includes (i) 348,390 Common Shares owned by the W. Brent LaGere Irrevocable Trust (the
     "Trust") and (ii) 22,500 Common Shares owned by W&L Holding Corp. ("W&L Holding"), a
     corporation 100% of which is owned by the Trust.  Mr. LaGere disclaims beneficial ownership
     of the shares held by the Trust and W&L Holding.  The business address of Mr. LaGere is
     1010 Manvel Avenue, Chandler, Oklahoma, 74834.

(4)  Includes 8,027 shares held by Ms. Watson's husband.  Ms. Watson disclaims beneficial
     ownership of the shares owned by her husband.

(5)  Includes 34,500 Common Shares issuable upon exercise of outstanding options.

(6)  Includes (i) 10,000 Common Shares which have been awarded pursuant to the Directors' Plan
     and will be issued during 2001, and (ii) 34,500 Common Shares issuable upon exercise of
     outstanding options.

(7)  Includes 1,500 Common Shares issuable upon exercise of outstanding options.


(8)  Includes 105,000 Common Shares issuable upon exercise of outstanding options.  In addition,
     includes 3,528 Common Shares owned by another executive officer of the Company not listed
     in the table above.

</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 28, 2001.  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>

Benjamin T. Walkingstick
  1001 Manvel Avenue, Chandler, Oklahoma 74834 .....        377,529 (3)               11.5%
Marvel List
  420 Bennett Boulevard, Chandler, Oklahoma 74834 ..        375,477 (4)               11.4%

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

(1)  The rules of the SEC provide that, for the purposes hereof, a person is considered the
     "beneficial owner" of shares with respect to which the person, directly or indirectly, has
     or shares the voting or investment power, irrespective of his economic interest in the
     shares.  Unless otherwise noted, each person identified possesses sole voting and
     investment power over the shares listed, subject to community property laws.

(2)  Based on 3,295,408 Common Shares outstanding on February 28, 2001.

(3)  Includes 2,500 Common Shares held by Mr. Walkingstick's wife, 16,256 Common Shares held by
     Mr. Walkingstick's son, 3,562 Common Shares held by Mr. Walkingstick's daughter, and 2,873
     held by Mr. Walkingstick's grandchildren.  Mr. Walkingstick disclaims beneficial ownership
     of these shares.

(4)  Includes 370,890 Common Shares held by the Trust, of which 22,500 Common Shares are
     directly owned by W&L Holding, which is 100% owned by the Trust.  Ms. List serves as
     trustee of the Trust.

</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.

     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.
During November 2000, the Company acquired 1,142,625 shares of its own stock
in exchange for payment of $6,882,500 to CenTra and its affiliates.  The
acquisitions were made pursuant to a divestiture plan proposed by NAICO and
approved by the Nebraska Court.  All shares were canceled upon their return
to the Company.

     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.

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 Thrift Plan 52,000 and 80,000 shares, respectively,
of the Company's common stock.  On November 19, 1998, the Thrift Plan acquired
these and other shares of the Company's common stock at no profit to Mr. LaGere.

<PAGE>
                                                                       PAGE 42

     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 1998, 1999 and 2000, Chandler USA incurred approximately
$217,000, $202,000 and $265,000, respectively, in expenses associated with its
use of this property, including $7,000, $8,000 and $9,000 paid to Davenport
Farms for reimbursement of certain expenses, such as utility and similar
expenses, for the years 1998, 1999 and 2000, 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 continued to be a consultant to Chandler USA and its
subsidiaries pursuant to the Employment Agreement and continued to receive
compensation under the Employment Agreement through October 2000.  Mr.
Walkingstick received $269,409 in compensation under Employment Agreement
during 2000.

     Chandler USA and its subsidiaries paid $142,694, $248,188 and $9,155 in
1998, 1999 and 2000, 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 1998, and as Assistant Secretary during 1999 and
2000.  Approximately $35,323 and $227,545 of the 1998 and 1999 amounts related
to the issuance of debentures by Chandler USA during 1999.  During 2000,
Chandler Barbados paid Gardere & Wynne, L.L.P., $331,097 for legal services of
which $125,121 related to the CenTra litigation and $107,059 related to the
Recapitalization Plan.

     ADVANCEMENT OF LITIGATION EXPENSES.  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
totaling approximately $2.3 million as of  December 31, 2000.  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 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.  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 settling this
matter.  Except for the recovery of a portion of the litigation costs from the
D&O 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 43

                                     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, 1999 and 2000, 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, 2000, together with the
           related notes thereto and the report of Deloitte & Touche,
           independent auditors on such financial statements as of December
           31, 2000 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. (1) (2)

           4.1  Specimen Certificate for common shares of the Company. (3)

          10.1  Directors' Stock Option and Stock Grant Plan. (4)

          21.1  Subsidiaries of the registrant.

          23.1  Deloitte & Touche consent.

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

           (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 Registration No. 33-33540 on
                Form S-2 and incorporated herein by reference.

           (4)  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.

       No report on Form 8-K was filed by the Company during or applicable to
       the quarter ended December 31, 2000.

<PAGE>
                                                                       PAGE 44

                                   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, 2001          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 DATES INDICATED.

Date:  March 20, 2001              /s/ W. Brent LaGere
                                   --------------------------------------------
                                   W. Brent LaGere, Chairman of the Board,
                                   Chief Executive Officer, President and
                                   Director (Principal Executive Officer)

Date:  March 20, 2001              /s/ Mark T. Paden
                                   --------------------------------------------
                                   Mark T. Paden, Executive Vice President,
                                   Chief Financial Officer and Director
                                   (Principal Financial Officer)

Date:  March 20, 2001              /s/ Mark C. Hart
                                   --------------------------------------------
                                   Mark C. Hart, Vice President - Accounting
                                   and Treasurer (Principal Accounting Officer)

Date:  March 20, 2001              /s/ Brenda B. Watson
                                   --------------------------------------------
                                   Brenda B. Watson, Executive Vice President
                                   and Director


Date:  March 20, 2001              /s/ Richard L. Evans
                                   ---------------------------------------------
                                   Richard L. Evans, Vice President and Director


Date:  March 20, 2001              /s/ James M. Jacoby
                                   ---------------------------------------------
                                   James M. Jacoby, Director


Date:  March 20, 2001              /s/ Robert L. Rice
                                   ---------------------------------------------
                                   Robert L. Rice, Director

<PAGE>
                                                                       PAGE 45


Date:  March 20, 2001              /s/ Paul A. Maestri
                                   ---------------------------------------------
                                   Paul A. Maestri, Director


Date:  March 20, 2001              /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, 1999 and 2000 ...................         F-2

Consolidated Statements of Operations for the years ended
   December 31, 1998, 1999 and 2000 ............................................         F-3

Consolidated Statements of Comprehensive Income for the years ended
   December 31, 1998, 1999 and 2000 ............................................         F-4

Consolidated Statements of Cash Flows for the years ended
   December 31, 1998, 1999 and 2000 ............................................         F-5

Consolidated Statements of Shareholders' Equity for the years ended
   December 31, 1998, 1999 and 2000 ............................................         F-6

Notes to Consolidated Financial Statements .....................................   F-7 through F-28

Independent Auditors' Report on Consolidated Financial Statements
   and Financial Statement Schedules ...........................................        F-29

SCHEDULES

   I   Summary of Investments - Other Than Investments in Related Parties ......        F-30

   II  Condensed Financial Information of Registrant ...........................  F-31 through F-33

   III Supplementary Insurance Information .....................................        F-34

   IV  Reinsurance .............................................................        F-35

