SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-K

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


For the Fiscal Year Ended December 31, 2000
Commission File Number 0-21988


                                 Kaye Group Inc.
             (exact name of registrant as specified in its charter)


         Delaware                                  13-3719772
(State or Other Jurisdict               (IRS Employer Identification No.)
Incorporation or Organization)

                    122 East 42nd Street, New York, NY 10168
              (Address and Zip Code of Principal Executive Offices)

                  Registrant's Telephone Number: (212) 338-2100

Securities Registered Under Section 12(b) of the Exchange Act:

     Title of Each Class                           Name of Exchange
     -------------------                           ----------------
Common Stock $.01 par value                     NASDAQ National Market

Securities Registered Under Section 12(g) of the Exchange Act:

                                      None

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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 ___

     Check  if  disclosure  of  delinquent  filers  in  response  to Item 405 of
Regulation  S-K is not  contained  in  this  form,  and no  disclosure  will  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. ____


<PAGE>

     The  aggregate  market  value  of the  registrant's  common  stock  held by
non-affiliates  of  the  registrant  as  of  March  5,  2001  was  approximately
$65,000,000.

     Number of shares of the registrant's  common stock  outstanding as of March
5, 2001: 8,494,031.


                       DOCUMENTS INCORPORATED BY REFERENCE

     The registrant's  definitive proxy statement,  which will be filed with the
Securities  and  Exchange  Commission  within 120 days after  December  31, 2000
(incorporated by reference under Part III).

     Total number of pages filed including cover and under page 93.

     Index to Exhibits is on page 47.





                                       2
<PAGE>

                                 KAYE GROUP INC.

                                TABLE OF CONTENTS

Part I

Item 1.           Business                                                    4

Item 2.           Properties                                                 19

Item 3.           Legal Proceedings                                          20

Item 4.           Submission of Matters to a Vote of Security Holders        20


Part II

Item 5.           Market for Common Equity and Related
                  Stockholder Matters                                        21

Item 6.           Selected Financial Data                                    22

Item 7.           Management's Discussion and Analysis
                  of Financial Condition and Results of Operations           23

Item 8.           Financial Statements and Supplementary Data                36

Item 9.           Changes in and Disagreements with Accountants
                  on Accounting and Financial Disclosure                     36


Part III

Item 10.          Directors and Executive Officers of the Registrant         36

Item 11.          Executive Compensation                                     39

Item 12.          Security Ownership of Certain
                  Beneficial Owners and Management                           43

Item 13.          Certain Relationships and Related Transactions             45



Part IV

Item 14.          Exhibits, Financial Statement Schedules
                  and Reports on Form 8-K                                    46

Financial Statements                                                         F-1


                                       3
<PAGE>


                                     PART I

Item 1.  Business

Business Segments

          Kaye Group Inc. (the "Company"), a Delaware corporation,  is a holding
company  which,  through  its  subsidiaries,  is  engaged  in a broad  range  of
insurance brokerage,  underwriting and related activities.  The Company operates
in  two  insurance  business  segments  -  the  Insurance   Brokerage  Companies
Operations ("Brokerage Operations"),  comprised of the Retail Brokerage Business
and the Program  Brokerage  Business,  and the Property  and Casualty  Companies
Operations.

          In addition,  Corporate  Operations  includes  those  activities  that
benefit the Company in its entirety  and cannot be  specifically  identified  to
either  the  Brokerage   Operations  or  the  Property  and  Casualty  Companies
Operations.  Such activities include debt servicing and public company expenses,
including investor relations costs.

          The Company's  activities  are conducted from offices in New York, New
York,  Arcadia,  California,  Westport,  Connecticut,  Woodbury,  New  York  and
Warwick, Rhode Island.

Insurance Brokerage Companies Operations

          The Retail Brokerage Business operates insurance brokerage  businesses
through four subsidiaries of the Company, the "Retail Brokerage Companies".  The
Retail Brokerage  Companies offers commercial  clients a full range of insurance
brokerage services including  procurement of property/casualty  insurance,  risk
management consulting,  bonding, loss prevention engineering, and group employee
benefit  consulting  services.  In addition,  personal lines and life and health
insurance coverage are placed on behalf of individual clients.

          The Retail Brokerage  Business'  primary strategy is to service middle
market  companies and  organizations  just below the Fortune 500 level for which
other national brokers intensely compete.  Within this middle market, the Retail
Brokerage Business has developed particular expertise and knowledge of the risks
facing a number of industry sectors including health care, real estate,  retail,
manufacturing, houses of worship, law firms, homes for the aged and fine arts.

          During 2000,  the Retail  Brokerage  Business  serviced  approximately
15,000 insureds.  The Retail Brokerage  Business is compensated for its services
primarily in the form of commissions paid by insurance companies. The commission
is usually a percentage  of the premium paid by the  insured.  Commission  rates
depend upon the type of insurance,  the particular  insurance  company,  and the
role in which the Retail Brokerage  Business acts. In some cases a commission is
shared  with other  agents or



                                       4
<PAGE>


brokers who have acted jointly with the Retail Brokerage  Business in connection
with the  transaction.  The Retail  Brokerage  Business may also receive from an
insurance  company  a  contingent  commission  that is  generally  based  on the
profitability  and volume of  business  placed  with it by the Retail  Brokerage
Business  over a given period of time.  The Retail  Brokerage  Business may also
receive fees from insureds in connection  with consulting  services  relating to
the marketing of insurance.

          Program  Brokerage   Corporation  ("PBC"  or  the  "Program  Brokerage
Business")  is a subsidiary  of the Company and  operates a wholesale  insurance
brokerage  business which offers retail insurance agents and brokers  innovative
solutions to the twin insurance  problems of price and availability of coverage.
It  accomplishes  this by  organizing  pools of  similar  risks  into  specially
designed alternative distribution programs through which it places insurance for
affinity groups (the "Programs").

          The  Program  Brokerage   Business  is  one  of  the  leaders  in  the
application   of  purchasing   groups  in  the  commercial   insurance   market.
Approximately 73% of PBC's premium volume was generated by its own producers and
approximately  800 unrelated retail insurance agent and broker producers serving
approximately  10,500  insureds during 2000. The remaining 27% were derived from
the Retail  Brokerage  Business.  Approximately  35% of PBC's premium  volume is
directly or indirectly placed with two affiliates, Old Lyme Insurance Company of
Rhode Island,  Inc.  ("OLRI") and Old Lyme  Insurance  Company,  Ltd.  (Bermuda)
("OLB").

Property and Casualty Companies Operations

          The Company conducts its property and casualty  underwriting  business
through two insurance company subsidiaries (the "Insurance Companies"), OLRI and
OLB. OLRI is a property and casualty  insurance company licensed in Rhode Island
and  eligible as a surplus  lines  insurer in New York and New Jersey.  OLB is a
property and casualty insurance company organized and licensed under the laws of
Bermuda.  In states where the Insurance  Companies are not admitted  insurers or
surplus lines insurers, the Insurance Companies underwrite risks through various
reinsurance agreements.

          The Insurance Companies  underwrites  property risks (loss or physical
damage to property) and OLRI  underwrites  casualty  risks (legal  liability for
personal  injury or damaged  property  of  others)  for  insureds  in the United
States. Insurance is sold principally through the Programs marketed by PBC which
insure  various  types of  businesses  and  properties  that have  similar  risk
characteristics,  such as apartments, condominiums,  cooperatives,  restaurants,
building  maintenance  companies,  automobile  service stations,  retail stores,
funeral homes and pharmacies, among others.

          The  Insurance  Companies'  strategy is to  underwrite  only the first
"layer" of the property  and casualty  insurance  provided  under the  Programs.
Exposure  to  individual  insureds  on  individual  losses is thereby  generally
limited to between  $10,000  and $25,000 per claim,  depending  on the  Program.
Under the Programs,  the Insurance  Companies'



                                       5
<PAGE>

policies are sold in conjunction  with policies issued by  unaffiliated  Program
insurers  that  provide  coverage  for  losses  above  the  first  layer of risk
underwritten by the Insurance Companies.  In addition,  OLRI has issued policies
on a selected  basis with  limits up to  $3,500,000  with net  retention  on one
policy of  $100,000  of  exposure  and  reinsuring  the  remaining  limits  with
unaffiliated  reinsurers rated A or better by A.M. Best Company ("A.M. Best"), a
major rating agency for insurers. The Property and Casualty Companies Operations
includes Claims Administration  Corporation ("CAC"), a subsidiary of the Company
which is responsible  for the  administration  of a large majority of the claims
submitted to the Insurance  Companies.  The  administration  of claims  includes
investigation,  engagement of legal  counsel,  approval of  settlements  and the
making of payments to, or on behalf of insureds. OLRI pays CAC for its services.
CAC also provides claims  administration  service to certain of the unaffiliated
Program insurers for a fee.

History of the Company

1952 to 1993

          Prior to the  initial  public  offering  ("IPO")  of Old Lyme  Holding
Corporation's  ("Holding")  common stock in August 1993,  the  operations of the
Retail Brokerage Companies,  PBC, the Insurance Companies and CAC were part of a
single  combined  insurance and brokerage  business owned by Kaye  International
L.P.  ("KILP")  and  certain  individuals.  KILP,  via  several  stock and asset
acquisitions  and mergers,  traces its origins  back to 1952.  Prior to the IPO,
KILP  developed  the concept of the  "deductible"  primary  "layer" of insurance
coverage  administered  through  Programs.  This business was placed through the
Insurance  Companies.  In August 1993,  after years of  successful  growth,  the
Insurance  Companies,  PBC  and CAC  were  organized  under  Holding,  of  which
approximately 33% were sold to the public.

          At the  time of the  IPO,  management  of  Holding  believed  that its
historical marketing efforts and ability to expand its business were hampered by
its  small  capital  base  and its  lack of a  letter  rating  from  A.M.  Best.
Approximately $13,000,000 of the proceeds of the IPO were contributed to OLRI to
increase its capital and surplus to permit it to (i)  increase its  underwriting
capabilities,  (ii) obtain a letter rating from A.M. Best, and (iii) enable OLRI
to meet certain regulatory capital and surplus requirements.  As a result of the
proceeds  being  contributed,  OLRI  significantly  increased  its  underwriting
capacity.  This  enabled  it to  ultimately  obtain  an A.M.  Best  rating of A-
(Excellent)  (which it currently  maintains) and meet all regulatory capital and
surplus requirements.

          The  business  growth of OLRI  however  depends on the creation of new
Programs and the addition of insureds into existing Programs. OLRI relies on PBC
to develop  new


                                       6
<PAGE>

Programs.  PBC is also OLRI's most important and significant  producing  broker,
historically producing all of the Insurance Companies' net premiums earned.

1994

          In 1994, the Retail  Brokerage  Business  completed the integration of
its 1992  acquisition of Amalgamated  Programs  Corporation and related entities
("Amalgamated")  and  continued to downsize to adjust for the  continuing  "soft
market" in property and casualty premium rates. At the time, the officers of the
general  partners  of  KILP  (which  included  members  of  Holding's  Board  of
Directors)  concluded that the  combination of Holding and the Retail  Brokerage
Business would be advantageous for both OLRI and KILP. This conclusion was based
on three factors:  (a) improved  operating  results derived from the Amalgamated
integration  and "soft  market"  downsizing,  (b) the  improved  outlook for the
Retail Brokerage  Business and (c) the fact that the Retail  Brokerage  Business
accounted for approximately one-half of PBC's premium volume.

          In  evaluating  the  combination,  Holding's  Board of Directors  also
considered the fact that the market for Holding's common stock following the IPO
was relatively  illiquid.  The Board believed that the combination of the Retail
Brokerage  Business with Holding would  increase the size of Holding,  make it a
more financially  diverse company and potentially  attract a broader spectrum of
investors.

1995

          The combination  ("Transaction") was effective October 2, 1995 and was
accounted for as a transfer and exchange between companies under common control.
Accordingly,  the assets and liabilities of the Retail  Brokerage  Business were
combined with those of Holding at their historical cost in a manner similar to a
"pooling of interests". The combination was accomplished as follows:

          1. Holding  transferred  to then  recently  formed Kaye Holding  Corp.
("KHC") all of the  outstanding  stock of the  Insurance  Companies  and its two
other subsidiaries, PBC and CAC, and its other assets in exchange for (i) 82,400
shares of KHC common  stock,  representing  82.4% of the total  outstanding  KHC
common  stock,   and  (ii)  the  assumption  by  KHC  of  certain  of  Holding's
liabilities.

          2. KILP  transferred  all of its interest in the limited  partnerships
conducting the Retail Brokerage Business (the "Retail Partnerships") and certain
related  assets to KHC in exchange  for (i) 17,200  shares of KHC common  stock,
representing  17.2% of the total  outstanding  KHC  common  stock,  and (ii) the
assumption by KHC of certain KILP liabilities.

          3. Certain  individuals  transferred to KHC all of their  interests in
the corporate general partners of the Retail Partnerships (the "Retail Brokerage
Companies") in



                                       7
<PAGE>

exchange  for 400 shares of KHC  common  stock,  representing  0.4% of the total
outstanding KHC common stock.

          4. KHC  contributed  its interests in the Retail  Partnerships  to the
Retail  Brokerage  Companies  thereby  causing  the  dissolution  of the  Retail
Partnerships.  As a result, the Retail Brokerage Companies, as a group, owns all
of the assets and is subject to all of the liabilities,  of the Retail Brokerage
Business.

          5. Holding changed its name to Kaye Group Inc.

1997

          On  December  30,  1997   stockholders  of  the  Company   approved  a
restructuring  that merged KHC into the Company.  This  eliminated  the minority
interest  in KHC  held  by KILP  and  simplified  the  corporate  structure  and
reporting of the Company.

1998

          On May 12, 1998 KILP was dissolved and approximately  6,100,000 shares
of the Company were  distributed  by KILP to its  partners,  consisting  of Kaye
Investments L.P., ZS Kaye, L.P., other entities and individuals.

2000

         The chart below reflects the current structure of the Company:


                         ------------------------------
                                 KAYE GROUP INC.
                             (Corporate Operations)
                         ------------------------------
                             /    100%          \    100%
                            /                    \
                           /                      \
    --------------------------------       -----------------------------------
    Insurance Brokerage Companies:         Property and Casualty Companies
      Kaye Insurance Associates, Inc.        Old Lyme Insurance Company of
      Kaye Insurance Associates, Inc.-         Rhode Island, Inc.
        New England                          Old Lyme Insurance Company, Ltd.
      Kaye-Western Insurance & Risk          Park Brokerage, Ltd.
        Services, Inc.                       Claims Administration Corporation
      Program Brokerage Corporation
    --------------------------------       -----------------------------------






                                       8
<PAGE>

2001

          On January 20,  2001,  the  Company  reported  that Hub  International
Limited  ("Hub") had entered into a definitive  agreement to acquire the Company
through a merger transaction.

          Upon the merger,  each  holder of the  Company's  shares will  receive
$14.00 per share  consisting  of cash of $9.33 and $4.67  principal  amount of 5
year 8.50% subordinate convertible debentures of Hub.

          Completion  of this  transaction,  anticipated  to occur in the second
quarter of 2001, is subject to the receipt of satisfactory applicable regulatory
approvals, approval of the merger by the shareholders of the Company, compliance
with  applicable   legal  and  regulatory   requirements  and  standard  closing
conditions. The holders of approximately 55% of the shares of the Company, under
individual  agreements,  have  agreed to vote in favor of the  merger,  and have
granted Hub an irrevocable option to purchase their shares of the Company in the
event that the merger is not completed.

          Immediately  prior to the transaction  all  outstanding  stock options
shall  become  vested,  and in return  for their  cancellation,  the  holders of
options will receive a cash payment;  and in return for the  cancellation of all
outstanding  and awarded  Performance  Stock Shares,  the holders will receive a
cash payment at a later date. On completion of the transaction, the Company will
record an expense of approximately $2,400,000 related to the cancellation of the
awarded shares of the Stock Performance Plan.