   V   Valuation and Qualifying Accounts .......................................        F-36

   VI  Supplemental Information (for property-casualty insurance underwriters)..        F-37

</TABLE>

<PAGE>
                                                                       PAGE F-2

                        CHANDLER INSURANCE COMPANY, LTD.
                          CONSOLIDATED BALANCE SHEETS
                  (Amounts in thousands except share amounts)
<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                               ------------------------
                                                                                  1999          2000
                                                                               ----------    ----------
<S>                                                                            <C>           <C>
ASSETS
Investments
  Fixed maturities available for sale, at fair value (amortized cost
    $112,476 and $116,680 in 1999 and 2000, respectively) .................... $ 108,709     $ 116,982
  Fixed maturities held to maturity, at amortized cost (fair value
    $1,039 and $1,139 in 1999 and 2000, respectively) ........................       984         1,056
  Equity securities available for sale, at fair value ........................       306           442
                                                                               ----------    ----------
    Total investments ........................................................   109,999       118,480
Cash and cash equivalents ....................................................     8,456        13,605
Premiums receivable, less allowance for non-collection
  of $263 and $308 at 1999 and 2000, respectively ............................    47,721        33,525
Reinsurance recoverable on paid losses, less allowance for
  non-collection of $275 at 1999 and 2000 ....................................     3,281         3,282
Reinsurance recoverable on unpaid losses, less allowance for
  non-collection of $302 and $397 at 1999 and 2000, respectively .............    37,539        39,387
Prepaid reinsurance premiums .................................................    19,960        32,700
Deferred policy acquisition costs ............................................     6,488         3,504
Property and equipment, net ..................................................    10,765        12,485
Licenses, net ................................................................     4,044         3,894
Excess of cost over net assets acquired, net .................................     3,955         2,963
Other assets .................................................................    16,912        18,844
                                                                               ----------    ----------
Total assets ................................................................. $ 269,120     $ 282,669
                                                                               ==========    ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
  Unpaid losses and loss adjustment expenses ................................. $  98,460     $ 100,173
  Unearned premiums ..........................................................    67,769        74,198
  Policyholder deposits ......................................................     5,135         5,062
  Accrued taxes and other payables ...........................................     6,796         6,905
  Premiums payable ...........................................................     7,312        17,807
  Litigation liabilities .....................................................     8,905         2,436
  Debentures .................................................................    24,000        24,000
                                                                               ----------    ----------
    Total liabilities ........................................................   218,377       230,581
                                                                               ----------    ----------
 Shareholders' equity
  Common stock, $1.67 par value, 10,000,000 shares authorized, 4,428,033 and
    3,295,408 shares issued and outstanding in 1999 and 2000, respectively ...     7,395         5,503
  Paid-in surplus ............................................................    21,380        16,483
  Common stock to be issued (10,000 shares in 2000) ..........................         -            83
  Retained earnings ..........................................................    31,426        29,474
  Less: Stock rescinded through litigation (1,142,625 shares in 1999) ........    (6,883)            -
  Accumulated other comprehensive income (loss):
    Unrealized gain (loss) on investments available for sale,
      net of deferred income taxes ...........................................    (2,575)          545
                                                                               ----------    ----------
Total shareholders' equity ...................................................    50,743        52,088
                                                                               ----------    ----------
Total liabilities and shareholders' equity ................................... $ 269,120     $ 282,669
                                                                               ==========    ==========

</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,
                                                                               ------------------------------------
                                                                                  1998         1999         2000
                                                                               ----------   ----------   ----------
<S>                                                                            <C>          <C>          <C>
Premiums and other revenues
  Direct premiums written and assumed ........................................ $ 134,329    $ 169,635    $ 197,227
  Reinsurance premiums ceded .................................................   (68,793)     (41,698)     (83,674)
                                                                               ----------   ----------   ----------
    Net premiums written and assumed .........................................    65,536      127,937      113,553
  Decrease (increase) in unearned premiums ...................................     4,528      (19,610)       6,310
                                                                               ----------   ----------   ----------
    Net premiums earned ......................................................    70,064      108,327      119,863
Interest income, net .........................................................     6,467        5,594        6,109
Realized investment gains, net ...............................................     1,163           55          180
Fee for rescinded reinsurance treaties .......................................         -       10,000            -
Commissions, fees and other income ...........................................     1,952        1,730        1,600
                                                                               ----------   ----------   ----------
    Total premiums and other revenues ........................................    79,646      125,706      127,752
                                                                               ----------   ----------   ----------
Operating costs and expenses
  Losses and loss adjustment expenses ........................................    47,879       79,816       84,235
  Policy acquisition costs ...................................................    17,033       28,681       29,388
  General and administrative expenses ........................................    12,710       12,029       14,628
  Interest expenses ..........................................................       936        1,531        2,275
  Litigation expenses, net ...................................................    (2,707)       1,133          654
                                                                               ----------   ----------   ----------
    Total operating costs and expenses .......................................    75,851      123,190      131,180
                                                                               ----------   ----------   ----------
Income (loss) before income taxes ............................................     3,795        2,516       (3,428)
Federal income tax (provision) benefit
  of consolidated U.S. subsidiaries ..........................................      (353)        (365)       1,476
                                                                               ----------   ----------   ----------
  Net income (loss) .......................................................... $   3,442    $   2,151    $  (1,952)
                                                                               ==========   ==========   ==========
Basic earnings (loss) per common share ....................................... $    0.54    $    0.34    $   (0.46)
Diluted earnings (loss) per common share ..................................... $    0.53    $    0.34    $   (0.46)

Basic weighted average common shares outstanding .............................     6,429        6,330        4,281
Diluted weighted average common shares outstanding ...........................     6,438        6,347        4,281

</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,
                                                                           ------------------------------------
                                                                              1998         1999         2000
                                                                           ----------   ----------   ----------
<S>                                                                        <C>           <C>         <C>

Net income (loss) ........................................................ $   3,442    $   2,151    $  (1,952)
                                                                           ----------   ----------   ----------
Other comprehensive income (loss), before income tax:
  Unrealized gains (losses) on securities:
    Unrealized holding gains (losses) arising during period ..............     1,905       (4,568)       4,386
    Less: Reclassification adjustment for gains included in
      net income (loss) ..................................................    (1,163)         (55)        (180)
                                                                           ----------   ----------   ----------
Other comprehensive income (loss), before income tax .....................       742       (4,623)       4,206
Income tax benefit (provision) related to items of other
  comprehensive income (loss) ............................................      (202)       1,255       (1,086)
                                                                           ----------   ----------   ----------
Other comprehensive income (loss), net of income tax .....................       540       (3,368)       3,120
                                                                           ----------   ----------   ----------
Comprehensive income (loss) .............................................. $   3,982    $  (1,217)   $   1,168
                                                                           ==========   ==========   ==========
</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,
                                                                           ------------------------------------
                                                                              1998         1999         2000
                                                                           ----------   ----------   ----------
<S>                                                                        <C>           <C>         <C>

OPERATING ACTIVITIES
  Net income (loss) ...................................................... $   3,442    $   2,151    $  (1,952)
  Add (deduct):
    Adjustments to reconcile net income (loss) to cash provided by
      (applied to) operating activities:
      Realized investment gains, net .....................................    (1,163)         (55)        (180)
      Net (gains) losses on sale of equipment ............................      (146)          69           10
      Amortization and depreciation ......................................     2,458        2,361        2,700
      Provision for non-collection of premiums ...........................       152          210          179
      Provision for non-collection of reinsurance recoverables ...........        50            -            -
      Earned compensation - non-employee director stock option
        and stock-grant plan .............................................       272            -          177
    Net change in non-cash balances relating to operating activities:
      Premiums receivable ................................................      (552)     (19,452)      14,017
      Reinsurance recoverable on paid losses .............................      (160)        (671)         (50)
      Reinsurance recoverable on unpaid losses ...........................   (17,676)      (8,419)      (1,799)
      Prepaid reinsurance premiums .......................................   (12,786)       2,488      (12,740)
      Deferred policy acquisition costs ..................................     2,931       (4,107)       2,984
      Other assets .......................................................      (562)        (767)      (3,131)
      Unpaid losses and loss adjustment expenses .........................     5,980       17,551        1,713
      Unearned premiums ..................................................     8,259       17,122        6,429
      Policyholder deposits ..............................................       106          199          (73)
      Accrued taxes and other payables ...................................    (2,471)       2,927          109
      Premiums payable ...................................................     6,407       (3,649)      10,495
      Litigation liabilities .............................................    (3,390)         776          414
                                                                           ----------   ----------   ----------
      Cash provided by (applied to) operating activities .................    (8,849)       8,734       19,302
                                                                           ----------   ----------   ----------

INVESTING ACTIVITIES
  Fixed maturities available for sale:
    Purchases ............................................................   (71,195)     (30,931)     (51,071)
    Sales ................................................................    47,957        4,159       16,210
    Maturities ...........................................................    27,413       21,948       30,498
  Fixed maturities held to maturity:
    Maturities ...........................................................       100          265            -
  Cost of property and equipment purchased ...............................    (3,470)      (3,920)      (2,953)
  Proceeds from sale of property and equipment ...........................       337          121           46
                                                                           ----------   ----------   ----------
    Cash provided by (applied to) investing activities ...................     1,142       (8,358)      (7,270)
                                                                           ----------   ----------   ----------
FINANCING ACTIVITIES
  Cost of common stock purchased by subsidiary ...........................      (524)           -            -
  Payments to acquire stock under divestiture plan .......................         -      (15,204)      (6,883)
  Proceeds from notes payable & debentures ...............................     8,548       24,000            -
  Payments on notes payable ..............................................    (1,933)      (9,410)           -
  Debt issue costs .......................................................         -       (1,689)           -
                                                                           ----------   ----------   ----------
    Cash provided by (applied to) financing activities ...................     6,091       (2,303)      (6,883)
                                                                           ----------   ----------   ----------
  Increase (decrease) in cash and cash equivalents during the period .....    (1,616)      (1,927)       5,149
  Cash and cash equivalents at beginning of period .......................    11,999       10,383        8,456
                                                                           ----------   ----------   ----------
  Cash and cash equivalents at end of period ............................. $  10,383    $   8,456    $  13,605
                                                                           ==========   ==========   ==========
</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                 Stock    rescinded      other        Total
                                   Common  Paid-in   stock to be  Retained   held by    through   comprehensive shareholders'
                                    stock  surplus     issued     earnings  subsidiary litigation income (loss)    equity
                                  -------- -------- ------------ ---------- ---------- ---------- ------------- ------------
<S>                               <C>      <C>      <C>          <C>        <C>        <C>        <C>           <C>

Balance, January 1, 1998 ........ $11,593  $34,942  $         -  $  25,833  $  (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     29,275     (2,905)   (11,799)          793       62,065

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

Stock issued for non-employee
  director stock option and 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            -     31,426          -     (6,883)       (2,575)      50,743

Net loss ........................       -        -            -     (1,952)         -          -             -       (1,952)

Stock issued or to be issued for
  non-employee director stock
  option and stock grant plan
  (20,000 shares) ...............      16       78           83          -          -          -             -          177

Stock acquired pursuant to
  divestiture order and retired..  (1,908)  (4,975)           -          -          -      6,883             -            -

Change in unrealized gain on
  investments available for
  sale, net of income tax .......       -        -            -          -          -          -         3,120        3,120
                                  -------- -------- ------------ ---------- ---------- ---------- ------------- ------------

Balance, December 31, 2000 ...... $ 5,503  $16,483  $        83  $  29,474  $       -  $       -  $        545  $    52,088
                                  ======== ======== ============ ========== ========== ========== ============= ============
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>
                                                                       PAGE F-7

                      CHANDLER INSURANCE COMPANY, LTD.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                YEARS ENDED DECEMBER 31, 1998, 1999 AND 2000

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.").  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.  Certain
       reclassifications of prior years have been made to conform to the 2000
       presentation.

  (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 4, 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, 1998 (1,142,625 were outstanding at
       December 31, 1999), and exclude 544,475 shares held by a subsidiary of
       the Company at December 31, 1998.  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,
                                                          --------------------------------
                                                             1998       1999       2000
                                                          ---------- ---------- ----------
                                                                   (In thousands)
<S>                                                       <C>        <C>        <C>
       Denominator for basic earnings (loss) per
          common share - weighted average shares.........     6,429      6,330      4,281
       Effect of dilutive securities-
          non-employee director stock options............         9         17          -  (1)
                                                          ---------- ---------- ----------
       Denominator for dilutive earnings (loss) per
          common share - adjusted weighted average
          shares and assumed conversions.................     6,438      6,347      4,281
                                                          ========== ========== ==========
------------------------
<FN>

       (1)  The diluted share base for the year ended December 31, 2000 excludes incremental shares
            of 17,000 related to non-employee director stock options.  These shares are excluded due
            to their antidilutive effect as a result of the Company's net loss for the year ended
            December 31, 2000.

</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.  When the sum of the anticipated losses, loss
       adjustment expenses and unamortized policy acquisition costs exceeds
       the related unearned premiums, including anticipated investment income,
       a provision for the indicated deficiency is recorded.  Certain policy
       acquisition costs, such as policyholder dividends, are expensed
       directly.  NAICO expensed $242,000, $324,000 and $190,000 during 1998,
       1999 and 2000, respectively, for dividends to policyholders primarily
       on participating workers compensation policies.  Gross written premiums
       for participating policies were $2.3 million, $1.9 million and $1.6
       million in 1998, 1999 and 2000, respectively.


<PAGE>
                                                                       PAGE F-9

  (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>
                                                          1999       2000
                                                       ---------- ----------
                                                           (In thousands)
               <S>                                      <C>       <C>
               Real estate and improvements............ $  8,157  $   9,921
               Other property and equipment............   11,353     11,977
                                                        --------- ----------
                                                          19,510     21,898
               Accumulated depreciation................   (8,745)    (9,413)
                                                        --------- ----------
                                                        $ 10,765  $  12,485
                                                        ========= ==========
</TABLE>

          Depreciation expense was approximately $1,062,000, $1,090,000 and
       $1,178,000 for 1998, 1999 and 2000, 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>
                                                          1999       2000
                                                       ---------- ----------
                                                           (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...................    (8,740)    (9,882)
                                                       ---------- ----------
                                                       $   7,999  $   6,857
                                                       ========== ==========
</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.

<PAGE>
                                                                       PAGE F-10

  (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.

  (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,
                                                  --------------------------------
                                                     1998       1999       2000
                                                  ---------- ---------- ----------
                                                           (In thousands)
     <S>                                          <C>        <C>        <C>
     Cash payments during the year for:
        Interest................................. $   1,307  $     549  $   2,255
        Income taxes.............................       170        857        587

</TABLE>

          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.  In November 2000, the
       Company paid the $6,882,500 in exchange for the stock which was then
       canceled.  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, as amended, 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
       effective January 1, 2001.  The adoption of SFAS No. 133 will not have
       a material impact on the Company's consolidated financial condition,
       results of operations or cash flows since the Company has no derivative
       instruments.