          In addition,  as a result of the  transaction,  the Company will incur
related expenses of approximately $2.5 million during the period January 1, 2001
through completion of the transaction.

Affinity Group Marketing

          The Company  generally  services middle market entities just below the
Fortune 500 level. Within this market, it has developed particular expertise and
knowledge of risks facing a number of industry sections. Based on this expertise
and knowledge,  the Company develops and markets insurance  programs for various
purchasing groups (Affinity Group Marketing), including hospitals, churches, law
firms,  mental  health  practitioners,  homes for the aged and fine arts,  among
others.  Affinity Group Marketing programs (including  alternative  distribution
programs) contribute 63% of the Company's 2000 consolidated revenues,  excluding
investment income.

Retail Brokerage Operations

          The  Retail  Brokerage   Business  generally  services  middle  market
entities as described above. Approximately 20% of the Retail Brokerage Business'
2000 revenues relate to such affinity groups. Of this 20%,  approximately 44% of
the related revenues are derived from unrelated insurance markets. The remaining
56% is derived from PBC. (The premium volume associated with this 56% represents
approximately  27% of PBC's



                                       9
<PAGE>

premium volume.) No premiums are placed with the Insurance Companies directly by
the Retail Brokerage Business.

PBC and Insurance Companies Operations

          PBC designs alternative  distribution programs for affinity groups and
markets  via a  network  of  retail  insurance  brokers,  including  the  Retail
Brokerage  Companies.  PBC's distribution network includes its own producers and
approximately 800 unrelated retail agent and broker  producers.  These producers
account for 73% of PBC's premium volume.  The Insurance  Companies  underwrite a
portion of the Programs and only underwrite  programs designed by PBC. Beginning
in 2000 PBC began the placement of non-program related business on behalf of its
unrelated retail agent and broker producer network.  The Insurance  Companies do
not underwrite any of this business.

          During  the past  seven  years the  original  1:2  ratio of  insurance
premiums produced by unrelated retail brokers to insurance  premiums produced by
the Retail  Brokerage  Companies (the  "Production  Ratio"),  respectively,  has
reversed. But production from both sources has grown. PBC's total premium volume
for  2000 of  $86,000,000  increased  26% over  1999.  It is  expected  that the
Production  Ratio will approach 4:1 during 2001,  consistent with PBC's strategy
of growing the unrelated retail producer distribution network.

          Once PBC  establishes  a program,  it acts as the placing  broker with
respect  to  insurance  under  the  Programs.  In  such a role,  PBC  acts as an
intermediary in placing the programs with various unaffiliated  insurers as well
as the Insurance Companies.

          PBC  receives  commissions  from  OLRI  and the  unaffiliated  Program
insurers.  Pursuant to sub-brokerage agreements,  PBC pays commissions to retail
brokers based upon all business  produced by such agents and brokers  (including
business placed by PBC with the unaffiliated Program insurers).

          The  Insurance  Companies'  strategy is to  underwrite  only the first
"layer" per claim (the deductible range) of the property and casualty  insurance
provided  under the  Programs  developed by PBC.  This limits their  exposure to
individual  insureds on individual  losses to the deductible  range depending on
the Program.  Under the Programs,  the Insurance Companies' policies are sold in
conjunction with policies issued by unaffiliated  insurers that provide coverage
for  losses  above the  first  "layer"  of risk  underwritten  by the  Insurance
Companies.  The  Insurance  Companies  believe  that  their  rates for the first
"layer" of risk, when combined with the rates of such other  unrelated  insurers
for the coverage above such layer, are generally competitive with the rates that
other insurance companies would charge to provide comparable coverage.

          The  Insurance  Companies  currently  participates  in 27  alternative
distribution programs. The major program groupings are as follows:



                                       10
<PAGE>
          The  residential  real estate programs  provide  property and casualty
insurance for residential real estate including rental apartments, cooperatives,
and  condominiums.  Policies protect the owner from property losses and casualty
claims,  such as claims  brought by a tenant or member of the public  injured on
the premises.  These programs are offered  principally in the New York City area
and have approximately 2,400 insureds.

          The restaurant  programs insure  restaurants  against  casualty claims
(most typically  brought by an injured  restaurant  patron) and property losses.
Many  of  the  restaurants   that  participate  in  these  programs  are  "white
tablecloth"  restaurants.  The  restaurant  programs  have  approximately  2,600
insureds.

          The real estate umbrella  program  insures  residential and commercial
real estate  owners  against  certain  types of casualty  losses.  Insureds  are
provided  with an extra  level of  protection  in  conjunction  with a  standard
umbrella  policy.  Coverage is provided for losses that are included  within the
broad terms of the policy,  but are excluded under the general  casualty policy.
This program also offers high umbrella  casualty  limits  primarily  provided by
unrelated Program insurance companies to individual real estate owners. OLRI has
a maximum  exposure of $10,000 per claim.  The real estate umbrella  program has
approximately 500 insureds.

          The restaurant  programs,  residential  real estate  programs and real
estate  umbrella  program  accounted  for 76% of the net premiums  earned by the
Insurance Companies in 2000.

          The remaining programs represent 24% of the net premiums earned by the
Insurance Companies in 2000. They have approximately 4,800 insureds and include,
among others,  the following  affinity groups:  catalog  showrooms,  homeowners,
retail stores, drug stores, funeral directors,  bars and taverns, waste haulers,
laundromats  and  dry  cleaners,   New  England   restaurants,   Asian  American
restaurants,  automobile  service stations,  houses of worship,  and main street
small businesses.

          The following  table sets forth the percentage of net premiums  earned
attributable  to the  programs  and all other  business  during the years  ended
December 31, 2000, 1999, and 1998.


                                               Net Premiums Earned
                                             Years Ended December 31,
                                               2000   1999    1998
                                               ----   ----    ----
Residential real estate programs ...........    45%    45%    43%
Restaurant programs ........................    16%    22%    26%
Real estate umbrella program ...............    15%    16%    18%
Other ......................................    24%    17%    13%
                                               ----   ----   ----
                                               100%   100%   100%
                                               ----   ----   ----

                                       11
<PAGE>

Acquisitions

          During 1998,  the Brokerage  Operations  acquired  certain  assets and
liabilities  of Florida  Insurance  Associates,  Inc.  ("FIA"),  Daniel V. Keane
Agency, Inc. ("DVK") and Laub Group of Florida, Inc. ("LGF"). These acquisitions
were accounted for as purchases. FIA, located in Hollywood, Florida, represented
the Company's entrance into the Florida marketplace. DVK, located in Bridgeport,
Connecticut,  was relocated to the Company's  Westport,  Connecticut  office and
added  to  that  office's  personal  lines  and  main  street  (small  business)
operations.  LGF, located in Hollywood,  Florida, added alternative distribution
transfer capabilities to the FIA operations.

          During the first quarter of 1999,  the Brokerage  Operations  acquired
certain assets and liabilities of Seaman,  Ross, & Wiener,  Inc.  ("SRW").  This
acquisition was accounted for as a purchase. SRW, located in Woodbury, New York,
enhances the general  commercial,  group benefits and life  insurance  Brokerage
Operations in the New York City metropolitan area.

          During  the first  half of 2000,  the  Brokerage  Operations  sold the
majority of operations  of LGF at no gain or loss as well as certain  assets and
liabilities of FIA.

          The  Company  believes  that the  effect of past,  present  and future
acquisitions  will be to expand  its  insurance  program  services  to  affinity
groups, thus providing earnings to all operations.

          The Company is  considering  and intends to consider from time to time
additional  acquisitions  and divestitures on terms it deems consistent with its
strategies.  The Company at this time is engaged in preliminary discussions with
a number of  candidates  for  possible  future  acquisitions  but has not signed
contracts  or  agreements  in  principle  to make  additional  acquisitions.  No
assurances can be given that any additional acquisitions or divestitures will be
completed, or if completed, that they will be advantageous to the Company.

Seasonality

          The Brokerage  Operations' revenues vary significantly from quarter to
quarter as a result of the timing of policy renewals and their related billings.
This is due to the revenue  recognition  method for brokerage  commissions which
requires  that a full year's  commissions  be  recognized  immediately  upon the
billing  date  of  the  related  policies.  This  is  based  on  the  fact  that
substantially  all of the expenses to obtain and service the business  have been
incurred  at this point in time.  However,  premium  revenues  of the  Insurance
Companies are  recognized  ratably over the term of the related  policies.  As a
result,  there is little  variation  from quarter to quarter in the Property and
Casualty Companies Operations' revenues.

          Consolidated  revenues by quarter for 2000, 1999, and 1998 were earned
as follows.  Amounts  shown  represent  a  percentage  of the related  full year
consolidated revenues.

                                       12
<PAGE>

                                   2000           1999           1998
                                   ----           -----          ----
First Quarter                       22%            23%           23%
Second Quarter                      26%            26%           24%
Third Quarter                       24%            24%           26%
Fourth Quarter                      28%            27%           27%


Competition, and Industry and Market Risk

          The Company is the 30th largest  insurance broker in the United States
according to "Business Insurance", a leading insurance industry publication.  It
operates in a highly  competitive  industry and faces  competition from regional
brokers and regional offices of worldwide brokers and insurers.

          The insurance  brokerage business is highly  competitive.  The Company
believes that it is well  positioned  to compete  within its  designated  market
because of the  expertise  and  knowledge it has  developed in servicing  middle
market companies,  the Programs it has developed and the proprietary database of
affinity group underwriting and claims information it has developed. In general,
premium pricing and commission rate changes impact the Company and the insurance
industry as a whole. The Company has been successful in replacing  business lost
from such premium and commission rate changes and attrition through new business
developed  from new accounts and programs,  and extension of service to existing
accounts.

          Many  insurance  companies  which compete with OLRI have a higher A.M.
Best-rating  (OLRI is rated  A-(Excellent)),  and  are  larger and have  greater
financial, marketing and management resources than OLRI. Competition is based on
many factors,  including  perceived overall  financial  strength of the insurer,
premiums charged, policy terms and conditions,  services offered, reputation and
experience. Due to its size, management and operational flexibility, the Company
can  respond  quickly  to,  and  take  advantage  of,   changing   circumstances
encountered in the marketplace.

          In the  event  that  admitted  insurers  (including  the  unaffiliated
Program  insurers)  begin to offer the  coverage  in New York which the  Company
offers as a surplus  lines  insurer,  it is possible  that OLRI may be unable to
receive  placements  on a surplus  lines basis,  because  brokers are  generally
required first to obtain three "declinations" from admitted carriers before they
can offer the business to a surplus  lines  underwriter.  In  addition,  in soft
insurance  markets,  other insurance  companies may be more willing to offer low
deductibles,  at prices  competitive  with or lower than the  insurance  offered
under the Programs.

          As part of its  ongoing  business,  the  Company is exposed to certain
market  risks of  potential  losses  from  adverse  changes in market  rates and
prices.  The  Company's  primary  market risk  exposure is interest rate risk in
regard to fixed rate domestic



                                       13
<PAGE>

instruments and outstanding  debt. At December 31, 2000, the Company has certain
investments in equity  securities,  which have market risk  exposure.  It has no
derivative instruments.

          The Company's financial instruments consist of corporate and municipal
bonds,  U.S.  Treasury  securities and equity  securities that are classified as
available  for sale.  The  Company  generally  selects  investment  assets  with
characteristics such as duration,  yield,  currency, and liquidity to match cash
flows of related  insurance and  reinsurance  contracts.  It selects medium term
fixed  rate  investments  to  support  general   liability  claims  and  shorter
investments to support property claims.

          The fixed rate  investment  portfolio fair value and weighted  average
rate of return as of December 31, 2000 was $43,232,000 and 9.75%,  respectively.
The  equity  portfolio  fair  value and  weighted  average  rate of return as of
December 31, 2000 was $8,529,000 and (2)%,  respectively.  The weighted  average
rate of return is based on interest income or dividends earned plus or minus the
change in realized and unrealized  appreciation or depreciation  during the year
divided by the average  beginning  of the year and end of the year fair value of
the  respective  portfolio.  Interest on tax exempt  investments  is adjusted to
reflect an equivalent taxable amount using the Company's effective tax rate.

          During the first quarter of 2001, the equity  portfolio was liquidated
and U.S.  Treasury Bonds were  purchased  with the proceeds.  A realized loss of
approximately $200,000 resulted.


Year 2000 Compliance

          The Year 2000 issue arose from computer  programs  being written using
two digits rather than four digits to define the applicable  year,  resulting in
the perception  that there would be failures in information  technology  systems
and other equipment containing imbedded technology in the year 2000.

          A  comprehensive  review was performed by the Company of the insurance
policies written by its Insurance Companies and their underwriting guidelines to
determine Year 2000 exposure.  The Insurance Companies primarily issued policies
covering  all or  part  of an  insured's  self-insured  retention,  with  limits
generally  up to $25,000  that follow the form of the  policies  for coverage in
excess of the Insurance  Companies'  policies.  The Insurance  Companies did not
issue Year 2000 related  exclusions on these policies.  The Insurance  Companies
also issued a number of policies with greater limits of coverage, and included a
Year 2000  exclusion  on such  policies.  The  Company  is aware  that Year 2000
liabilities  may be deemed not to be  fortuitous in nature and,  therefore,  not
covered under the policies  underwritten by the Insurance  Companies.  Moreover,
based upon the classes of  insurance  primarily  underwritten  by the  Insurance
Companies,  the Company believes that its coverage exposure with respect to Year
2000 losses will not be  material.  However,  changes in social and legal trends
may establish  coverage  unintended for Year



                                       14
<PAGE>

2000 exposures by  re-interpreting  insurance  contracts and  exclusions.  As of
December 31, 2000, the Company is not aware of any Year 2000 exposures.

Ceded Reinsurance

          OLRI has from time to time  obtained  reinsurance  for portions of, or
specific risks, under the first layer of risks underwritten by OLRI. Reinsurance
has been placed with PXRE  Reinsurance  Company and The  Hartford  Steam  Boiler
Inspection and Insurance Co. which are rated A or better by A.M. Best.  However,
if reinsurance  should become more widely available at economical  prices,  OLRI
may increase the amount of reinsurance it purchases.

Losses and Loss Expenses

          The  Insurance  Companies  are  directly  liable  for  losses and loss
expense  payments  under the terms of insurance  policies  that they write,  and
under the reinsurance agreements to which they are party. In many cases, several
years may elapse between the occurrence of an insured loss, the reporting of the
loss to the  Insurance  Companies and the  Insurance  Companies  payment of that
loss. The Insurance  Companies  reflect their liability for the ultimate payment
of all incurred losses and loss expenses by  establishing  loss and loss expense
reserves,  which are balance sheet liabilities  representing estimates of future
amounts needed to pay claims and related expenses with respect to insured events
that have occurred.

          When a claim  involving a probable  loss is  reported,  the  Insurance
Companies  establish a loss reserve for the  estimated  amount of the  Insurance
Companies'  ultimate loss and loss expense  payments.  The estimate  reflects an
informed  judgment based on established  reserving  practices and the experience
and  knowledge of CAC's claims  examiners  regarding the nature and value of the
claim, as well as the estimated  expense of settling the claim,  including legal
and other fees,  and general  expenses of  administering  the claims  adjustment
process.  The Insurance  Companies also establish reserves on an aggregate basis
to provide for losses  incurred but not reported ("IBNR  reserves"),  as well as
future developments on losses reported to the Insurance Companies. The amount of
an insurer's  incurred  losses in a given period is  determined by adding losses
and loss expenses paid during the period to case loss and loss expense  reserves
and IBNR reserves  (collectively  "loss reserves") at the end of the period, and
then subtracting loss reserves existing at the beginning of the period.