<PAGE>
                                                                       PAGE F-11

NOTE 2.  GOING PRIVATE TRANSACTION

          On March 5, 2001, various proposals which constituted a going private
       transaction were approved at a special meeting of the Company's
       shareholders.  The going private transaction will have the effect of
       deregistration of the Company's shares and result in the Company being
       privately held by Brent LaGere, the Company's Chairman of the Board and
       Chief Executive Officer who will hold 80% of the voting common shares
       and Mark Paden, the Company's Executive Vice President and Chief
       Financial Officer, who will hold 20% of the Company's voting common
       shares.

          Certain key shareholders, including certain employees of the
       Company's subsidiaries ("continuing shareholders"), have elected to
       exchange their common shares for non-voting preferred shares.  All
       other shareholders except Messrs. LaGere and Paden will receive a cash
       payment equal to $10 per share for each share they own on the record
       date established by the Company's board of directors for the
       consummation of a 1 for 1,000,000 reverse stock split.  The reverse
       stock split and repurchase will occur after all continuing shareholders
       have exchanged their voting common stock for non-voting preferred
       stock in accordance with the Company's plan.

NOTE 3.  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,
                                                    --------------------------------
                                                       1998       1999       2000
                                                    ---------- ---------- ----------
                                                             (In thousands)
<S>                                                 <C>        <C>        <C>
Interest on fixed-maturity investments............. $   6,236  $   5,908  $   6,729
Interest on cash equivalents.......................       953        907      1,151
Investment expenses................................      (722)    (1,221)    (1,771)
                                                    ---------- ---------- ----------
   Interest income, net............................     6,467      5,594      6,109
                                                    ---------- ---------- ----------
Realized gains, net - fixed-maturity investments...     1,163         55        180
                                                    ---------- ---------- ----------
                                                    $   7,630  $   5,649  $   6,289
                                                    ========== ========== ==========
</TABLE>

     Investment expenses include $399,000, $851,000 and $1,365,000 for the
years ended December 31, 1998, 1999 and 2000, respectively, in expense to
subsidize a premium finance program for certain insureds of NAICO with an
unaffiliated premium finance company.

<PAGE>
                                                                       PAGE F-12

     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, 1999                            COST       GAINS     LOSSES     VALUE       VALUE
----------------------------------------- ---------- ---------- ---------- ---------- ----------
FIXED MATURITIES AVAILABLE FOR SALE:                          (In thousands)
<S>                                       <C>        <C>        <C>        <C>        <C>
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>

<TABLE>
<CAPTION>
                                                        GROSS     GROSS
                                                     UNREALIZED UNREALIZED   FAIR      CARRYING
DECEMBER 31, 2000                            COST       GAINS     LOSSES     VALUE       VALUE
----------------------------------------- ---------- ---------- ---------- ---------- ----------
FIXED MATURITIES AVAILABLE FOR SALE:                          (In thousands)
<S>                                       <C>        <C>        <C>        <C>        <C>

U.S. Treasury securities and obligations
   of U.S. government corporations
   and agencies.......................... $  45,315  $     507  $    (362) $  45,460  $  45,460
Obligations of states and political
   subdivisions..........................     8,157         64         (9)     8,212      8,212
Corporate obligations....................    44,981        573       (461)    45,093     45,093
Public utilities.........................    13,218        164       (163)    13,219     13,219
Mortgage-backed securities...............     5,009          -        (11)     4,998      4,998
                                          ---------- ---------- ---------- ---------- ----------
                                          $ 116,680  $   1,308  $  (1,006) $ 116,982  $ 116,982
                                          ========== ========== ========== ========== ==========

FIXED MATURITIES HELD TO MATURITY:
U.S. Treasury securities and obligations
   of U.S. government corporations
   and agencies.......................... $   1,056  $      83  $       -  $   1,139  $   1,056
                                          ========== ========== ========== ========== ==========
EQUITY SECURITIES AVAILABLE FOR SALE:
Corporate stock.......................... $       -  $     442  $       -  $     442  $     442
                                          ========== ========== ========== ========== ==========
</TABLE>

<PAGE>
                                                                       PAGE F-13

     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, 2000 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.................... $  15,986  $  15,990  $       -  $       -
Due after one year through five years......    55,366     55,917      1,056      1,139
Due after five years through ten years.....    40,319     40,077          -          -
Due after ten years........................         -          -          -          -
                                            ---------- ---------- ---------- ----------
                                              111,671    111,984      1,056      1,139
Mortgage-backed securities.................     5,009      4,998          -          -
                                            ---------- ---------- ---------- ----------
                                            $ 116,680  $ 116,982  $   1,056  $   1,139
                                            ========== ========== ========== ==========
</TABLE>

     Realized gains and losses from sales of fixed maturities are shown below:

<TABLE>
<CAPTION>
                                             GROSS REALIZED GAINS  GROSS REALIZED LOSSES
                                             --------------------  ---------------------
                                                           (In thousands)
          <S>                                <C>                   <C>
          1998.............................. $             1,224   $                 61
          1999..............................                  67                     12
          2000..............................                 241                     61

</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, 1999 and 2000, Chandler Barbados had cash and
investments with a carrying value of approximately $24.1 million and $26.9
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, 1999 and 2000, the carrying value of these deposits totaled approximately
$7.2 million and $5.9 million, respectively.

     At December 31, 2000, the total amount of cash and investments restricted
as a result of these arrangements was approximately $32.8 million.

NOTE 4. 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 $4.4 million and $4.8 million at
December 31, 1999 and 2000, 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.

<PAGE>
                                                                       PAGE F-14


     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,
                                                                        --------------------------------
                                                                            1998       1999       2000
                                                                        ---------- ---------- ----------
                                                                                 (In thousands)
<S>                                                                     <C>        <C>        <C>
Net balance before provision for uncollectible reinsurance
   at beginning of year................................................ $  62,890  $  51,194  $  60,327
                                                                        ---------- ---------- ----------
Net losses and loss adjustment expenses incurred related to:
   Current year........................................................    42,724     74,997     78,551
   Prior years.........................................................     5,155      4,819      5,684
                                                                        ---------- ---------- ----------
      Total............................................................    47,879     79,816     84,235
                                                                        ---------- ---------- ----------
Net paid losses and loss adjustment expenses related to:
   Current year........................................................   (23,152)   (37,806)   (40,836)
   Prior years.........................................................   (36,423)   (32,877)   (43,478)
                                                                        ---------- ---------- ----------
      Total............................................................   (59,575)   (70,683)   (84,314)
                                                                        ---------- ---------- ----------
Balance before provision for uncollectible reinsurance at end of year..    51,194     60,327     60,248
Adjustments to reinsurance recoverables on
   unpaid losses for uncollectible reinsurance.........................       745        594        538
                                                                        ---------- ---------- ----------
Net balance at end of year............................................. $  51,939  $  60,921  $  60,786
                                                                        ========== ========== ==========

</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.

NOTE 5. DEBENTURES

     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.  As of December
31, 2000, Chandler USA has capitalized $1.5 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, 2000, 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, 2000.

<PAGE>
                                                                       PAGE F-15

     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 Oklahoma Department of Insurance, the Company is also subject
to regulation under the insurance laws of Oklahoma (the "Oklahoma Insurance
Code").  In addition to various reporting requirements imposed on the Company,
the Oklahoma Insurance Code 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 Oklahoma Department of Insurance
regarding their proposed ownership of such shares.