          As part of the  reserving  process,  historical  data is reviewed  and
consideration is given to the anticipated  effect of various factors,  including
anticipated  legal  developments,  changes in social  attitudes,  inflation  and
economic conditions.  Reserve amounts are necessarily based on management's best
estimates,  and as other data



                                       15
<PAGE>

becomes  available and is reviewed,  these  estimates are revised,  resulting in
increases or decreases to existing reserves.

          To  further  review  the  adequacy  of  the  reserves,  the  Insurance
Companies engage  independent  actuarial  consultants to perform annual case and
ultimate loss reserve analysis.

          The following table sets forth a  reconciliation  of the change in the
reserves for  outstanding  losses and loss  expenses,  including paid losses and
loss expenses, for each year in the three year period ended December 31, 2000.

<TABLE>
<CAPTION>

                                                             Years Ended December 31,
                                                            ------------------------
                                                   2000                  1999                   1998
                                                   ----                  ----                   ----
                                                                    (in thousands)

<S>                                               <C>                   <C>                   <C>
Balance at January 1,                           $ 23,969              $ 21,567              $ 19,126
         Less reinsurance recoverables            (2,678)               (3,220)               (2,811)
                                                --------              --------              --------

         Net balance                              21,291                18,347                16,315
                                                --------              --------              --------
Incurred related to:
         Current year                             13,340                10,410                 8,461
         Prior years                              (1,070)                 (656)                   35
                                                --------              --------              --------
         Total incurred                           12,270                 9,754                 8,496
                                                --------              --------              --------

Paid related to:
         Current year                              2,809                 2,188                 1,877
         Prior years                               7,368                 4,622                 4,587
                                                --------              --------              --------
         Total paid                               10,177                 6,810                 6,464
                                                --------              --------              --------

Net balance at December 31,                       23,384                21,291                18,347
         Plus reinsurance recoverables             4,600                 2,678                 3,220
                                                --------              --------              --------

         Balance                                $ 27,984              $ 23,969              $ 21,567
                                                ========              ========              ========
</TABLE>


          2000 and 1999 incurred provisions  increased over prior year's amounts
due to the growth of liability business.  Incurred provision  reductions in 2000
and 1999  relating to prior years were due to redundant  property and  liability
reserves  established  in those  years.  Paid  losses  in 2000 and 1999 for both
current  and prior  years  increased  over the prior  year's  amount  due to the
overall growth in business.

          The following table presents the development of unpaid losses and loss
expense reserves for the past ten years for the Insurance Companies.  During the


                                       16
<PAGE>

ten year period covered by this table,  OLB changed its fiscal  year-end  during
1990 from April 30 to December  31. In  addition,  Bermuda  domiciled  insurance
companies,  unlike U.S.  domiciled  insurers,  are not required to file calendar
year loss development information with regulatory authorities.  Accordingly, the
loss development information included in the following table with respect to OLB
prior to 1992,  reflects  development  data  converted from the policy year loss
development data maintained by OLB through the use of mathematical  models.  The
top line of the table shows the  estimated  reserve  for unpaid  losses and loss
expenses  at the  balance  sheet  date for each of the  indicated  years.  These
figures  represent the  estimated  amount of unpaid losses and loss expenses for
claims  arising  in the  current  and all prior  years  that were  unpaid at the
balance  sheet  date,  including  losses  that  had  been  incurred  but not yet
reported.  The table  also  shows  the  re-estimated  amount  of the  previously
recorded  reserve based on experience as of the end of each succeeding year. The
estimate changes as more information  becomes  available,  principally about the
frequency  of claims  for  individual  years.  The table is  presented  gross of
reinsurance  for all years  presented.  The  reinsurance  recoverable  on unpaid
losses  at  December  31,  2000  and  1999  were   4,600,000   and   $2,678,000,
respectively.




                                       17
<PAGE>

KAYE GROUP INC.
LOSS DEVELOPMENT SCHEDULE
(In thousands)

<TABLE>
<CAPTION>
     Year Ended               1990      1991     1992      1993      1994      1995      1996     1997     1998     1999      2000
     ----------               ----      ----     ----      ----      ----      ----      ----     ----     ----     ----      ----

<S>                           <C>       <C>      <C>      <C>       <C>       <C>       <C>      <C>      <C>      <C>       <C>
Reserves for outstanding
  losses and loss expenses
  on December 31,             $12,555   $16,244  $18,444  $17,929   $14,118   $12,672   $15,227  $19,126  $21,567  $23,969   $27,984

Cumulative amount paid as of:

  One year later               $4,374    $5,569   $6,379   $6,965    $4,161    $3,697    $4,943   $4,587   $4,670   $7,533
  Two years later               7,545     9,258   11,704   10,002     6,802     6,882     7,780    7,712    9,375
  Three years later             9,245    12,695   13,833   12,278     9,455     8,691     9,752   10,665
  Four years later             11,378    13,813   14,973   14,120    10,917     9,421    11,273
  Five years later             11,705    14,146   15,784   15,281    11,535     9,828
  Six years later              11,768    14,385   16,374   15,784    11,882
  Seven years later            11,877    14,562   16,637   16,096
  Eight years later            11,917    14,631   16,813
  Nine years later             11,927    14,729
  Ten years later              12,001

Re-estimated liability as of:

  One year later              $13,665   $16,117  $18,140  $17,856   $14,254   $12,257   $15,494  $18,534  $19,600  $23,696
  Two years later              13,003    15,182   18,511   18,184    13,487    12,454    15,352   16,931   19,232
  Three years later            11,850    15,609   18,636   16,552    13,990    12,448    14,622   16,336
  Four years later             12,410    15,462   18,177   18,157    13,985    12,100    14,214
  Five years later             12,468    15,312   18,252   17,993    13,827    11,609
  Six years later              12,224    14,982   17,999   17,874    13,456
  Seven years later            12,121    14,872   17,903   17,554
  Eight years later            11,996    14,898   17,768
  Nine years later             11,981    14,990
  Ten years later              12,032

Cumulative
Redundancy (Deficiency):         $523    $1,254     $676     $375      $662    $1,063    $1,013   $2,790   $2,335     $273
</TABLE>


Regulation

          The Company is subject to a substantial  degree of regulation  that is
designed to protect the interests of insurance policyholders.  As a Rhode Island
property  and  casualty



                                       18
<PAGE>

insurance company,  OLRI is primarily subject to the regulatory oversight of the
Rhode Island Department of Business Regulation through its Insurance Division.

          The  National  Association  of  Insurance  Commissioners  ("NAIC") has
developed  risk-based  capital formulas to be applied to all domestic  insurance
companies.  These  formulas  calculate a minimum  required  statutory net worth,
based on the  underwriting,  investment  and other business risks inherent in an
insurance  company's  operations.  Any  insurance  company  that  does  not meet
threshold  risk-based  capital  levels  ultimately  will be subject to statutory
receivership  proceedings.  The statutory net worth of OLRI is adequate in light
of its current and  anticipated  future business and OLRI has met its risk-based
capital and surplus  requirements  at December 31, 2000. The authorized  control
level  risk-based  capital for OLRI, as of December 31, 2000 was  $6,447,548 and
OLRI exceeded that threshold by $27,439,701.

          As a Bermuda property and casualty insurance  company,  OLB is subject
to regulation of the regulatory  body of Bermuda.  Such  regulation  relates to,
among  other  things,   authorized  lines  of  business,   capital  and  surplus
requirements and general  standards of solvency,  the filing of annual and other
financial reports prepared on the basis of statutory accounting  practices,  the
filing and form of actuarial  reports,  the  establishment  and  maintenance  of
reserves  for  unearned  premiums,   losses  and  loss  expenses,   underwriting
limitations,  investment  parameters,  transactions  with  affiliates,  dividend
limitations,   changes  in  control  and  a  variety  of  other   financial  and
non-financial matters.

Employees

          As of December 31, 2000, the Company had 344 employees. The Company is
not unionized and believes that its employee relationships are satisfactory.

Item 2.  Properties

          The Company owns approximately 7,500 square feet of space in an office
condominium building in Warwick, Rhode Island, which is utilized by employees of
PBC and OLRI.  The Company  also  leases  space  located in New York,  New York,
Arcadia, California, Westport, Connecticut and Woodbury, New York. The Company's
total leased space at these locations net of sub-leases is approximately 126,000
square feet and is suitable for its current needs.




                                       19
<PAGE>


Item 3.  Legal Proceedings

          The  Company is a party to  lawsuits  arising in the normal  course of
business.  Virtually all pending lawsuits in which the Insurance Companies are a
party,  involve  claims  under  policies   underwritten  or  reinsured  by  such
Companies.  Management believes these lawsuits have been adequately provided for
in its  established  loss and loss expense  reserves and that the  resolution of
these  lawsuits  will  not  have a  material  adverse  effect  on the  Company's
financial condition or results of operations.

          The  Insurance  Brokerage  Companies  and CAC are  subject  to various
claims and lawsuits from both private and  governmental  parties,  which include
claims and lawsuits in the ordinary course of business.  The majority of pending
lawsuits involve insurance claims,  errors and omissions,  employment claims and
breaches of contract. The Company believes that the resolution of these lawsuits
will not have a material adverse effect on the Company's  financial condition or
results of operations.

          As licensed  brokers,  the  Insurance  Brokerage  Companies are or may
become  party  to  administrative  inquiries  and  at  times  to  administrative
proceedings commenced by state insurance regulatory bodies. Certain subsidiaries
were involved in an  administrative  investigation  commenced in 1992 by the New
York  Insurance  Department  ("Department")  relating to how property  insurance
policies were issued for the Residential Real Estate Program.  As a result,  the
manner in which policies are structured for certain clients in this Program were
altered,  which has not had a material adverse effect on this Program. While the
Company  had  discussions  with  the  Department  regarding  settlement  of such
investigation, this matter has not been pursued for several years. If the matter
is not closed or settled,  the Department  could  institute  formal  proceedings
against the subsidiaries  seeking fines or license  revocation.  Management does
not believe the resolution of this issue will have a material  adverse effect on
the Company.

Item 4.  Submission of Matters to a Vote of Security Holders

          No matters were submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year ended December 31, 2000.



                                       20
<PAGE>


                                     PART II

Item 5.           Market for Common Equity and Related Stockholder Matters

          In August 1993, in connection  with the  consummation  of the IPO, the
Company's Common Stock was listed on the NASDAQ National Market System under the
symbol  "OLHC".  On October 2, 1995, in connection  with the  combination of the
Retail Brokerage Business of Kaye with Holding, Holding changed its name to Kaye
Group Inc. and is now listed under the symbol "KAYE".  The following  table sets
forth the closing high and low prices for the Common Stock as reported on NASDAQ
for the indicated periods and the dividends paid per share during such periods.



                                           Price Range        Dividends
                                           -----------          Paid
                                        High       Low       Per Share
                                        ----       ---       ---------
2000:
First Quarter                         $11.875    $5.250    $ .025 cash
Second Quarter                          7.938     5.000    $ .025 cash
Third Quarter                          10.000     5.250    $ .025 cash
Fourth Quarter                          9.156     5.563    $ .025 cash

1999:
First Quarter                         $ 7.875    $7.125    $ .025 cash
Second Quarter                          8.375     6.750    $ .025 cash
Third Quarter                           9.438     7.000    $ .025 cash
Fourth Quarter                          9.000     7.250    $ .025 cash

          The  approximate  number of holders of record of the Company's  Common
Stock as of March 2, 2001 was 83.

          See  Item 7 -  "Management's  Discussion  and  Analysis  of  Financial
Condition and Results of  Operations - Dividends"  for a discussion of dividends
paid by the Company.


                                       21
<PAGE>


Item 6.  Selected Financial Data

The following  table should be read in conjunction  with, and is supplemented in
its entirety by, the  consolidated  financial  statements and the notes thereto.
The financial data herein has been derived from the audited financial statements
of the Company.


<TABLE>
<CAPTION>
                                                                                  As of and for the years ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                           2000        1999         1998         1997       1996
                                                                         --------    ---------     --------    --------    --------
                                                                             (in thousands, except per share data and ratios)
<S>                                                                      <C>         <C>           <C>         <C>         <C>
Statement of Income Data:

Operating revenues                                                       $ 73,021    $  64,231     $ 60,191    $ 55,309    $ 51,339
Net investment income                                                       4,573        4,529        4,735       4,312       3,576
Net realized gains (losses) on investments                                    804          (16)          85          21          72
                                                                         --------    ---------     --------    --------    --------

Total revenues                                                           $ 78,398    $  68,744     $ 65,011    $ 59,642    $ 54,987
                                                                         --------    ---------     --------    --------    --------


EBITA (1)                                                                $ 15,894    $  12,915     $ 11,725    $  9,010    $  6,764

Net income                                                               $  9,404    $   7,504     $  7,282    $  4,357    $  3,071

Earnings per share:
        Basic                                                            $   1.11    $    0.89     $   0.86    $   0.62    $   0.44
        Diluted                                                          $   1.09    $    0.87     $   0.85    $   0.62    $   0.44
-----------------------------------------------------------------------------------------------------------------------------------


        Weighted average of shares outstanding - basic                      8,470        8,460        8,474       7,024       7,020

        Weighted average of shares and
        share equivalents outstanding - diluted                             8,613        8,630        8,593       7,083       7,021

Balance Sheet  data:

Total assets                                                             $173,011    $ 149,212     $160,583    $133,210    $151,288
Long -term debt (2)                                                         1,048        2,911        4,672       5,810      12,787
Stockholders' equity                                                       56,042       47,251       41,769      35,168      24,984
Net book value  per share (3)                                                6.61         5.59         4.93        4.15        3.56
Cash dividends  per share                                                    0.10         0.10         0.10        0.10        0.10

GAAP operating data:

Loss ratio                                                                   40.2%        36.4%        34.4%       38.2%       36.4%
Expense ratio                                                                41.4%        41.8%        39.3%       41.0%       42.5%
Combined ratio                                                               81.6%        78.2%        73.7%       79.2%       78.9%


Statutory operating data (4):

Net underwriting gain                                                    $  6,854    $   6,603     $  6,925    $  5,890    $  4,455
Policyholders' surplus                                                     35,309       32,514       29,286      25,566      25,485

Loss ratio                                                                   37.5%        33.2%        33.1%       36.6%       34.1%
Expense ratio                                                                40.6%        40.6%        39.1%       38.6%       40.0%
Combined ratio                                                               78.1%        73.8%        72.2%       75.2%       74.1%
</TABLE>

(1)  Earnings before interest, taxes and intangible amortization.

(2)  Excludes that portion of long-term debt maturing in less than one year.

(3)  Based upon 8,481,481  shares  outstanding  at December 31, 2000,  8,458,295
     shares outstanding at December 31, 1999 and 8,474,435 shares outstanding at
     December 31, 1998 and 1997 and 7,020,000 outstanding at December 31, 1996.

(4)  Based upon  statutory  accounting  practices and derived from the statutory
     financial statements of the Insurance Companies, which excludes the effects
     of CAC.

(5)  Certain information prior to 1998 has been reclassified to conform with the
     1998 and forward year presentation.


                                       22


<PAGE>






Item 7.  Management's  Discussion  and Analysis of Financial  Condition and
         Results of Operations

General

          Kaye Group Inc. (the "Company"), a Delaware corporation,  is a holding
company  which,  through  its  subsidiaries,  is  engaged  in a broad  range  of
insurance brokerage,  underwriting and related activities.  The Company operates
in  two  insurance  business  segments  -  the  Insurance   Brokerage  Companies
Operations  comprised of the Retail Brokerage Business and the Program Brokerage
Business,  and the Property and Casualty  Companies  Operations  ("Property  and
Casualty  Companies"  or  "Insurance  Companies"),  comprised  of the  Insurance
Companies  and  Claims  Administration  Corporation  ("CAC")  (see Note 1 to the
consolidated financial statements of the Company).

Overview

          The Insurance  Brokerage  Companies  derive their revenue  principally
from  commissions  associated  with the  placement  of  insurance  coverage  for
corporate clients.  These commissions are paid by the insurance carriers and are
usually a fixed percentage of the total premiums.  Certain of these  commissions
are  contingent  upon the  level of  volume  and  profitability  of the  related
coverage to the insurance companies.  There is normally a lag between receipt of
funds from the insured and payment to the insurance company. Investment of these
funds over this  period  generates  additional  revenue in the form of  interest
income.

          The Insurance  Companies  underwrite  property and casualty  risks for
insureds  in  the  United  States,   principally   through  specially   designed
alternative  distribution  programs,  covering  various types of businesses  and
properties,  which have similar risk  characteristics.  The Insurance  Companies
generally  underwrite  the  first  layer of  insurance  under the  programs  and
unaffiliated  program insurers provide coverage for losses above the first layer
of risk. Substantially all of the Insurance Companies' revenues are derived from
premiums  on  this  business,  plus  the  investment  income  generated  by  the
investment portfolio of the Insurance Companies.

          Corporate Operations include those activities that benefit the Company
and,  for the most part,  the related  expenses are  allocated to the  Insurance
Brokerage  Companies or the Property and  Casualty  Companies.  Certain  holding
company expenses are not allocated and include debt servicing and public company
expenses,  including investor relations costs. In addition, Corporate Operations
include an investment in Arista Investors Corp. ("Arista").

          The Company has foreign operations in Bermuda.  For further discussion
see Note 19 to the consolidated financial statements of the Company.


Results of Operations

Year ended December 31, 2000
compared with the year ended December 31, 1999


                                       23
<PAGE>

Net Income

          Net  Income  for  the  year  ended  December  31,  2000  increased  by
$1,900,000  (25%) to $9,404,000 or basic earnings per share of $1.11 compared to
$7,504,000 or $0.89 for the same period last year, as explained below.


Insurance Brokerage Companies

          Income before income taxes increased by $1,913,000 (82%) to $4,235,000
in 2000 from $2,322,000 in 1999, primarily due to higher revenues,  as discussed
below.

          Total revenues in 2000 were  $43,405,000  compared with $38,753,000 in
1999, an increase of $4,652,000 (12%). Gross commissions and fees were higher by
$6,493,000 (14%) primarily as a result of new business  exceeding lost business,
price  increases on certain  lines of business and  adjustments  on prior period
renewals  which are  recorded  when they  occur.  The  commission  expense  rate
(defined as  commissions  incurred to  independent  producers as a percentage of
gross  commissions and fees) to produce new and renewal business  increased from
20%  to 21%  which  resulted  in a  decrease  in net  commissions  and  fees  of
approximately  $494,000.  Investment  income decreased by $35,000 (3%) primarily
due to a non-recurring investment gain in 1999.

          Compensation and benefits  increased by $1,330,000 (6%) to $23,676,000
in 2000 compared to  $22,346,000  in 1999. The increase was mainly the result of
increased annual incentive based compensation and increased internal  commission
expense  partially offset by compensation  reductions due to lower headcount and
an increase in  inter-company  management  fees  allocated  to the  Property and
Casualty Companies.

          Amortization  of intangibles  increased  $66,000 (6%) to $1,161,000 in
2000  compared  with  $1,095,000  in 1999 due to the SRW  acquisition  partially
offset by a reduction in certain intangibles acquired in 1998.

          Other operating  expenses increased by $1,248,000 (10%) to $13,463,000
from  $12,215,000.  The  increase  was mainly due to  increased  consulting  and
advertising expenses.

          Interest  expense  increased by $95,000 (12%) to $870,000 in 2000 from
$775,000  in 1999 as a result  of the  1999 SRW  acquisition  which  includes  a
related note payable to the Property and Casualty  Companies and higher interest
rates partially offset by lower balances on other acquisitions.


                                       24
<PAGE>

Property and Casualty Companies

          Income   before  income  taxes   increased  by  $1,175,000   (13%)  to
$10,001,000 in 2000 from $8,826,000 in 1999. The increase was due to an increase
in net premiums earned,  investment income, and service fee income, offset by an
increase in the loss ratio, as discussed below.

          Net premiums  earned  increased by $3,706,000  (14%) to $30,486,000 in
2000  from  $26,780,000  in 1999.  The  increase  was due to the  growth  in the
Brokerage segment's managed programs which are insured on a direct basis and via
facultative reinsurance assumed.

          Net investment income increased by $178,000 (6%) to $3,127,000 in 2000
from $2,949,000 in 1999. The increase was due to an increase in investments.

          Net  realized  gains  on   investments   of  $804,000   resulted  from
re-balancing  equity  investments to include mutual funds.  In addition,  mutual
fund capital gain distributions were received.

          Other  income  increased  by  $397,000  as a result  of  non-recurring
service fee income.

          The loss ratio  (losses  and loss  expenses  incurred  expressed  as a
percentage of premiums  earned)  increased to 40% in 2000 from 36% in 1999.  The
increase was due to the growth in reinsurance liability business which generally
experiences a higher loss frequency, and is reserved for accordingly,  offset by
favorable property loss developments.

             The acquisition costs and general and administrative expenses ratio
decreased to 41% in 2000 from 42% in 1999. The decrease was due to a decrease in
general and administrative expenses.


Corporate

          Net  expenses  before  income  taxes  increased  by $188,000  (45%) to
$607,000 in 2000 from $419,000 in 1999 due to increased consulting fees.


Provision for Income Taxes

          The  provision for income taxes for 2000 and 1999 was  $4,225,000  and
$3,225,000,  respectively, resulting in an effective tax rate of 31% and 30% for
2000 and 1999,  respectively.  The difference between the statutory rate and the
effective rate was primarily related to tax exempt interest income.


                                       25
<PAGE>

Year ended December 31, 1999
compared with the year ended December 31, 1998

Net Income

          Net Income for the year ended  December 31, 1999 increased by $222,000
(3%) to $7,504,000 or basic  earnings per share of $0.89  compared to $7,282,000
or $0.86 for the same period  last year as  explained  below.  During the fourth
quarter of 1999 the Company  updated the  assumptions  used to allocate  certain
human  resource  and  other  operating  costs  to its  insurance  brokerage  and
underwriting   units.  These  costs  are  corporate   administrative   expenses,
attributable to all of the Company's operations, but not previously allocated to
all  revenue-generating  business  segments.  The effect of this revision was to
move approximately $1,300,000 of expenses from the Insurance Brokerage Companies
to the  Property  and  Casualty  Companies,  but had no effect on the  Company's
consolidated results.

Insurance Brokerage Companies

          Income before income taxes  increased by $617,000  (36%) to $2,322,000
in 1999 from  $1,705,000 in 1998. The increased  operating  result was primarily
due to a reduction  of  expenses  as a result of an  increase  in  inter-company
management fees allocated to the Property and Casualty  Companies,  as discussed
above.

          Total revenues in 1999 were  $38,753,000  compared with $37,202,000 in
1998,  an  increase  of  $1,551,000  (4%).  Gross  commissions  and fees grew by
$3,325,000  (8%) as a result of new business  and  acquisitions  exceeding  lost
business.  The SRW  acquisition  generated  $3,653,000 of gross revenues  during
1999.  Included in lost  business  were  revenues  that had been  derived from a
certain  New York City - based  entities'  medical  malpractice  coverage.  This
portfolio  of  business   represented  the  majority  of  the  Retail  Brokerage
Operations revenues in this concentration of coverage placement.  The commission
expense rate  (defined as  commissions  incurred to  independent  producers as a
percentage of gross  commissions  and fees) to produce new and renewal  business
increased  from 18% to 20% which resulted in a decrease in net  commissions  and
fees of approximately  $860,000.  Investment  income decreased by $472,000 (26%)
primarily  due to lower  fiduciary  investments  as a  result  of  certain  lost
business.

          Salaries and benefits  increased by $1,023,000  (5%) to $22,346,000 in
1999  compared  to   $21,323,000  in  1998.  The  increase  was  the  result  of
acquisitions and salary  increments  offset  partially by headcount  reductions,
reduced incentive compensation and an increase in inter-company  management fees
allocated to the Property and Casualty Companies discussed previously.



                                       26
<PAGE>

         Amortization of intangibles increased $416,000 (61%) to $1,095,000 in
1999 compared with $679,000 in 1998 due to amortization of acquisition related
intangibles on 1998 and 1999 acquisitions.

          Other operating  expenses  decreased by $1,231,000 (9%) to $12,215,000
in  1999  compared  with  $13,446,000  in  1998  mainly  due to an  increase  in
inter-company  management fees allocated to the Property and Casualty  Companies
(discussed previously) as well as reduced insurance costs.

          Interest  expense  increased  by  $726,000  as a  result  of  the  SRW
acquisition,  which includes a related note payable to the Property and Casualty
Companies.

Property and Casualty Companies

          Income before income taxes decreased by $811,000 (8%) to $8,826,000 in
1999  from  $9,637,000  in 1998.  The  decrease  was due to an  increase  in the
combined ratio due to an increase in  inter-company  management  fees (discussed
previously) offset by an increase in net premiums earned.

          Net  premiums   earned  for  1999  increased  by  $2,091,000  (8%)  to
$26,780,000  from  $24,689,000  in 1998.  The  Company's  efforts to develop new
alternative  distribution  programs  and  broaden  the  distribution  network of
existing  programs and coverage  types has  contributed to the growth of premium
volume.

          Net investment  income increased by $29,000 (1%) to $2,949,000 in 1999
from $2,920,000 in 1998. The increase was due to an increase in investments.

          Net realized  loss was $16,000 in 1999  compared to a realized gain of
$85,000 in 1998. The realization of investment gains and losses is determined by
market conditions and management's  decision regarding the holding period of the
portfolio.

          The loss ratio  (losses  and loss  expenses  incurred  expressed  as a
percentage of premiums earned) was 36% and 34% for 1999 and 1998,  respectively.
Exclusive  of the  inter-company  management  fee  increase  in  1999  discussed
previously,  the loss  ratio  would  have  been  35% and 34% for 1999 and  1998,
respectively.  This increase was due to the change in the mix of business toward
assumed  general  liability,  which  traditionally  experiences  a  higher  loss
frequency.

          The acquisition  costs and general and  administrative  expenses ratio
was 42% and 39%  for  1999  and  1998,  respectively.  Exclusive  of a bad  debt
recovered  in 1998,  the  ratio  would  have been 42% and 40% for 1999 and 1998,
respectively.  Exclusive of the  inter-company  management  fee increase in 1999
discussed previously, the expense ratio would have been 40% for 1999 and 1998.


                                       27
<PAGE>

Corporate

          Net expenses  before income taxes  decreased in 1999 by $369,000 (47%)
to $419,000  from  $788,000 in 1998.  The  segment's  sole  investment in Arista
Investors Corp. was reduced due to an initial liquidating distribution. Arista's
management has indicated its intention to sell its remaining  asset, its license
to operate,  and its stock.  This initial  liquidating  distribution,  partially
offset by the corresponding  reduction in fair market value of Arista stock, was
accounted  for in net  investment  income  and is the  primary  reason  for  the
positive  variance  along  with  lower  interest  expense  due to the June  1998
restructuring of corporate debt.

Provision for Income Taxes

          The  provision for income taxes for 1999 and 1998 was  $3,225,000  and
$3,272,000,  respectively.  The 1999 provision reflects an adjustment to reflect
the tax on the Company's  income tax returns  resulting in an effective tax rate
of 30% and 31% for 1999 and  1998,  respectively.  The  difference  between  the
statutory  rate and the  effective  rate was  primarily  related  to tax  exempt
interest income.


Financial Condition and Liquidity

          Management believes that the Company's operating cash flow, along with
its cash and cash equivalents will provide  sufficient  sources of liquidity and
capital to meet the  Company's  anticipated  needs during the next twelve months
and the  foreseeable  future.  The Company has no capital  commitments  that are
material individually or in the aggregate.

          Total  assets  increased  by  $23,799,000  (16%)  to  $173,011,000  at
December 31, 2000 from  $149,212,000  at December 31,  1999.  Total  liabilities
increased  by  $15,008,000  (15%) to  $116,969,000  at  December  31,  2000 from
$101,961,000  at December  31,  1999.  These  increases  were  primarily  due to
increases in  brokerage  segment  fiduciary  assets and  liabilities  (insurance
premiums) and general growth in operations.

          Stockholders'  equity  increased by $8,791,000 (19%) to $56,042,000 at
December 31, 2000, from $47,251,000 at December 31, 1999. The increase in equity
resulted  from  net  income  of  $9,404,000,   an  increase  in  net  unrealized
appreciation  of investments of $21,000,  $192,000 for net issuances of treasury
stock,  and $19,000 related to amortization of unearned  compensation  under the
Company's Stock Performance Plan, offset by dividends paid of $845,000.

          The  Company   maintains  a   substantial   level  of  cash  and  cash
equivalents, which are used to meet anticipated payment obligations. At December
31, 2000 and 1999, the Company had cash and cash  equivalents of $39,513,000 and
$43,238,000,  respectively,  of which  $25,374,000  and  $25,610,000  represents
premiums  collected  and held in a



                                       28
<PAGE>

fiduciary  capacity which are generally not available for operating needs of the
Company. Of the Company's total invested assets, fixed maturities, cash and cash
equivalents  carried  at  market  value of  $27,328,000  and  $22,270,000  as of
December 31, 2000 and 1999,  respectively,  are pledged or deposited  into trust
funds to collateralize the Company's obligations under reinsurance agreements.

          As  presented  in the  Consolidated  Statements  of  Cash  Flows,  the
Company's cash and cash  equivalents  decreased by $3,725,000 for the year ended
December 31, 2000. Operating activities provided cash of $11,423,000.  Investing
activities  used cash of  $12,840,000  for the net purchase of  investments  and
fixed  assets,  and  acquisition  payments.  Financing  activities  used cash of
$2,308,000 for payments of dividends and loan repayments.

          During  1998,  the  Company  paid  off its  revolving  credit  line of
$6,094,000 early, and replaced it with a term loan of $5,000,000, at an interest
rate  reduction of  approximately  50 basis  points,  thereby  reducing  debt by
$1,094,000.  As of December 31, 2000 and 1999,  $2,071,000  and  $3,311,000  was
outstanding  on the  Term  Loan.  In  addition,  the  Company  has  available  a
$4,500,000  revolving line of credit with a bank. Both lines are  collateralized
by the stock of the Property and Casualty Companies.  The proceeds are available
for general operating needs and acquisitions.  As of December 31, 2000 and 1999,
no amount was outstanding on the revolving line of credit.

          The Company has calculated  risk-based  capital and the result is that
the   statutory  net  worth  of  OLRI  is  adequate  in  light  of  the  current
requirements.

          The Company is subject to a substantial degree of regulation, which is
designed to protect the interests of insurance policyholders.  As a Rhode Island
property  and  casualty  insurance  company,  OLRI is  primarily  subject to the
regulatory  oversight  of the Rhode  Island  Department  of Business  Regulation
through its Insurance Division.

          The  Company's  primary  source  of cash  is  derived  from  insurance
premiums (fiduciary assets),  insurance brokerage commissions and fees, proceeds
from the sale of investments,  and investment  income.  The Company's  principal
uses of  cash  are  payments  of  insurance  premiums  (fiduciary  liabilities),
commissions  to brokers who produce the  business,  losses and loss expenses and
operating expenses, and purchases of investments, acquisitions and fixed assets.

          The Company has sought to minimize its investment risk by investing in
a mix of cash  equivalents;  high  quality  tax  exempt  municipal  bonds;  U.S.
Government  and  government  agency  securities  and corporate  bonds rated A or
better by an accredited  rating agency with an average duration of approximately
four years; and equity securities.  During the first quarter of 2001, the equity
portfolio was liquidated and U.S. Treasury Bonds were purchased. A realized loss
of approximately $200,000 resulted.