     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 U.S.
District Court for the District of Nebraska (the "Nebraska Court").  During
November 2000, the Company acquired the remaining 1,142,625 of its common
shares owned by CenTra Inc. ("CenTra") and its affiliates in exchange for
payment of $6,882,500 to CenTra and its affiliates.  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.

     During December 1999, Chandler Insurance Management, Ltd., a wholly owned
subsidiary of the Company, 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>
                                                1998         1999         2000
                                             ----------   ----------   ----------
                                                        (In thousands)
            <S>                              <C>          <C>          <C>
            Statutory net income (loss)..... $   6,877    $  (1,455)   $   2,915
            Statutory capital and surplus... $  45,327    $  44,638    $  48,550

</TABLE>

     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 Oklahoma has adopted
Codification to be effective January 1, 2001.  If Codification had been in
effect at December 31, 2000, NAICO's statutory surplus would have increased
by approximately $3.5 million.

     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, 1999 and 2000.

<PAGE>
                                                                       PAGE F-16

     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 $43.9 million at
December 31, 2000) 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 Oklahoma Department of Insurance is generally
limited to the greater of (i) statutory net income excluding realized capital
gains for the preceding year 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 2001 without the approval of the
Oklahoma 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 2000, NAICO paid cash shareholder
dividends totaling $2.5 million to Chandler USA.  On January 31, 2001, the
Oklahoma Department of Insurance approved the payment of an extraordinary
dividend by NAICO of up to $8.0 million to Chandler USA.

     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 $15.9 million
as of December 31, 2000).  NAICO paid approximately $561,000, $465,000 and
$294,000 in policyholder dividends during 1998, 1999 and 2000, respectively.

NOTE 7. STOCK OPTIONS AND WARRANTS

     During 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 are eligible for grants of
stock options and stock grants in accordance with the terms of the Directors'
Plan.  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 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 during 2000,
20,000 shares valued at $165,000, based upon a weighted average grant-date
fair value of $8.25 per share, were awarded to one director.  These amounts
are included in general and administrative expenses in the Company's
consolidated statements of operations.  During 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 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.  During November 2000, the Company issued
10,000 new shares to one director.

     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.

<PAGE>
                                                                       PAGE F-17

     The following table summarizes the information regarding stock options
that were outstanding and exercisable at December 31, 2000:

<TABLE>
<CAPTION>
                                                                               REMAINING
               DATE OF                      EXERCISE          NUMBER        CONTRACTUAL LIFE
                GRANT                         PRICE         OUTSTANDING        (IN YEARS)
--------------------------------------   --------------    -------------    ----------------
<S>                                      <C>               <C>              <C>
March 3, 1998 ........................   $         5.92           66,000                7.17

March 10, 1999 .......................             8.06            6,000                8.19

March 8, 2000 ........................             8.13            7,500                9.18

November 15, 2000 ....................             7.85           30,000                9.87
                                         --------------    -------------    ----------------
                                         $         6.72(1)       109,500                8.11(1)
                                         ==============    =============    ================
--------------------
<FN>

(1)  Weighted average.

</TABLE>


     During 1998 and 2000, the Company recognized $22,000 and $12,000 of
compensation expense related to the issuance of stock options.  As the
exercise price exceeded the market value at the date of grant, the Company
did not recognize any compensation expense for the options issued in 1999.
No stock options have been exercised under the Directors' Plan as of December
31, 2000.

     The Company applies Accounting Principles Board Opinion No. 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 amounts for 1998, 1999 and 2000 would have been as
follows:

<TABLE>
<CAPTION>
                                                       1998             1999             2000
                                                    ----------       ----------       ----------
                                                    (Amounts in thousands except per share data)

<S>                                                 <C>              <C>              <C>
Pro forma net income (loss) applicable to
  common shareholders ............................. $   3,278        $   2,131        $  (2,083)

Pro forma basic earnings (loss) per
  common share .................................... $    0.51        $    0.34        $   (0.49)

Pro forma diluted earnings (loss) per
  common share .................................... $    0.51        $    0.34        $   (0.49)

</TABLE>

     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, 1999 and 2000 under the Directors' Plan
was $2.81, $3.32 and $3.50, respectively.  The following weighted-average
assumptions were used in the Black-Scholes option pricing model for the
options granted in 1998, 1999 and 2000.

<TABLE>
<CAPTION>
                                   1998             1999             2000
                                ----------       ----------       ----------
<S>                             <C>              <C>              <C>

Dividend yield ...............         - %              - %              - %
Volatility ...................        39 %             38 %             36 %
Risk-free interest rate ......      5.62 %           5.30 %           5.87 %
Expected life (in years) .....         5                5                5

</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.

<PAGE>
                                                                       PAGE F-18

     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.

     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>
                                                        1998      1999      2000
                                                      --------  --------  --------
                                                             (In thousands)
<S>                                                   <C>       <C>       <C>
Computed income tax provision (benefit) at 34% ...... $ 1,290   $   855   $(1,166)
Increase (decrease) in income taxes resulting from:
   Benefit from income not subject to
      U.S. Federal income tax .......................  (1,023)     (760)     (694)
   Amortization of licenses and other intangibles ...     362       271       388
   Interest income on tax exempt securities .........    (298)     (140)     (147)
   Other, net .......................................      22       139       143
                                                      --------  --------  --------
Federal income tax provision (benefit) .............. $   353   $   365   $(1,476)
                                                      ========  ========  ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                       CURRENT  DEFERRED   TOTAL
                                                      --------  --------  --------
                                                             (In thousands)
<S>                                                   <C>       <C>       <C>
1998 ................................................ $    52   $   301   $   353
1999 ................................................   1,127      (762)      365
2000 ................................................  (1,268)     (208)   (1,476)

</TABLE>

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

<TABLE>
<CAPTION>
                                                        1998      1999      2000
                                                      --------  --------  --------
                                                             (In thousands)
<S>                                                   <C>       <C>       <C>

Loss reserve discounts .............................. $   921   $  (500)  $   486
Unearned premiums ...................................     395    (1,168)      481
Deferred policy acquisition costs ...................  (1,209)    1,093    (1,070)
Reserve for uncollectible premiums receivable
   and reinsurance recoverables .....................      (9)      (63)      (39)
Depreciation and lease expense ......................     (60)      (46)      (46)
Other ...............................................     263       (78)      (20)
                                                      --------  --------  --------
                                                      $   301   $  (762)  $  (208)
                                                      ========  ========  ========
</TABLE>

<PAGE>
                                                                       PAGE F-19

     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>
                                                                                   1999        2000
                                                                                ----------  ----------
                                                                                    (In thousands)
<S>                                                                             <C>         <C>
Deferred tax assets:
   Loss reserve discounts...................................................... $   3,410   $   2,956
   Unearned premiums...........................................................     2,598       2,117
   Reserve for uncollectible premiums receivable and reinsurance recoverables..       243         282
   Unrealized loss on investments available for sale...........................       886           -
   Compensated absences .......................................................         -         146
   Net operating loss carryforwards - state ...................................     2,279       2,549
   Other ......................................................................       263         219
   Valuation allowance ........................................................    (2,279)     (2,549)
                                                                                ----------  ----------
Total deferred tax assets .....................................................     7,400       5,720
                                                                                ----------  ----------
Deferred tax liabilities:
   Deferred policy acquisition costs ..........................................     1,066           -
   Depreciation and lease expense .............................................       766         768
   Amortization of discount on fixed maturity investments .....................       167         216
   Unrealized gain on investments available for sale ..........................         -         200
   Other ......................................................................       314         327
                                                                                ----------  ----------
Total deferred tax liabilities ................................................     2,313       1,511
                                                                                ----------  ----------
Net deferred tax assets ....................................................... $   5,087   $   4,209
                                                                                ==========  ==========

</TABLE>

     At December 31, 2000, Chandler USA had net operating loss carryforwards
available for Oklahoma state tax purposes totaling approximately $42.5
million which expire in the years 2007 through 2016.  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.