                                       29
<PAGE>

          The table below sets forth the composition of the Company's  portfolio
of fixed maturity investments by rating as of December 31, 2000 (in thousands):


                                        Market Value as   Percentage of
                            Amortized    Reflected on      Total at Market
    Rating (a)                Cost       Balance Sheet       Value
    ---------                 ----       -------------       -----
      AAA(b)                 $29,874        $29,898           69.2%
        AA+                    1,006          1,003            2.3%
        AA                     6,427          6,531           15.1%
        AA-                    2,800          2,775            6.4%
         A+                    1,778          1,762            4.1%
         A                     1,272          1,263            2.9%
                             -------        -------          ------
                             $43,157        $43,232          100.0%
                             =======        =======          ======



(a)       Ratings are assigned  primarily by Standard & Poor's  Corporation with
          the remaining ratings assigned by Moody's Investors Services, Inc. and
          converted to the equivalent Standard & Poor's ratings.
(b)       Includes U.S. Government Obligations.

          The amortized cost and estimated  market value of fixed  maturities at
December 31, 2000, by  contractual  maturity  date,  are listed below.  Expected
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without penalties.

                                              Investments Available
                                                    for Sale
                                           --------------------------
                                        Amortized Cost      Aggregate Fair Value
                                      ------------------   ---------------------

Due in one year or less                      $ 3,030                 $3,035
Due after one year through five years         19,497                 19,683
Due after five years through ten years        18,898                 18,790
Due after ten years                            1,732                  1,724
                                             -------                 ------
Total                                        $43,157                $43,232
                                             =======                =======


          Investment  results of the  Company for each of the three years in the
period ended December 31, 2000 are shown in the following table (in thousands):


                                       30
<PAGE>

                                                   As of and for the
                                                 years ended December 31,
                                          -------------------------------------
                                                2000        1999          1998
                                                ----        ----          ----
Average cash and cash equivalents
         and invested assets (1)              $90,608     $ 91,097      $85,191

Investment income                             $ 4,573     $  4,529      $ 4,735

Average yield on total investments               5.1%         5.0%         5.6%

Net realized investment gain (loss)           $   804     ($    16)     $    85

(1)       Based  upon  the  average  of the  beginning  and  end  of the  period
          amortized cost for fixed maturities and cost for equity securities.

          The  Company's  insurance  subsidiaries  require  capital  to  support
premium  writing.  The  guidelines set forth by the NAIC for OLRI suggest that a
property and casualty  insurer's ratio of annual  statutory net premiums written
to policyholders'  surplus should not exceed 3 to 1. At December 31, 2000, OLRI,
with a statutory  surplus of  $33,887,000,  had a ratio of annual  statutory net
premiums written to its statutory surplus of .84 to 1.

Quantitative and Qualitative Disclosures about Market Risk

          As part of its  ongoing  business,  the  Company is exposed to certain
market  risks of  potential  losses  from  adverse  changes in market  rates and
prices.  The  Company's  primary  market risk  exposure is interest rate risk in
regard to fixed rate domestic  instruments and outstanding  debt. The Company is
exposed  to the  changes  in the  prices of equity  securities.  A  hypothetical
decrease of 10% in the market prices of the equity  securities  held at December
31, 2000 and 1999 would have  resulted in a decrease of $853,000  and  $474,000,
respectively,  in the fair value of the equity securities portfolio. The Company
has no derivative  instruments.  The Company's financial  instruments consist of
corporate and municipal bonds,  equity securities,  and U.S. Treasury securities
that are classified as available for sale.

          The Company generally selects  investment assets with  characteristics
such as duration,  yield,  currency,  and  liquidity  to reflect the  underlying
characteristics  of related  insurance and  reinsurance  contracts.  The Company
selects medium term fixed rate  investments to support general  liability claims
and shorter investments to support property claims.

          The  following  table  summarizes   information  about  the  Company's
financial  instruments  that are  sensitive  to changes in  interest  rate as of
December 31,  2000.  The table  presents  principal  and interest  cash flow and
related weighted  average  interest rates by expected  maturity dates for assets
and liabilities. The Company has presumed the call date as the expected maturity
date for those asset instruments with call features.  Weighted average rates are
calculated  using the sum of  expected  investment  income or  interest  expense
divided  by the sum of the  amortized  cost of assets or the sum of the  average
debt  outstanding at each respective  period.  For variable rate debt,  expected
interest  cash flow



                                       31
<PAGE>

is calculated using the December 31, 2000 weighted average interest rate without
any adjustments for projected fluctuations in prime rate.

<TABLE>
<CAPTION>


                                                                EXPECTED CASH FLOW
                                                                  (in thousands)
                                    ---------------------------------------------------------------------------

                                  Fair      Total                                                          There-
Assets                           Value      Value      2001        2002       2003       2004     2005     after
------                           -----      -----      ----        ----       ----       ----     ----     -----

<S>                              <C>       <C>        <C>          <C>        <C>        <C>      <C>
U.S. Treasury Notes;
Interest rates ranging from
4.63% to 7.25%                   $3,834    $4,663     $1,358       $816       $513       $979     $997

Weighted average interest rate                5.7%       5.5%       6.3%       5.7%       5.0%     6.6%

Municipal Bonds with call
features;  Interest rates
ranging from 5.4% to 12.6%        7,155     8,651        725      1,287      2,988        782      567     $2,302

Weighted average interest rate                6.3%       6.2%       6.2%       6.3%       6.3%     6.5%       6.3%

Municipal Bonds without call
features;  Interest rates
ranging from 3.8% to 10.9%       28,672    38,718      2,731      4,374      3,555      5,359    1,965     20,734

Weighted average interest rate                6.5%       6.9%       6.9%       5.5%       7.1%     6.3%       6.3%

Corporate Bonds; Interest
rates ranging from 5.4% to 7.5%   3,571     4,254        974        710        362      1,890      318

Weighted average interest rate                5.9%       6.3%       5.7%       6.8%       4.5%     6.3%


Total Fixed Rate Instruments    $43,232   $56,286     $5,788     $7,187     $7,418     $9,010   $3,847    $23,036

Weighted average interest rate                6.3%       6.2%       6.3%       6.2%       6.2%     6.4%       6.3%

</TABLE>



                                       32
<PAGE>
<TABLE>
<CAPTION>

                                                           EXPECTED CASH FLOW
                                                             (in thousands)
                                    -----------------------------------------------------------------

                                 Fair      Total                                                         There-
Liabilities                     Value      Value       2001        2002       2003      2004     2005    after
-----------                     -----      -----       ----        ----       ----      ----     ----    -----

<S>     <C>                     <C>        <C>        <C>          <C>
Debt - Fixed Rate Interest
rate of 7.8%                    $2,256     $2,412     $1,623       $789

Weighted average interest                     8.2%       8.8%       6.0%
rate

Debt - Variable Rate
Interest rate at prime             656        698        411        287

Weighted average interest                     6.9%       7.7%       4.3%
rate

Total Debt                      $2,912     $3,110     $2,034     $1,076

Weighted average interest                     7.9%       8.5%       5.5%
rate

</TABLE>

Dividends

          On  December  20,  2000 the Board of  Directors  declared a  quarterly
dividend of $.025 per share,  payable January 19, 2001 to stockholders of record
on December 29, 2000.  The Company is largely  dependent upon dividends from the
Insurance  Companies  to  pay  dividends  to  the  stockholders.  The  Company's
Insurance  Companies are subject to  regulations  that restrict their ability to
pay dividends.

          Under Rhode Island  Insurance  Law, OLRI may pay cash  dividends  only
from earned surplus determined on a statutory basis,  subject to the maintenance
of minimum  capital and surplus of $3,000,000.  Further,  OLRI is restricted (on
the basis of the  lesser of 10% of OLRI's  statutory  surplus  at the end of the
preceding  twelve-month period or 100% of OLRI's net income,  excluding realized
capital  gains,  for the  preceding  twelve-month  period)  as to the  amount of
dividends  it  may  declare  or pay in any  twelve-month  period  without  prior
approval of the  Department  of Business  Regulation  of Rhode  Island.  Without
special  permission,   at  December  31,  2000,  $3,388,700  was  available  for
distribution.

          OLB is required to  maintain a minimum  statutory  capital and surplus
based upon the higher of $1,000,000 or an amount  derived by applying a variable
rate to its current  premium volume or outstanding  losses at December 31, 2000.
At December 31, 2000,  $422,000 was available for distribution  from OLB and its
subsidiary, Park Brokerage Ltd.

          The continued payment and the amount of any cash dividends will depend
upon, among other factors,  the Company's  operating results,  overall financial
condition, capital requirements and general business conditions.

Newly Adopted Accounting Standards

          In December  1999,  the  Securities  and Exchange  Commission  ("SEC")
issued Staff  Accounting  Bulletin  ("SAB") No. 101 which provides  guidance for
applying  generally  accepted  accounting  principles  relating to the timing of
revenue  recognition in financial  statements filed with the SEC. The Company is
recognizing revenue in accordance with SAB No. 101.

                                       33
<PAGE>

Accounting Standards Not Yet Adopted

          In  June  1998,  the  Financial   Accounting  Standards  Board  issued
Statement  of Financial  Accounting  Standards  ("SFAS")  No. 133 (as  amended),
Accounting for Derivative  Instruments  and Hedging  Activities.  This statement
requires all derivatives to be recognized as either assets or liabilities in the
statement of financial position and to be measured at fair value. This statement
is effective for all fiscal  quarters and fiscal years  beginning after December
31,  2000.  The  statement  is not  expected  to have a  material  impact on the
financial position of the Company.

Year 2000 Compliance

          The Year 2000 issue arose from computer  programs  being written using
two digits rather than four digits to define the applicable  year,  resulting in
the perception  that there would be failures in information  technology  systems
and other equipment containing imbedded technology in the year 2000.

          A  comprehensive  review was performed by the Company of the insurance
policies written by its Insurance Companies and their underwriting guidelines to
determine Year 2000 exposure.  The Insurance Companies primarily issued policies
covering  all or  part  of an  insured's  self-insured  retention,  with  limits
generally  up to $25,000  that follow the form of the  policies  for coverage in
excess of the Insurance  Companies'  policies.  The Insurance  Companies did not
issue Year 2000 related  exclusions on these policies.  The Insurance  Companies
also issued a number of policies with greater limits of coverage, and included a
Year 2000  exclusion  on such  policies.  The  Company  is aware  that Year 2000
liabilities  may be deemed not to be  fortuitous in nature and,  therefore,  not
covered under the policies  underwritten by the Insurance  Companies.  Moreover,
based upon the classes of  insurance  primarily  underwritten  by the  Insurance
Companies,  the Company believes that its coverage exposure with respect to Year
2000 losses will not be  material.  However,  changes in social and legal trends
may establish  coverage  unintended for Year 2000  exposures by  re-interpreting
insurance contracts and exclusions.  As of December 31, 2000, the Company is not
aware of any Year 2000 exposures.


Subsequent Event

          On January 20,  2001,  the  Company  reported  that Hub  International
Limited  ("Hub") had entered into a definitive  agreement to acquire the Company
through a merger transaction.

          Upon the merger,  each  holder of the  Company's  shares will  receive
$14.00 per share  consisting  of cash of $9.33 and $4.67  principal  amount of 5
year 8.50% subordinate



                                       34
<PAGE>

convertible   debentures  of  Hub.  Hub  has  the  right  to  amend  the  merger
consideration  by replacing  any or all of the  convertible  debentures  with an
equal amount of cash.

          Completion  of this  transaction,  anticipated  to occur in the second
quarter of 2001, is subject to the receipt of satisfactory applicable regulatory
approvals, approval of the merger by the shareholders of the Company, compliance
with  applicable   legal  and  regulatory   requirements  and  standard  closing
conditions. The holders of approximately 55% of the shares of the Company, under
individual  agreements,  have  agreed to vote in favor of the  merger,  and have
granted Hub an irrevocable option to purchase their shares of the Company in the
event that the merger is not completed.

          Immediately  prior to the transaction  all  outstanding  stock options
shall  become  vested,  and in return  for their  cancellation,  the  holders of
options will receive a cash payment;  and in return for the  cancellation of all
outstanding  and awarded  Performance  Stock Shares,  the holders will receive a
cash payment at a later date. On completion of the transaction, the Company will
record an expense of approximately $2,400,000 related to the cancellation of the
awarded shares of the Stock Performance Plan.

          In addition,  as a result of the  transaction,  the Company will incur
related expenses of approximately $2.5 million during the period January 1, 2001
through completion of the transaction.

Safe Harbor Disclosure

          The Private Securities  Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking  statements. This SEC Form 10-K or any other written
or  oral   statements   made  by  or  on  behalf  of  the  Company  may  include
forward-looking  statements,  which  reflect the  Company's  current  views with
respect  to future  events  and  financial  performance.  These  forward-looking
statements  are subject to certain  uncertainties  and other  factors that could
cause  actual  results  to  differ   materially  from  such  statements.   These
uncertainties and other factors (which are described in more detail elsewhere in
documents  filed by the Company with the  Securities  and  Exchange  Commission)
include,  but are not limited  to,  uncertainties  relating to general  economic
conditions  and  cyclical  industry   conditions,   uncertainties   relating  to
government  and regulatory  policies,  volatile and  unpredictable  developments
(including storms and catastrophes), the legal environment, the uncertainties of
the  reserving  process  and the  competitive  environment  in which the Company
operates. The words "believe",  "expect",  "anticipate",  "project", "plan", and
similar expressions,  identify forward-looking statements. Readers are cautioned
not to place undue  reliance on these  forward-looking  statements,  which speak
only as of their dates. The Company  undertakes no obligation to publicly update
or  revise  any  forward-looking   statements,   whether  as  a  result  of  new
information, future events or otherwise.


                                       35
<PAGE>


Item 8.   Financial Statements and Supplementary Data

                  See page F-1.


Item 9.   Changes in and  Disagreements  with  Accountants  on Accounting and
          Financial Disclosure

                  None.


                                    PART III


Item 10. Directors, Executive Officers, Promoters and Control Persons

(a)  Identification.  Pursuant  to the  bylaws  of the  Company,  the  Board  of
Directors  has  determined  that the number of Directors  constituting  the full
Board of Directors is nine.  Each  Director was elected to hold office until the
next  Annual  Meeting  of  Stockholders  or until his  successor  is chosen  and
qualified. Messrs. Guthart, Sherwood, Ezekiel and Butler became Directors of the
Company in 1993.  Mr.  Barbanell  became a Director  in 1995.  Mr. Kaye became a
Director in 1996. Messrs.  Sabanos and Cooperstone became Directors in 1997. Mr.
Greenfield  was a Director  from 1993 through  December  31, 1997,  and then was
appointed  by the Board to serve as a director  on October  10,  2000,  when the
Board  increased  the  number  of  directors  (from  eight to nine) at a Special
Meeting of the Board of Directors.

Listed below are the name, age (as of April 1, 2001), positions and offices with
the  registrant,  period  he  has  served  as  a  director,  principal  business
experience during the last five years, and other  information  regarding each of
the directors, executive officers, promoters and control persons.


Directors

          Bruce D.  Guthart,  C.P.C.U.,  is 45 years  old.  Mr.  Guthart  is the
Chairman,  President and Chief Executive Officer ("CEO") of the Company.  He has
held the position of President of the Company since its  formation  1993. He was
appointed  CEO in 1996 and  Chairman  in 1997.  Mr.  Guthart is an  officer  and
director and  stockholder of Kaye KINV,  Inc., the managing  general  partner of
Kaye  Investments  L.P. Mr. Guthart is also a director and,  except where noted,
Chairman,  CEO and President of the following



                                       36
<PAGE>

subsidiaries of the Company:  Old Lyme Insurance  Company of Rhode Island,  Inc.
(since November 1999, Chairman and CEO only), Claims Administration  Corporation
(since  November 1999,  Chairman and CEO only),  Program  Brokerage  Corporation
(since November 1999,  Chairman and CEO only), Old Lyme Insurance Company,  Ltd.
(director  only),   Park  Brokerage,   Ltd.   (director  only),  Kaye  Insurance
Associates,  Inc. (director,  CEO and President only),  Kaye-Western Insurance &
Risk  Services,  Inc.  (director,   CEO  and  President  only),  Kaye  Insurance
Associates,  Inc.  - New  England  (director,  CEO  and  President  only),  Kaye
Administrators  Corporation  (director,  CEO and President only),  Kaye Services
Corp.

          Lawrence  Greenfield is 64 years old. Mr.  Greenfield is a director of
Old Lyme Insurance Company, Ltd. and Park Brokerage,  Ltd. and a director,  Vice
President and  Secretary of Walter Kaye  Associates,  Inc. a general  partner of
Kaye Investments L.P.

          Howard Kaye is 55 years old.  Mr.  Kaye is Chairman of Kaye  Insurance
Associates,  Inc. and previously served as Chairman of the Company.  Mr. Kaye is
an officer,  director and stockholder of Walter Kaye  Associates,  Inc. and Kaye
KINV,  Inc.,  general  partners  of Kaye  Investments  L.P.  Mr.  Kaye is also a
director  and  Chairman  of the  following  subsidiaries  of the  Company:  Kaye
Insurance Associates,  Inc., Kaye-Western Insurance & Risk Services,  Inc., Kaye
Insurance Associates, Inc. - New England, Kaye Administrators Corporation.

          Michael P. Sabanos,  C.P.A.,  is 44 years old. Mr. Sabanos,  the Chief
Financial Officer ("CFO") of the Company, was appointed Executive Vice President
of the Company in  November  1999.  He had served as the Senior  Vice  President
since joining the Company in 1996. Prior to joining the Company, Mr. Sabanos was
Executive  Vice  President  and  Chief   Financial   Officer  of   Kalvin-Miller
International,  Inc.  from 1993 to 1996.  Mr.  Sabanos is also a  director  and,
except where noted,  Executive Vice President (previously Senior Vice President)
and CFO of the following subsidiaries of the Company: Old Lyme Insurance Company
of Rhode Island,  Inc.,  Claims  Administration  Corporation,  Program Brokerage
Corporation,  Old Lyme Insurance Company,  Ltd. (director only), Park Brokerage,
Ltd.   (director  only),  Kaye  Insurance   Associates,   Inc.,  Kaye  Insurance
Associates,  Inc. - New England, Kaye Administrators  Corporation,  Kaye-Western
Insurance & Risk Services, Inc., Kaye Services Corp.

          Robert L.  Barbanell  is 70 years old. He has served as  President  of
Robert L. Barbanell  Associates,  Inc., a financial  consultancy firm since July
1994. He is a director of Cantel  Industries,  Inc., Marine Drilling  Companies,
Inc. and Blue Dolphin Energy Company.

          Richard B. Butler is 47 years old. Mr. Butler is the President and CEO
of Strategic Capital Advisors,  LLC, a financial services  consulting firm. From
1992  to 1999  Mr.  Butler  was  Managing  Director  and  Head of the  Financial
Institutions  Group at ING



                                       37
<PAGE>

Barings,  a global investment banking firm. From 1995 to 1999, he also served as
President and CEO of ING (U.S.) Capital Securities, a wholly owned subsidiary of
ING Barings.

          Elliot S.  Cooperstone  is 39 years old. He is the Vice  President and
General Manager of the employee  administration unit of Intuit Inc.  Previously,
Mr.  Cooperstone  was CEO and  co-founder of  EmployeeMatters,  Inc.,  which was
acquired by Intuit in 1999. Mr.  Cooperstone  served as Executive Vice President
and Chief  Administrative  Officer of Alexander  and  Alexander  Services,  Inc.
("A&A"),  one of the world's  largest risk  management  and insurance  brokerage
organizations,  from  1994-1997,  before its  acquisition by Aon  corporation in
1997. Mr. Cooperstone was also President and CEO of A&A's U.S. operation.

          David Ezekiel is 52 years old. He has, since 1981,  been the President
and Managing  Director of International  Advisory  Services,  Ltd.  ("IAS"),  an
insurance  management  company in Bermuda  which is a subsidiary  of Mutual Risk
Management,  Ltd. IAS manages Old Lyme Insurance Company,  Ltd., a subsidiary of
the Company, under contract as one of 110 insurance companies that IAS manages.

          Ned L.  Sherwood  is 51 years old.  He owns and  controls  the general
partner of ZS Fund, L.P. Mr. Sherwood has served as President of N.L. Sherwood &
Co.,  Inc.,  a private  investment  firm,  since  September  1985.  He is also a
director of Mazel  Stores.  Mr.  Sherwood is an officer and director of ZS Kaye,
Inc., a limited  partner of Kaye  Investments  L.P.;  and a member of ZS Pubco I
L.L.C., the general partner of ZS Pubco I. L.P.

Other Executive Officers

          Marc I.  Cohen is 34 years  old.  He has  served as the  President  of
Program  Brokerage  Corporation and Old Lyme Insurance  Company of Rhode Island,
Inc.  since  November 1, 1999.  From 1996 through 1999, he served as Senior Vice
President of those companies.

          Robert  N.  Munao  is 46 years  old.  He has  served  as  Senior  Vice
President of Kaye Insurance  Associates,  Inc. since November 1, 1999. From 1990
through 1999 he served as President of KM Consulting, Inc.


(b)  Family relationships. None.

(c)  Involvement in certain legal proceedings. None.

(d)  Promoters and control persons. Not applicable.


                                       38
<PAGE>

Item 11.  Executive Compensation


Summary Compensation Table

          The following Summary Compensation Table discloses for the fiscal year
indicated  individual  compensation  information on Mr.  Guthart,  the Company's
Chief Executive Officer,  and the four other most highly  compensated  executive
officers (collectively, the "named executives"):
<TABLE>
<CAPTION>

                                        Annual Compensation (1)
                                        -----------------------

                                                                                                          Long-Term
                                                                                                        Compensation(4)
                                                                                                        ---------------
                                                                                      Other Annual
                                            Fiscal       Salary          Bonus        Compensation         Options
   Name and Principal Position               Year         ($)             ($)            ($)(2)              (#)
----------------------------------         ---------   -----------    -------------  ---------------   ------------------

<S>                                         <C>         <C>            <C>                 <C>            <C>
Bruce D. Guthart                            2000        $450,448       $742,500            $10,133        122,500(5)
  Chairman,                                 1999         450,000        100,000              8,678        102,500(5)
  President, and                            1998         450,000        450,000              8,261              0
  Chief Executive Officer

Howard Kaye                                 2000        $450,000       $      0            $ 8,917              0
 Chairman of Kaye Insurance                 1999         450,000              0             15,263              0
 Associates, Inc.                           1998         450,000         66,667             15,103              0

Michael P. Sabanos                          2000        $250,447       $200,000            $ 8,869              0
 Executive Vice President                   1999         250,000         55,000             12,099         75,000
 And Chief Financial Officer                1998         247,500        125,000             10,626              0

Marc I. Cohen                               2000        $250,447       $325,000            $10,740              0
 President                                  1999         250,000        110,000             10,819         85,500
 Program Brokerage Corp.,                   1998         250,000        250,000             10,324          5,000
 Claims Administration Corp., and
 Old Lyme Ins. Co. of  Rhode Island

Robert N. Munao                             2000        $235,334       $ 54,111            $ 7,470              0
  Senior Vice President of                  1999          40,770(3)       9,826                  0         10,000
  Kaye Insurance Associates, Inc.           1998               0              0                  0              0

</TABLE>

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

(1)  All  compensation  described  in  the  table  was  paid  by  the  Company's
subsidiary,   Kaye   Insurance   Associates,   Inc.,   except  for  Mr.  Cohen's
compensation,  which was paid by the  Company's  subsidiary,  Program  Brokerage
Corporation.

(2) Amounts include the estimated value of a Company-provided automobile devoted
to personal use, commissions, cash dividends on shares of Performance Stock, and
employer contributions made pursuant to the Company's Retirement Savings Plan.

(3) Mr. Munao's  employment with the Company  commenced on November 1, 1999 and,
thus, his salary, as reflected, was for a portion of the year.

(4) During 1998  Messrs.  Sabanos and Cohen were each granted  38,461  shares of
Performance Stock under



                                       39
<PAGE>

the Company's  Stock  Performance  Plan. In 1999,  Mr. Munao was granted  13,008
shares of Performance  Stock under the Plan. Grants of stock under this Plan are
intended to attract and retain Key  Employees  for a long period after the grant
date.  In  addition,  the Plan is  intended  to  provide  an  incentive  for Key
Employees to achieve  long-range  performance goals, and enable Key Employees to
share in the  successful  performance  of the stock of the  Company as  measured
against  pre-established  performance  goals.  The dollar value of the grants to
Messrs.  Sabanos,  Cohen  and  Munao on the date of such  grants  was  $250,000,
$250,000 and $100,000,  respectively. This value represents the number of shares
granted  multiplied by the closing market price of the Company's common stock on
the NASDAQ on the date of the  grant.  In 1999,  7,692 of the shares  granted to
Messrs.  Sabanos and Cohen were awarded  pursuant to the Plan. No shares granted
or awarded under this Plan have vested.

(5) Mr. Guthart was granted  options for 225,000 shares of the Company's  stock,
of which  102,500 were issued  effective  December 16, 1999,  and the balance of
122,500 were issued subsequent to shareholder  approval at the Annual Meeting of
Stockholders held on May 15, 2000.


Options

          The following table sets forth certain  information  relating to stock
option grants made in 2000 to the named executives:
<TABLE>
<CAPTION>

                                                                                        Potential Realizable
                                                                                          Value at Assumed
                                                                                          Annual Rates of
                                                                                            Stock Price
                                                                                          Appreciation for
                                                                                            Option Term
                                                                                            -----------
                           Number of        % of Total
                          Securities         Options
                          Underlying        Granted to
                            Options        Employees in      Exercise    Expiration
         Name             Granted (#)    Fiscal Year (1)      Price         Date         (5%)        (10%)
         ----             -----------    ---------------      -----         ----         ----        -----

<S>                         <C>                <C>            <C>          <C>  <C>   <C>         <C>
Bruce D. Guthart            122,500            98.6           $7.50        5/15/10    $577,797    $1,464,251
</TABLE>

-----------------------
(1) Does not include 20,000 options issued to directors during 2000.


The following table sets forth, as of December 31, 2000, certain information
relating to stock option grants held by the named executives:



                                       40
<PAGE>

                                      Number of Securities Underlying
                                      Unexercised Options at
                                      Fiscal Year End (#)
                   Name               Exercisable/Unexercisable

         Bruce D. Guthart               247,500    /      240,000

         Howard Kaye                    22,500     /      0

         Michael P. Sabanos             38,000     /      72,000

         Marc I. Cohen                  28,000     /      77,000

         Robert N. Munao                 2,000     /       8,000

Director Compensation

          In 2000,  directors  of the  Company  not  employed  by the Company or
affiliated with Kaye Investments L.P. received fees of $10,000 annually,  $1,000
per board meeting attended and $500 per committee meeting  attended,  as well as
an annual grant of 5,000 options for the Company's  stock.  Chairpersons  of the
Audit and  Compensation  Committees  receive  an  additional  $500 per  quarter.
Messrs.  Butler,  Ezekiel,  Barbanell and Cooperstone received aggregate fees in
2000 of $20,000, $18,000, $21,000 and $19,000, respectively, for their services,
as well as 5,000 stock options each in 2000.  The exercise price for the options
granted in 2000 was $6.90,  which is below the trading price of the Common Stock
as of March 21, 2001.

Employment Agreements

          Messrs.  Guthart and Munao have employment agreements with the Company
or its  subsidiaries  which  expire on  December  31,  2001,  and May 25,  2001,
respectively. The employment agreements between the Company and Mr. Sabanos, and
the Company and Mr. Cohen may be terminated by the Company or the employee, upon
60 days written notice of termination.

          Upon  termination  of  employment  related to Change of Control of the
Company,  as defined in his  employment  agreement,  Mr.  Guthart is entitled to
receive  two times his Prior  Compensation  (salary  and bonus in respect of the
calendar  year  preceding  termination),  as  defined,  and  benefits,  and  his
previously  granted stock options vest. The Company has entered into  agreements
with Mssrs.  Sabanos and Cohen that in the event of a termination  of employment
within one year following a Change of Control of the Company, they shall receive
one times their  annual  compensation.

Compensation Committee Interlocks and Insider Participation

          The members of the  Compensation  Committee  are Robert L.  Barbanell,
Elliot S.  Cooperstone and Ned L. Sherwood.  Mr. Sherwood was a director of, and
had shared  beneficial  ownership  of more than ten  percent of the  outstanding
common stock of, Sun Television and Appliances, Inc. ("Sun TV"). In 1994, Sun TV
and a  subsidiary  of the  Company  entered  into  two  agreements  whereby  the
Company's  subsidiary  agreed to assume certain service contracts that were sold
by Sun TV to its retail  customers (the  "Agreement") and contracted with Sun TV
to have Sun TV provide repair  services  under



                                       41
<PAGE>

certain service  contracts.  The Board of Directors believes that the agreements
were  commercially  reasonable.  On September 11, 1998, Sun TV filed  bankruptcy
petitions  under Chapter 11 of the  Bankruptcy  Code.  The Company's  subsidiary
filed a proof of claim on March 11,  1999 for any and all  amounts  that are due
and owing under the Agreement.

          The Company retained ZS Fund, L.P. ("ZS Fund") as a financial  advisor
to assist in the formulation of the transaction structure, due diligence and the
negotiation of the Merger  Agreement  between the Company and Hub  International
Limited  (see Item 12).  Mr.  Sherwood  is a  limited  partner  in ZS Fund and a
controlling  shareholder of the general partner of ZS Fund, N.L. Sherwood & Co.,
Inc. Upon consummation of the Merger, ZS Fund is entitled to an advisory fee and
reimbursement of reasonable out-of-pocket expenses related to the Merger.

Compensation Committee Report

          Through the Kaye Group Inc.  Amended and  Restated  Stock Option Plan,
1,129,710 options were awarded as of December 31, 2000, and 220,290 options were
available to be awarded.

          Through the Kaye Group Inc. Stock  Performance Plan, the Committee may
grant Performance Stock. No grants of Performance Stock were made during 2000.

          The Committee has not made any  determination  relating to a bonus for
the  Company's  chief  executive  officer,  Bruce  D.  Guthart,  in light of the
Company's  signing a definitive  agreement  to be acquired by Hub  International
Limited  through  a merger  transaction,  which is  anticipated  to occur in the
second quarter of 2001.


                                         By the Compensation Committee:
                                                  Robert L. Barbanell
                                                  Elliot S. Cooperstone
                                                  Ned L. Sherwood


                                       42
<PAGE>


Item 12.   Security Ownership of Certain Beneficial Owners and Management


The following  table sets forth  information as of April 1, 2001 with respect to
beneficial ownership of the Company's Common Stock by any person who is known to
the Company to be the beneficial owner of more than 5% of the outstanding shares
of Common Stock, each Director,  each nominee for Director, the named executives
(as defined  below) and all Directors and executive  officers as a group,  based
upon 8,489,553 shares of Common Stock outstanding as of that date.