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 2000 was
$10,500.  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 $3,725 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 $259,000, $276,000 and $307,000 for 1998, 1999 and 2000, 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, and premiums payable, approximates
their fair value as of December 31, 1999 and 2000.  The estimated fair values
of the Company's fixed-maturity and equity security investments are disclosed
at Note 3.  At December 31, 2000, the fair value of Chandler USA's debentures
was estimated to be $21.6 million based on quoted market prices.  At December
31, 2000, the Company maintained custody of letters of credit from
policyholders totaling $12.2 million, which is a reasonable estimate of their
fair value.

<PAGE>
                                                                       PAGE F-20

NOTE 11. LITIGATION

GOING PRIVATE LITIGATION

     On June 5 and 6, 2000, three civil lawsuits were filed against the
Company, its indirect subsidiary Chandler USA, and all of the Company's
directors.  All three suits have now been consolidated into a single
proceeding.  The suit alleges that the plans announced on June 1, 2000 to take
the Company private are detrimental to the Disinterested Shareholders.  Each
suit also requests that it be certified as a class action and that the court
enter a temporary restraining order to prevent completion of the announced
plan.  The suit also alleges that all defendants have breached and are
breaching fiduciary duties owed to the plaintiffs and other shareholders.  The
plaintiffs have been granted leave to amend their petitions but have not yet
amended them.  As a result, the Company has not yet responded to the lawsuit
but plans to file timely responses denying the allegations.  On June 12, 2000,
CenTra made similar allegations in an already pending lawsuit in the Nebraska
Court involving a court-ordered divestiture of the Company's shares owned by
CenTra.  CenTra requested that the court enjoin and restrain Mr. LaGere and
others from completing the announced plans.  On July 20, 2000, the Nebraska
Court denied CenTra's request.  On June 27, 2000 CenTra filed a similar
request in an already pending case in the U.S. District Court for the Western
District of Oklahoma (the "Oklahoma Court").  The Company has responded, but
the Oklahoma Court has not ruled.

CENTRA LITIGATION

     The Company and certain of its subsidiaries and affiliates have been
involved in various matters of litigation with 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 Nebraska Court ordered CenTra and certain of its
affiliates to divest all Chandler shares owned by them.  The Nebraska Court
approved a divestiture plan submitted by NAICO 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.  During November 2000, the Company
acquired the remaining 1,142,625 shares of its stock in exchange for payment
of $6,882,500.  These shares were canceled upon acquisition by the Company.

     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.  Payment
was made and the stock was returned to the Company and canceled in November
2000.  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 were
recorded as receivables by Chandler USA and 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.

     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.

<PAGE>
                                                                       PAGE F-21

     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 1998.

     On March 23, 1998, the CenTra Group filed a formal notice of intent to
appeal certain orders of the Oklahoma Court.  The appeals were considered by
the U.S. Court of Appeals for the 10th Circuit.  The CenTra Group's appeals
were 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 elected not to appeal any of the judgments.  The
individual officers and directors against whom judgments were entered all
filed appeals.  All of the judgments were affirmed during September 2000.
Following the execution of the judgment of the Nebraska Court, the CenTra
Group filed pleadings in the Oklahoma Court claiming entitlement to
post-judgment interest on the amounts the Company was ordered to pay in
exchange for the transfer of the shares.  CenTra claims that it is entitled
to post-judgment interest amounting to approximately $2.5 million.  The
Company vigorously opposes this claim and the issue is now pending before
the Oklahoma Court.  The Oklahoma Court has asked for briefs and may hear
argument but has not scheduled a date for decision of these issues.

     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 Martin, 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, 2000.  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
settling this matter.

     The ultimate outcome of litigation described above could have a material
adverse effect on the Company and could negatively impact future earnings and
cash flows.

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.

<PAGE>
                                                                       PAGE F-22

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.

     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 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.  During 2000,
NAICO purchased additional reinsurance for its workers compensation and
casualty lines of business which reduced the Company's net retention for these
lines of business.  Effective October 1, 2000, NAICO purchased quota share
reinsurance which further reduced the Company's net retention for its workers
compensation and casualty lines of business.

     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, 2001 reinsurance programs.  At the present
time, NAICO expects to renew the reinsurance programs that renew on April 1
and July 1, 2001.

     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 $931,000
in 1998 and a decrease in net premiums earned of $877,000 and $1,094,000 in
1999 and 2000, respectively.

     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, 2000.  NAICO is currently engaged in arbitration
in order to enforce the terms of the reinsurance treaties.

<PAGE>
                                                                       PAGE F-23

     Reliance Insurance Company ("Reliance") reinsured NAICO for certain
workers compensation risks during 1998 and 1999.  During the fourth quarter of
1999, NAICO agreed to rescind two reinsurance treaties which had been in
effect since January 1, 1999.  At December 31, 2000, NAICO had reinsurance
recoverables from Reliance for paid and unpaid losses relating to the 1998
treaties of approximately $2.3 million.  Reliance was placed under regulatory
supervision in Pennsylvania during January 2001.

     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 $50,000 to policy acquisition costs
during 1998 for estimated uncollectible reinsurance recoverables from certain
unaffiliated reinsurers.  NAICO did not incur any charges for uncollectible
reinsurance recoverables from unaffiliated reinsurers in 1999 and 2000.

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

<TABLE>
<CAPTION>
                                          1998                 1999                 2000
                                  -------------------- -------------------- --------------------
                                   WRITTEN     EARNED   WRITTEN     EARNED   WRITTEN     EARNED
                                  ---------  --------- ---------  --------- ---------  ---------
                                                          (In thousands)
<S>                               <C>        <C>       <C>        <C>       <C>        <C>
Direct........................... $134,436   $126,017  $169,449   $152,314  $197,041   $190,627
Assumed..........................     (107)        54       186        199       186        171
Ceded............................  (68,793)   (56,007)  (41,698)   (44,186)  (83,674)   (70,935)
                                  ---------  --------- ---------  --------- ---------  ---------
Net premiums..................... $ 65,536   $ 70,064  $127,937   $108,327  $113,553   $119,863
                                  =========  ========= =========  ========= =========  =========
</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 $42.6 million,
$59.0 million and $53.9 million for 1998, 1999 and 2000, 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,
1999 and 2000 were $47.7 million and $33.5 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, 2000, the Company maintained custody of such letters
of credit securing these and other transactions totaling approximately $12.2
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
1998, 1999 or 2000.

     NAICO's bail bond underwriting manager was responsible for gross written
premiums of $2.8 million, $2.8 million and $2.5 million during 1998, 1999 and
2000, respectively.

     Approximately $19.1 million, or 25% of the Company's reinsurance
recoverables and prepaid reinsurance premiums at December 31, 2000 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-24

     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, 2000.

<TABLE>
<CAPTION>
                                                                              CEDED
                                                              NET          REINSURANCE
                                                          REINSURANCE     PREMIUMS FOR      A.M.
                                                          RECOVERABLE    THE YEAR ENDED   BEST CO.
NAME OF REINSURER                                             (1)      DECEMBER 31, 2000   RATING
--------------------------------------------------------  -----------  -----------------  --------
                                                                (Dollars in thousands)
<S>                                                       <C>          <C>                <C>
Swiss Reinsurance America Corporation ..................  $   25,917   $         26,857      A++
GE Reinsurance Corporation .............................      16,513             18,253      A++
SCOR Reinsurance Company ...............................       8,232              9,904      A+
Red River Reinsurance, Ltd. ............................       4,104              6,072      -(2)
PMA Capital Insurance Company ..........................       3,782              4,735      A
                                                          -----------  -----------------  --------
   Top five reinsurers .................................  $   58,548   $         65,821
                                                          ===========  =================
   All reinsurers ......................................  $   75,369   $         83,674
                                                          ===========  =================
Percentage of total represented by top five reinsurers..         78%                79%
--------------------------------------------------------

<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, 2000.

(2)  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, 2000, Red
     River's reinsurance recoverables were collateralized by cash and investments with a fair value
     of $3.3 million deposited in a trust account for the benefit of NAICO and by premiums payable
     to Red River of approximately $1.2 million.

</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, 2000
consist of 25 individual loans totaling approximately $744,000 ($650,000 at
December 31, 1999) 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 $667,000 and $577,000 at December 31, 1999 and 2000,
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 $67,000 and $65,000 at December 31, 1999 and 2000,
respectively.

<PAGE>
                                                                       PAGE F-25

     At December 31, 2000, the Company's subsidiaries were committed under
noncancellable operating leases for certain equipment and office space.
Rental payments under these leases were $535,000, $487,000 and $599,000
in 1998, 1999 and 2000, respectively.  Future minimum lease payments are
as follows:

<TABLE>
<CAPTION>
                                                  (In thousands)
                               <S>                <C>

                               2001.............. $         506
                               2002..............           369
                               2003..............           254
                               2004..............           111
                               2005..............            26
                                                  --------------
                                                  $       1,266
                                                  ==============
</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 $755,000 and $629,000 as of December 31, 1999 and 2000,
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 $217,000, $202,000 and
$265,000 in expenses associated with its use of this property during 1998,
1999 and 2000, respectively, including $7,000, $8,000 and $9,000 paid to
Davenport Farms for reimbursement of certain expenses, such as utility and
similar expenses, for the years 1998, 1999 and 2000, 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-26

     The property and casualty segment accounted for 89.6%, 92.4% and 92.7% of
1998, 1999 and 2000 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%, 48% and 47%
of gross written premiums in 1998, 1999 and 2000, respectively, while Texas
accounted for approximately 28%, 37% and 42% 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 10.0%, 7.2% and 7.0% of 1998, 1999 and
2000 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>
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

2000
Revenues from external customers .................... $     1,291   $   119,891   $       281   $         -   $   121,463
Intersegment revenues ...............................       8,142           184           160        (8,486)            -
Interest income, net ................................          55         6,052             2             -         6,109
Interest expense ....................................           1         2,274             -             -         2,275
Segment profit (loss) before income taxes (1) .......        (411)       (1,230)       (1,787)            -        (3,428)
Segment assets ......................................       5,394       287,112           483       (10,320)      282,669
Depreciation and amortization .......................          68         1,624         1,008             -         2,700

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

(1)  Includes net realized investment gains.
</TABLE>
<PAGE>
                                                                       PAGE F-27

     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                                                          1998           1999           2000
--------------------------------------------------------------------- -------------- -------------- --------------
                                                                                     (In thousands)
<S>                                                                   <C>            <C>            <C>
NET PREMIUMS EARNED
Standard property and casualty....................................... $      41,662  $      71,676  $      89,517
Political subdivisions...............................................        13,073         17,415         16,853
Surety bonds.........................................................         9,938         10,896         10,033
Group accident and health............................................         4,646          8,261          3,221
Other................................................................           745             79            239
                                                                      -------------- -------------- --------------
                                                                      $      70,064  $     108,327  $     119,863
                                                                      ============== ============== ==============

LOSSES AND LOSS ADJUSTMENT EXPENSES
Standard property and casualty....................................... $      31,419  $      53,916  $      64,531
Political subdivisions...............................................        10,502         16,893         12,273
Surety bonds.........................................................         1,569            721          3,176
Group accident and health............................................         4,149          8,589          5,105
Other................................................................           240           (303)          (850)
                                                                      -------------- -------------- --------------
                                                                      $      47,879  $      79,816  $      84,235
                                                                      ============== ============== ==============

</TABLE>

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

<TABLE>
<CAPTION>
                                                                            1998           1999           2000
                                                                       -------------- -------------- --------------
                                                                                      (In thousands)
<S>                                                                    <C>            <C>            <C>
Segment asset eliminations
   Investment in subsidiaries......................................... $         475  $       5,675  $       5,675
   Other consolidating adjustments....................................        16,230          3,861          4,645
                                                                       -------------- -------------- --------------
                                                                       $      16,705  $       9,536  $      10,320
                                                                       ============== ============== ==============

</TABLE>

NOTE 15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

     The Company's quarterly results of operations (unaudited) for 1999 and
2000 are as follows:

<TABLE>
<CAPTION>
                                                                              NET           BASIC EARNINGS   DILUTED EARNINGS
                                                         TOTAL              INCOME            (LOSS) PER        (LOSS) PER
                                                        REVENUES            (LOSS)           COMMON SHARE      COMMON SHARE
                                                    ----------------  ------------------   ----------------  ----------------
                                                                     (In thousands except per share amounts)
<S>                                                 <C>               <C>                  <C>               <C>
1999
--------------------------------------------------
     First quarter................................  $        22,918   $             525   $          0.08    $         0.08
     Second quarter...............................           22,387              (1,155)            (0.18)            (0.18)
     Third quarter................................           24,242                (323)            (0.05)            (0.05)
     Fourth quarter...............................           56,159               3,104              0.51              0.51
2000
--------------------------------------------------
     First quarter................................ $         30,951   $          (1,263)  $         (0.29)            (0.29)
     Second quarter...............................           31,906                (497)            (0.11)            (0.11)
     Third quarter................................           35,591                 803              0.18              0.18
     Fourth quarter...............................           29,304                (995)            (0.26)            (0.26)

</TABLE>


<PAGE>
                                                                       PAGE F-28

     Due to changes in the number of average common shares and equivalent
shares outstanding, quarterly earnings (loss) per common share may not add to
the totals for the years.

     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-29

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,
2000 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, 2000 (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, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2000 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 16, 2001
(March 5, 2001 as to Note 2)

<PAGE>
                                                                       PAGE F-30

                                                                    SCHEDULE I


                CHANDLER INSURANCE COMPANY, LTD. AND SUBSIDIARIES

                         SUMMARY OF INVESTMENTS - OTHER
                      THAN INVESTMENTS IN RELATED PARTIES
                            AS OF DECEMBER 31, 2000

                                (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............................... $          45,315  $      45,460  $       45,460
Obligations of states and political subdivisions......................             8,157          8,212           8,212
Corporate obligations.................................................            44,981         45,093          45,093
Public utilities......................................................            13,218         13,219          13,219
Mortgage-backed securities............................................             5,009          4,998           4,998
                                                                       ------------------ -------------- ---------------
                                                                                 116,680        116,982         116,982
FIXED MATURITIES HELD TO MATURITY:
U.S. Treasury securities and obligations of U.S.
   government corporations and agencies...............................             1,056          1,139           1,056