                                                   Shares Beneficially Owned (1)
Record Owner                                              Number  Percent
------------                                              ------  -------
Kaye Investments L.P. (2)                              2,216,140  26.10
ZS Pubco I L.P. (3)                                    1,129,242  13.30
Woodbourne Partners, L.P. (4)                            864,137  10.18

Directors and Named Executives:
Bruce D. Guthart (2)(5)                                 657, 623   7.75
Howard Kaye (2)(5)                                       942,536  11.10
Michael P. Sabanos (5)(6)                                 55,692  *
Robert L. Barbanell (5)                                   27,000  *
Richard Butler (5)                                        31,800  *
Elliot S. Cooperstone (5)                                  6,000  *
David Ezekiel (5)                                         30,000  *
Lawrence Greenfield (2)(5)                               580,939   6.84
Ned L. Sherwood (2)                                      485,003   5.71
Marc I. Cohen (5)(6)                                      39,442  *
Robert N. Munao (5)                                        2,000  *
All executive officers and directors as a group        2,858,035  33.67
  (11 persons) (2)(5)

----------------------------------
* denotes less than 1%

(1)  Beneficial  ownership is  determined  in  accordance  with the rules of the
Securities and Exchange  Commission,  which  attribute  beneficial  ownership of
securities to persons who possess sole or shared voting power and/or  investment
power with  respect to those  securities.  The  figures  assume  exercise by the
stockholder  named in each row of all options held by such stockholder which are
exercisable on or within 60 days of April 1, 2001.

(2) The general partners of Kaye Investments L.P. ("Investments") are Kaye KINV,
Inc. ("KINV"), a Delaware corporation, and Walter Kaye Associates, Inc. ("WKA"),
a New  York  corporation.  KINV  owns  42%  of  Investments;  WKA  owns  20%  of
Investments.  Bruce D. Guthart,  Howard Kaye and Lawrence  Greenfield  own 5.3%,
47.3% and 36.3%, respectively,  of KINV. Howard Kaye and Lawrence Greenfield own
19.2% and 16.8%,  respectively,  of WKA.  Pursuant to  Investments'  partnership
agreement and the KINV and WKA  stockholders'  agreements,  the number of shares
reflected in the above chart for Messrs.  Guthart,  Kaye and Greenfield  include
shares that would be  distributed to them upon the  dissolution of  Investments,
KINV and WKA.  Messrs.  Guthart,  Kaye  and  Greenfield  and KINV and WKA may be
deemed to be  beneficial  owners of the  Common  Stock of the  Company  owned by
Investments,  but each disclaims such beneficial ownership. The number of shares
reflected for Messrs.  Guthart,  Kaye and Greenfield in the above chart includes
1,018,502  shares  that  would  be  distributed  to  Messrs.  Guthart,  Kaye and
Greenfield  upon the  dissolution  of  Investments,  KINV and WKA. The number of
shares  reflected for  Investments  in the above chart also  includes  1,018,502
shares that would be distributed to Messrs.  Guthart,  Kaye and Greenfield  upon
the  dissolution  of  Investments,  KINV  and WKA.  Thus,  if such  shares  were
distributed to Messrs.  Guthart, Kaye and Greenfield,  the remaining shares held
by Investments  would total 1,197,638.  Mr. Guthart also owns 26.24% of ZS Kaye,
Inc. ZS Kaye Inc. ("ZS") is a limited  partner in Investments.  Pursuant to ZS's
stockholder's  agreement and Investments'  partnership agreement,  the number of
shares  reflected in the above chart for Mr. Guthart include an approximation of
the number of shares that would be  distributed  to him upon the  dissolution of
Investments  and ZS. Mr.  Guthart may be deemed to be a beneficial  owner of the
Common  Stock of the  Company  owned by ZS,  but he  disclaims  such



                                       43
<PAGE>


beneficial ownership.  Ned L. Sherwood owns 32.24% of the stock of ZS. ZS has no
power to vote or dispose of any shares  held by  Investments,  and ZS  disclaims
beneficial  ownership of shares of Investments.  The number of shares  reflected
for Mr.  Sherwood  in the above  chart  does not  include  shares  that would be
distributed to Mr. Sherwood upon the dissolution of Investments and ZS.

(3) The  information  contained  herein  with  respect to these  shares has been
obtained  from  Amendment  No. 1 to Schedule  13D filed  August 5, 1999,  by the
beneficial owners named therein.

(4) The  information  contained  herein  with  respect to these  shares has been
obtained from the  Amendment No. 3 to Schedule 13D filed  September 21, 1998, by
the  beneficial  owners  named  therein.   Woodbourne  Partners,   LP  disclaims
beneficial ownership of such shares.

(5) Includes options (see note (1)) for the following individuals to acquire the
following shares: Bruce D. Guthart, 257,500; Lawrence Greenfield, 22,500; Howard
Kaye, 22,500; Michael P. Sabanos, 43,000; Robert L. Barbanell, 15,000; Richard
Butler, 20,000; Elliot Cooperstone, 6,000; David Ezekiel, 20,000; Marc I. Cohen,
31,000; and Robert N. Munao, 2,000.

(6)  Includes  shares  awarded but not vested  pursuant to the  Company's  Stock
Performance Plan for the following individuals:  Michael P. Sabanos, 7,692; Marc
I. Cohen, 7,692.

Change in Control

Hub International Limited has entered into a definitive agreement to acquire the
Company  through  a  merger   transaction.   Completion  of  this   transaction,
anticipated to occur in the second quarter of 2001, is subject to the receipt of
satisfactory  applicable  regulatory  approvals,  approval  of the merger by the
shareholders of the Company,  compliance  with  applicable  legal and regulatory
requirements and standard closing  conditions.  The holders of approximately 55%
of the shares of the Company, including Kaye Investments LP, Ned L. Sherwood, ZS
Pubco I, LP and  Woodbourne  Partners,  LP, under  individual  agreements,  have
agreed  to vote in favor of the  merger,  and have  granted  Hub an  irrevocable
option to purchase  their  shares of the Company in the event that the merger is
not completed.





                                       44
<PAGE>


Item 13. Certain Relationships and Related Transactions

Transactions with Non-Consolidated Entities

          International Advisory Services, Ltd., an insurance management company
located in Bermuda of which Mr.  Ezekiel,  a  Director  of the  Company,  and an
officer  of Old Lyme  Insurance  Co.,  Ltd.,  is a  director,  provides  various
management  services  to Old Lyme  Insurance  Co.,  Ltd.,  a  subsidiary  of the
Company.  During 1998,  1999 and 2000,  Old Lyme  Insurance  Co.,  Ltd.  paid to
International  Advisory Services,  Ltd. management fees of $30,000,  $20,000 and
$20,000, respectively.

          Mr.  Sherwood,  a Director of the  Company,  is a director of, and had
shared beneficial  ownership of more than ten percent of the outstanding  common
stock of Sun Television and  Appliances,  Inc. ("Sun TV"). In 1994, Sun TV and a
subsidiary  of the Company  entered into two  agreements  whereby the  Company's
subsidiary  agreed to assume certain service  contracts that were sold by Sun TV
to its retail customers (the "Agreement") and contracted with Sun TV to have Sun
TV  provide  repair  services  under  certain  service  contracts.  The Board of
Directors  believes  that  the  agreements  were  commercially  reasonable.   On
September 11, 1998,  Sun TV and Sun TV and  Appliances,  Inc.  filed  bankruptcy
petitions  under Chapter 11 of the  Bankruptcy  Code.  The Company's  subsidiary
filed a proof of claim on March 11,  1999 for any and all  amounts  that are due
and owing under the Agreement.

          The Company retained ZS Fund, L.P. ("ZS Fund") as a financial  advisor
to assist in the formulation of the transaction structure, due diligence and the
negotiation of the Merger  Agreement  between the Company and Hub  International
Limited.  Mr.  Sherwood  is a  limited  partner  in ZS  Fund  and a  controlling
shareholder of the general  partner of ZS Fund,  N.L.  Sherwood & Co., Inc. Upon
consummation  of the Merger,  ZS is entitled to an advisory fee based on 0.8% of
the first $25  million of the total  amount of cash and  securities  paid to the
shareholders  of the  Company  in  connection  with the Merger  (the  "Aggregate
Consideration")  plus  0.4% of the  Aggregate  Consideration  in  excess  of $25
million.  ZS is also  entitled  to  reimbursement  of  reasonable  out-of-pocket
expenses related to the Merger.


                                       45
<PAGE>


                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) Financial statements and schedules.

          1. Financial Statements:

             Report of Independent Accountants

             Consolidated Balance Sheets as of December 31, 2000 and 1999

             Consolidated Statements of Income for the years ended December 31,
                              2000, 1999 and 1998

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

             Consolidated Statements of Stockholders' Equity for the years ended
                              December 31, 2000, 1999 and 1998

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

             Notes to Consolidated Financial Statements


          2. Financial Statement Schedules:

             Schedule II --Condensed Financial Information of Registrant:

                           Balance Sheets as of December 31, 2000 and 1999

                           Statements of Income for the years ended December 31,
                           2000, 1999 and 1998

                           Statements of Cash Flows for the years ended December
                           31, 2000, 1999 and 1998

                           Notes to Condensed Financial Statements

             Schedule IV--Reinsurance for the years ended December
                          31, 2000, 1999 and 1998

             Schedule VI--Supplemental Information Concerning Property and
                            Casualty Insurance Operations for the years ended
                            December 31, 2000, 1999 and 1998

             The  information  for  Schedule I is  contained in the Notes to the
             Consolidated Financial Statements. The information for Schedule III
             is included in Schedule VI.

             The information required for Schedule V is not applicable.



                                       46
<PAGE>

         3.  Exhibits:

Exhibit
Number         Description

2            Acquisition Agreement, dated as of August 3, 1995, among Kaye Group
             Inc.  (formerly  known  as  Old  Lyme  Holding  Corporation),  Kaye
             International  L.P.,  certain  individuals and Kaye Holding Corp.(a
             copy of which was filed with the  Commission  on March 31, 1995 and
             which is incorporated herein by this reference).

2.1          Agreement and Plan of Merger among Hub International  Limited,  416
             Acquisition Inc. and Kaye Group Inc.

3(i)         Certificate of Incorporation of Kaye Group Inc.  (formerly known as
             Old Lyme Holding  Corporation)  (a copy of which was filed with the
             Commission  on  June  17,  1993  as  Exhibit  3.1 to the  Company's
             Registration  Statement  on Form  S-1),  and which is  incorporated
             herein by this reference).

3(ii)        By-laws  of Kaye  Group Inc.  (formerly  known as Old Lyme  Holding
             Corporation) (a copy of which was filed with the Commission on June
             17, 1993 as Exhibit 3.2 to the Company's  Registration Statement on
             Form S-1, and which is incorporated herein by this reference).


4.1          Form of  certificate  representing  shares of  Common  Stock of the
             Company (a copy of which was filed with the Commission on March 31,
             1995, and which is incorporated herein by this reference).

10.1         Kaye Group Inc.  (formerly  known as Old Lyme Holding  Corporation)
             1993  Stock  Option  Plan (a copy  of  which  was  filed  with  the
             Commission on August 17, 1993 as Exhibit 10.6 to Amendment No. 3 to
             the  Company's  Registration  Statement  on Form S-1,  and which is
             incorporated herein by this reference).

10.1(i)      Kaye Group Inc. Supplemental Stock Option Plan (a copy of which was
             filed with the Commission on March 31, 1997, as Exhibit  10.1(i) to
             the Company's Form 10-K, and which is  incorporated  herein by this
             reference).

10.1(ii)     Kaye Group Inc. Restated Supplementa1 Stock Option Plan. (a copy of
             which was filed with the  Commission  on March 31, 2000, as Exhibit
             10.1(ii)  to the  Company's  Form 10-K,  and which is  incorporated
             herein by this reference).


                                       47
<PAGE>


10.1(iii)    Kaye Group Inc.  Amended and Restated  Stock Option Plan (a copy of
             which was filed with the Commission on April 27, 2000, as Exhibit A
             to Schedule  14A,  Information  to the Company's  Proxy  Statement,
             pursuant to Section 14(a), and which is incorporated herein by this
             reference).

10.2         Registration Agreement among Kaye Group Inc. (formerly known as Old
             Lyme Holding  Corporation),  Kaye  International  L.P. and Old Lyme
             Holdings of Rhode Island,  Inc. (a copy of which was filed with the
             Commission on August 17, 1993 as Exhibit 10.7 to Amendment No. 3 to
             the  Company's  Registration  Statement  on Form S-1,  and which is
             incorporated herein by this reference).

10.11        Loan  Agreement  among Summit Bank and Kaye Group Inc.,  dated June
             24,  1998 (a copy of which was filed with the  Commission  on March
             30, 1999, on Exhibit 10.11 to the Company's Form 10-K, and which is
             incorporated herein by reference).

10.11(i)     First  Amendment to Loan Agreement among Summit Bank and Kaye Group
             Inc.,  dated  July 31,  1999 (a copy of which  was  filed  with the
             Commission on March 31, 2000, as Exhibit 10.11 (i) to the Company's
             Form 10-K, and which in incorporated here by this reference).

10.11(ii)    Second Amendment to Loan Agreement among Summit Bank and Kaye Group
             Inc.,  dated  November  1, 1999 (a copy of which was filed with the
             Commission on March 31, 2000, a Exhibit 10.11 (ii) to the Company's
             Form 10-K and which in incorporated herein by this reference).

10.11(iii)   Third  Amendment to Loan Agreement among Summit Bank and Kaye Group
             Inc., dated October 31, 2000.

10.11(iv)    Fourth Amendment to Loan Agreement among Summit Bank and Kaye Group
             Inc., dated January 31, 2001.

10.17        Executive Employment Agreement between Kaye Group Inc. and Bruce D.
             Guthart,  dated as of  January  2,  1997 (a copy of which was filed
             with the  Commission  on March 31,  1997,  as Exhibit  10.17 to the
             Company's  Form  10-K,  and  which is  incorporated  herein by this
             reference).

10.18        Employment  Agreement  between  Kaye  Group  Inc.  and  Michael  P.
             Sabanos,  dated as of May 15,  1996 (a copy of which was filed with
             the Commission on March 31, 1997, as Exhibit 10.18 to the Company's
             Form 10-K, and which is incorporated herein by this reference).



                                       48
<PAGE>

10.18(i)     Amendment  of  Employment  Agreement  between  Kaye Group Inc.  and
             Michael P. Sabanos, dated as of March 18, 1998 (a copy of which was
             filed with the Commission on March 30, 1999 as Exhibit 10.18 (i) to
             the Company's Form 10-K, and which is  incorporated  herein by this
             reference).

10.18(ii)    Agreement  regarding severance benefits between Kaye Group Inc. and
             Michael Sabanos, dated January 17, 2001.

10.19        Kaye Group Inc. Stock Performance Plan, dated as of October 2, 1997
             (a copy of which was filed with the Commission on December 8, 1997,
             as Annex B to Schedule  14A,  Information  to the  Company's  Proxy
             Statement,  pursuant to Section  14(a),  and which is  incorporated
             herein by this reference).

10.20        Asset Purchase Agreement between Kaye Insurance  Associates,  Inc.,
             Seaman,  Ross & Wiener,  Inc.,  AMSCO  Coverage  Corp.  and  D.S.I.
             Associates,  Inc., dated as of January 1, 1999 (a copy of which was
             filed with the  Commission  on March 30, 1999,  as Exhibit 10.20 to
             the Company's Form 10-K, and which is  incorporated  herein by this
             reference).

10.22        Employment  Agreement between Kaye Insurance  Associates,  Inc. and
             Robert  Munao,  dated as of May 25, 1999 (a copy of which was filed
             with the  Commission  on March 30,  1999,  as Exhibit  10.22 to the
             Company's  Form  10-K,  and  which is  incorporated  herein by this
             reference).

10.23        Employment Agreement between Program Brokerage Corporation and Marc
             Cohen, dated as of February 2, 1998 (a copy of which was filed with
             the Commission on March 30, 1999, as Exhibit 10.23 to the Company's
             Form 10-K, and which is incorporated herein by reference).