EQUITY SECURITIES AVAILABLE FOR SALE:
Corporate stock.......................................................                 -            442             442
                                                                       ------------------ -------------- ---------------
   Total investments.................................................. $         117,736   $    118,563  $      118,480
                                                                       ================== ============== ===============

</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)

                                 BALANCE SHEETS

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

                                                                                                DECEMBER 31,
                                                                                      --------------------------------
                                                                                            1999             2000
                                                                                      ---------------- ----------------
<S>                                                                                   <C>                <C>
ASSETS
Cash and cash equivalents ........................................................... $            73    $          69
Premiums receivable..................................................................           2,476            6,118
Deferred policy acquisition costs....................................................             838              879
Investment in subsidiaries, net......................................................          59,223           53,036
                                                                                      ---------------- ----------------
Total assets......................................................................... $        62,610  $        60,102
                                                                                      ================ ================

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
   Unpaid losses and loss adjustment expenses........................................ $           561  $         2,986
   Unearned premiums.................................................................           2,401            2,592
   Litigation liabilities............................................................           8,905            2,436
                                                                                      ---------------- ----------------
Total liabilities....................................................................          11,867            8,014
                                                                                      ---------------- ----------------
Shareholders' equity
   Common stock, $1.67 par value, 10,000,000 shares authorized;
      4,428,033 and 3,295,408 shares issued and outstanding in 1999
         and 2000, respectively......................................................           7,395            5,503
   Paid-in surplus...................................................................          21,380           16,483
   Common stock to be issued (10,000 shares in 2000).................................               -               83
   Retained earnings.................................................................          31,426           29,474
   Less: Stock rescinded through litigation (1,142,625 shares in 1999)...............          (6,883)               -
   Accumulated other comprehensive income (loss):
      Unrealized gain (loss) on investments available for sale, net of
         deferred income taxes.......................................................          (2,575)             545
                                                                                      ---------------- ----------------
Total shareholders' equity...........................................................          50,743           52,088
                                                                                      ---------------- ----------------
Total liabilities and shareholders' equity........................................... $        62,610  $        60,102
                                                                                      ================ ================

</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 OPERATIONS

                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,
                                                                      --------------------------------------------
                                                                           1998           1999           2000
                                                                      -------------- -------------- --------------
<S>                                                                   <C>            <C>            <C>
Premiums and other revenues
   Net premiums earned............................................... $          37  $       1,655  $       8,673
   Interest income, net..............................................             -              1              3
                                                                      -------------- -------------- --------------
      Total premiums and other revenues..............................            37          1,656          8,676
                                                                      -------------- -------------- --------------
Operating costs and expenses
   Losses and loss adjustment expenses...............................            22            671          4,585
   Policy acquisition costs..........................................             6            584          3,021
   General and administrative expenses...............................           272              -            185
   Interest expense..................................................             -              -          1,674
   Litigation expenses, net..........................................        (3,390)           777            414
                                                                      -------------- -------------- --------------
      Total operating costs and expenses.............................        (3,090)         2,032          9,879
                                                                      -------------- -------------- --------------
Income (loss) before equity in net income of subsidiaries............         3,127           (376)        (1,203)
Equity in net income (loss) of subsidiaries .........................           315          2,527           (749)
                                                                      -------------- -------------- --------------
Net income (loss).................................................... $       3,442  $       2,151  $      (1,952)
                                                                      ============== ============== ==============

</TABLE>

SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-33


                                                                    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,
                                                                      --------------------------------------------
                                                                           1998           1999           2000
                                                                      -------------- -------------- --------------
<S>                                                                   <C>            <C>            <C>
OPERATING ACTIVITIES
   Net income (loss)................................................. $       3,442  $       2,151  $      (1,952)
   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              -            177
      Net (income) loss of subsidiaries not distributed to parent....          (315)        (2,527)           749
   Net change in non-cash balances relating to operating activities:
      Premiums receivable............................................           (10)        (2,466)        (3,642)
      Deferred acquisition costs.....................................             -           (838)           (40)
      Unpaid losses and loss adjustment expenses.....................             -            561          2,425
      Unearned premiums..............................................             -          2,401            191
      Litigation liabilities.........................................        (3,390)           776            414
                                                                      -------------- -------------- --------------
      Cash provided by (applied to) operating activities.............            (1)            58         (1,678)
                                                                      -------------- -------------- --------------
FINANCING ACTIVITIES
   Proceeds from borrowing from subsidiary...........................             -         15,204          8,557
   Payments to acquire stock under divestiture plan..................             -        (15,204)        (6,883)
                                                                      -------------- -------------- --------------
      Cash provided by financing activities..........................             -              -          1,674
                                                                      -------------- -------------- --------------
Increase (decrease) in cash and cash equivalents.....................            (1)            58             (4)
Cash and cash equivalents at beginning of year.......................            16             15             73
                                                                      -------------- -------------- --------------
Cash and cash equivalents at end of year............................. $          15  $          73  $          69
                                                                      ============== ============== ==============

</TABLE>

SEE INDEPENDENT AUDITORS' REPORT.


<PAGE>
                                                                       PAGE F-34

                                                                    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, 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
                        =========== ======== ======== ========== ========= ========= ========== =========== ========= ========
YEAR ENDED
DECEMBER 31, 2000
Property and casualty.. $    3,504  $100,173 $ 74,198 $   5,062  $119,863  $  6,052  $  81,985  $   21,044  $ 13,773  $113,553
Agency.................          -         -        -         -         -        55          -       8,344     1,554         -
Other..................          -         -        -         -         -         2          -           -     2,230         -
                        ----------- -------- -------- ---------- --------- --------- ---------- ----------- --------- --------
Total.................. $    3,504  $100,173 $ 74,198 $   5,062  $119,863  $  6,109  $  81,985  $   29,388  $ 17,557  $113,553
                        =========== ======== ======== ========== ========= ========= ========== =========== ========= ========

</TABLE>

SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-35

                                                                    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, 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 %
                                                    ===========  ============  ============  ============   ===========
Year ended December 31, 2000
   Property and casualty........................... $  197,041   $   (83,674)  $       186   $   113,553         0.16 %
                                                    ===========  ============  ============  ============   ===========

</TABLE>

SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-36

                                                                    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:

      1998........................................... $           115   $           152   $           (67)  $           200
                                                      ================  ================  ================  ================
      1999........................................... $           200   $           210   $          (147)  $           263
                                                      ================  ================  ================  ================
      2000........................................... $           263   $           179   $          (134)  $           308
                                                      ================  ================  ================  ================
Allowance for non-collection of reinsurance
   recoverables on paid and unpaid losses:


      1998........................................... $           665   $            50   $          (110)  $           605
                                                      ================  ================  ================  ================
      1999........................................... $           605   $             -   $           (28)  $           577
                                                      ================  ================  ================  ================
      2000........................................... $           577   $             -   $            95   $           672
                                                      ================  ================  ================  ================

</TABLE>

SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-37

                                                                    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, 1998
   Property-casualty........................................ $            -   $       59,575
                                                             ===============  ===============
Year ended December 31, 1999
   Property-casualty........................................ $            -   $       70,683
                                                             ===============  ===============
Year ended December 31, 2000
   Property-casualty........................................ $            -   $       84,314
                                                             ===============  ===============

</TABLE>

SEE INDEPENDENT AUDITORS' REPORT.

<PAGE>
                                                                       PAGE F-38

                                                                    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, an Oklahoma 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-39

                                                                    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 16, 2001 (March 5, 2001
as to Note 2) (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, 2000.

/s/ Deloitte & Touche

DELOITTE & TOUCHE
Grand Cayman, Cayman Islands
March 27, 2001