10.23(i)     Addendum  to  Employment   Agreement   between  Program   Brokerage
             Corporation  and Marc Cohen,  dated as of March 11, 1999 (a copy of
             which was filed with the  Commission  on March 30, 1999, on Exhibit
             10.11 to the Company's Form 10-K, and which is incorporated  herein
             by this reference).

10.23(ii)    Agreement  regarding severance benefits between Kaye Group Inc. and
             Marc Cohen dated January 17, 2001.

10.24        Financial  Advisor  Agreement  between ZS Fund L.P.  and Kaye Group
             Inc. dated January 5, 2001.

11           Statement regarding computation of earnings per share.



                                       49
<PAGE>

21           Subsidiaries of Registrant
<TABLE>
<CAPTION>

        Name                                State of Incorporation    Names under which subsidiary
                                                                      Does business

        <S>                                 <C>                       <C>
        Kaye Insurance Associates, Inc.             Delaware          Kaye  Insurance  Associates, Inc.
                                                                      Kaye-Long Island
                                                                      Kaye Benefits Consulting
                                                                      Advanced Benefit Resources Corp.
                                                                      Kaye Environmental

        Kaye Insurance Associates, Inc.-
             New England                            Delaware

        Kaye-Western Insurance & Risk
            Services, Inc.                          Delaware

        Western Group Administrators Inc.           Delaware

        American Coverage Administrators Inc.       Delaware

        Program Brokerage Corp.                     Delaware

        Claims Administration Corp.                 Delaware

        Kaye Services Corp.                         Delaware

        Kaye Administrators Corp.                   Delaware

        Old Lyme Insurance Company
            Of Rhode Island, Inc.                   Rhode Island

        Old Lyme Insurance Co., Ltd.                Bermuda

        Park Brokerage Ltd.                         Bermuda

</TABLE>


(b)      Reports on Form 8-K

Exhibit 99.7 Kaye Group Inc. (the  "Company") on October 23, 2000,  reported 40%
third quarter EPS growth;  Lawrence Greenfield re-appointed to expanded Board of
Directors.  A press release announcing this was issued by the Company on October
23, 2000.




                                       50
<PAGE>


                                   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.

                                           KAYE GROUP INC.

                                           By:/ s / Bruce D. Guthart
                                           -------------------------------------
                                           Bruce D. Guthart,  Chairman

Dated: March 26, 2001

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons in the capacities
and on the dates indicated.

<TABLE>
<CAPTION>

Signature                                      Title                           Date
----------                                     -----                           ----

<S>                                 <C>                                    <C>
/ s / Bruce D. Guthart              Director, Chairman, President, and     March 26, 2001
-----------------------------       Chief Executive Officer
Bruce D. Guthart                    (Principal Executive Officer)

/ s / Howard Kaye                   Director                               March 26, 2001
-----------------------------
Howard Kaye

/ s /  Lawrence Greenfield          Director                               March 26, 2001
-----------------------------
Lawrence Greenfield

/ s / Michael P. Sabanos            Director, Executive Vice President,    March 26, 2001
-----------------------------       Chief  Financial  Officer  (Principal
Michael P. Sabanos                  Financial   Officer  and   Accounting
                                    Officer)

/ s / Robert Barbanell              Director                               March 26, 2001
-----------------------------
Robert Barbanell

/ s / Richard Butler                Director                               March 26, 2001
-----------------------------
Richard Butler

/ s / David Ezekiel                 Director                               March 26, 2001
-----------------------------
David Ezekiel

/ s / Elliot Cooperstone            Director                               March 26, 2001
-----------------------------
Elliot Cooperstone


/ s / Ned Sherwood                  Director                               March 26, 2001
-----------------------------
Ned Sherwood

</TABLE>


                                       51

<PAGE>


Item 8.  Financial Statements and Supplementary Data

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

                                                                            Page

Index to Notes to Consolidated Financial Statements                          F-2

Report of Independent Accountants                                            F-3

Consolidated Balance Sheets as of December 31, 2000
   and 1999                                                                  F-4

Consolidated Statements of Income for the years
   ended December 31, 2000, 1999 and 1998                                    F-6

Consolidated Statements of Cash Flows
   for the years ended December 31, 2000, 1999 and 1998                      F-7

Consolidated Statements of Stockholders' Equity
   for the years ended December 31, 2000, 1999 and 1998                      F-8

Consolidated Statements of Comprehensive Income
   for the years ended December 31, 2000, 1999 and 1998                      F-8

Notes to Consolidated Financial Statements                                   F-9

Financial Statement Schedules:

Schedule II - Condensed Financial Information of Registrant:
         Balance Sheets as of December 31, 2000 and 1999                    F-34

         Statements of Income for the years ended
         December 31, 2000, 1999 and 1998                                   F-35

         Statements of Cash Flows for the years ended
         December 31, 2000, 1999 and 1998                                   F-36

         Notes to Condensed Financial Statements                            F-37

Schedule IV - Reinsurance for the years ended
   December 31, 2000, 1999 and 1998                                         F-38

Schedule VI - Supplemental Information Concerning
   Property-Casualty Insurance Operations for the
   years ended December 31, 2000, 1999 and 1998                             F-39

The  information  for Schedule I is  contained in the Notes to the  Consolidated
Financial  Statements.  The information for Schedule III is included in Schedule
VI. The information required for Schedule V is not applicable.



                                       F-1


<PAGE>

               INDEX TO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 Footnote     Description                                                   Page
 --------     -----------                                                   ----

 1            Business......................................................F-9
 2            Significant Accounting Policies...............................F-11
 3            Changes in Accounting Policies................................F-16
 4            Acquisitions..................................................F-16
 5            Funds Held in Fiduciary Capacity..............................F-17
 6            Investments...................................................F-17
 7            Notes Payable.................................................F-20
 8            Income Taxes..................................................F-21
 9            Lease Commitments and Rentals.................................F-23
10            Defined Contribution Plan.....................................F-23
11            Commitments and Contingencies.................................F-23
12            Reinsurance...................................................F-24
13            Unpaid Losses and Loss Expenses...............................F-25
14            Statutory Financial Information and Dividend Restrictions.....F-26
15            Related Party Transactions....................................F-27
16            Dividends and Treasury Stock..................................F-27
17            Stock Performance and Stock Option Plans......................F-27
18            Quarterly Financial Information (Unaudited)...................F-30
19            Business Segments.............................................F-31
20            Supplemental Cash Flow Disclosures............................F-32
21            Subsequent Event..............................................F-33




                                       F-2

<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders of Kaye Group Inc.:

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material  respects,  the financial position of Kaye
Group Inc. and its  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. In addition, in our opinion,
the  financial  statement  schedules  listed in the  accompanying  index present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.  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 of these  statements in accordance with auditing  standards
generally  accepted in the United States of America,  which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion  expressed
above.



PricewaterhouseCoopers LLP
New York, New York
February 26, 2001




                                       F-3
<PAGE>
<TABLE>
<CAPTION>

                               KAYE GROUP INC.
                         CONSOLIDATED BALANCE SHEETS
                As of December 31, 2000 and December 31, 1999
                  (in thousands, except par value per share)


                                                                                         2000             1999
                                                                                       ---------        ---------

<S>                                                                                     <C>              <C>
ASSETS

INSURANCE BROKERAGE COMPANIES:
Current assets:
     Cash and cash equivalents
          (including short term investments, and funds held in a fiduciary
          capacity of $25,374 and $25,610)                                             $ 26,591           $ 27,678
     Premiums and other receivables                                                      41,744             27,265
     Prepaid expenses and other assets                                                    2,025              1,717
                                                                                       --------           --------
     Total  current assets                                                               70,360             56,660

Fixed assets (net of accumulated depreciation of $6,827 and $6,922)                       5,816              3,770
Intangible assets (net of accumulated amortization of $4,808 and $3,845)                 11,472             10,228
Other assets                                                                                665                195
                                                                                       --------           --------
     Total assets                                                                        88,313             70,853
                                                                                       --------           --------

PROPERTY AND CASUALTY COMPANIES:
Investments available-for-sale:
     Fixed maturities, at market value (amortized cost: 2000, $43,157;
         1999, $42,273)                                                                  43,232             41,304
     Equity securities, at market value (cost:2000, $8,610; 1999, $3,873)                 8,209              4,496
                                                                                       --------           --------
     Total investments                                                                   51,441             45,800

Cash and cash equivalents                                                                12,784             14,327
Accrued interest and dividends                                                              862                873
Premiums receivable                                                                       1,985              2,333
Reinsurance recoverable on paid and unpaid losses                                         4,600              2,747
Prepaid reinsurance premiums                                                                949                488
Deferred acquisition costs                                                                4,053              4,313
Deferred income taxes                                                                     1,505              1,236
Other assets                                                                              5,935              4,520
                                                                                       --------           --------
     Total assets                                                                        84,114             76,637
                                                                                       --------           --------

CORPORATE:
Cash and cash equivalents                                                                   138              1,233
Prepaid expenses and other assets                                                            59                153
Investments:
     Equity securities, at market value (cost:2000, $308, and 1999, $243)                   320                243
Deferred income taxes                                                                        67                 93
                                                                                       --------           --------
     Total assets                                                                           584              1,722
                                                                                       --------           --------

     Total assets                                                                      $173,011           $149,212
                                                                                       --------           --------
</TABLE>


     See notes to consolidated financial statements


                                       F-4

<PAGE>
<TABLE>
<CAPTION>

                               KAYE GROUP INC.
                         CONSOLIDATED BALANCE SHEETS
                As of December 31, 2000 and December 31, 1999
                  (in thousands, except par value per share)


                                                                                    2000                1999
                                                                                  ---------           ---------

<S>                                                                               <C>                  <C>
LIABILITIES

INSURANCE BROKERAGE COMPANIES:
Current liabilities:
     Premiums payable and unearned commissions                                    $  53,095            $  42,161
     Accounts payable and accrued liabilities                                         9,658                8,103
     Notes payable                                                                      521                  527
                                                                                  ---------            ---------
     Total current liabilities                                                       63,274               50,791
Notes payable                                                                           320                  841
Deferred income taxes                                                                 1,083                  491
                                                                                  ---------            ---------
     Total liabilities                                                               64,677               52,123
                                                                                  ---------            ---------

PROPERTY AND CASUALTY COMPANIES:
Liabilities:
     Unpaid losses and loss expenses                                                 27,984               23,969
     Unearned premium reserves                                                       13,697               13,694
     Accounts payable and accrued liabilities                                         7,532                7,953
     Other liabilities                                                                  567                  245
                                                                                  ---------            ---------
     Total liabilities                                                               49,780               45,861
                                                                                  ---------            ---------

CORPORATE:
Current liabilities:
     Accounts payable and accrued liabilities                                           254                  300
     Loan payable                                                                     1,343                1,241
     Income taxes payable                                                               187                  366
                                                                                  ---------            ---------
     Total current liabilities                                                        1,784                1,907
Loan payable-long-term                                                                  728                2,070
                                                                                  ---------            ---------
     Total liabilities                                                                2,512                3,977
                                                                                  ---------            ---------

     Total liabilities                                                              116,969              101,961
                                                                                  ---------            ---------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
     Preferred stock, $1.00 par value; 1,000 shares authorized;
          none issued or outstanding
     Common stock, $.01 par value; 20,000 shares authorized;
          shares issued and outstanding (2000, 8,481; 1999, 8,458)                       85                   85
     Paid - in capital                                                               18,019               18,019
     Accumulated other comprehensive loss, net of deferred
          income tax benefit (2000, $107; 1999, $118)                                  (207)                (228)
      Unearned stock grant compensation                                                (235)                (254)
      Retained earnings                                                              38,417               29,858
      Common stock in Treasury, shares at cost (2000, 4; 1999, 28)                      (37)                (229)
                                                                                  ---------            ---------

     Total stockholders' equity                                                      56,042               47,251
                                                                                  ---------            ---------

     Total liabilities and stockholders' equity                                   $ 173,011            $ 149,212
                                                                                  ---------            ---------
</TABLE>

     See notes to consolidated financial statements

                                       F-5

<PAGE>

                                 KAYE GROUP INC.
                        CONSOLIDATED STATEMENTS OF INCOME
              For the years ended December 31, 2000, 1999 and 1998
                    (in thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                                                        2000            1999            1998
                                                                                      --------        --------        --------
<S>                                                                                   <C>             <C>             <C>
     INSURANCE BROKERAGE COMPANIES:
     Revenues:
          Commissions and fees - net                                                  $ 42,066        $ 37,379        $ 35,356
          Investment income                                                              1,339           1,374           1,846
                                                                                      --------        --------        --------
          Total revenues                                                                43,405          38,753          37,202
                                                                                      --------        --------        --------
     Expenses:
          Compensation and benefits                                                     23,676          22,346          21,323
          Amortization of intangibles                                                    1,161           1,095             679
          Other operating expenses                                                      13,463          12,215          13,446
                                                                                      --------        --------        --------
          Total operating expenses                                                      38,300          35,656          35,448
                                                                                      --------        --------        --------
                                                                                      --------        --------        --------
          Interest expense                                                                 870             775              49
                                                                                      --------        --------        --------
          Income before income taxes                                                     4,235           2,322           1,705
                                                                                      --------        --------        --------

     PROPERTY AND CASUALTY COMPANIES:
     Revenues:
          Net premiums written                                                          30,028          27,821          24,538
          Change in unearned premiums                                                      458          (1,041)            151
                                                                                      --------        --------        --------
          Net premiums earned                                                           30,486          26,780          24,689
          Net investment income                                                          3,127           2,949           2,920
          Net realized gain (loss) on investments                                          804             (16)             85
          Other income                                                                     469              72             146
                                                                                      --------        --------        --------
          Total revenues                                                                34,886          29,785          27,840
                                                                                      --------        --------        --------
     Expenses:
          Losses and loss expenses                                                      12,270           9,754           8,496
          Acquisition costs and general and administrative expenses                     12,615          11,205           9,707
          Total expenses                                                                24,885          20,959          18,203
                                                                                      --------        --------        --------
          Income before income taxes                                                    10,001           8,826           9,637
                                                                                      --------        --------        --------

     CORPORATE:
     Revenues - Net investment income (loss)                                               107             206             (31)
     Expenses:
          Other operating expenses                                                         480             309             314
          Interest expense                                                                 234             316             443
                                                                                      --------        --------        --------
          Net expenses before income taxes                                                (607)           (419)           (788)
                                                                                      --------        --------        --------

     INCOME BEFORE INCOME TAXES                                                         13,629          10,729          10,554
                                                                                      --------        --------        --------

     Provision (benefit) for income taxes
          Current                                                                        3,887           3,261           3,422
          Deferred                                                                         338             (36)           (150)
                                                                                      --------        --------        --------
          Total provision for income taxes                                               4,225           3,225           3,272
                                                                                      --------        --------        --------

     NET INCOME                                                                       $  9,404        $  7,504        $  7,282
                                                                                      --------        --------        --------

     EARNINGS PER SHARE
          Basic                                                                       $   1.11        $   0.89        $   0.86
          Diluted                                                                     $   1.09        $   0.87        $   0.85

     Weighted average of shares outstanding - basic                                      8,470           8,460           8,474

     Weighted average shares outstanding and
     share equivalents outstanding - diluted                                             8,613           8,630           8,593

</TABLE>

     See notes to consolidated financial statements


                                       F-6


<PAGE>


<TABLE>
<CAPTION>

                                                  KAYE GROUP INC.
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                For the years ended December 31, 2000, 1999 and 1998
                                                   (in thousands)


                                                                               2000               1999             1998
                                                                            -----------       -----------        ---------
<S>                                                                           <C>               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                    $  9,404          $  7,504         $  7,282
Adjustments to reconcile net income to net
   cash provided by (used in) operating activities:
   Deferred acquisition costs                                                      260              (392)              18
   Amortization of bond premium - net                                              685               695              599
   Deferred income taxes                                                           338               (36)            (150)
   Net realized loss (gains) on investments                                       (868)              290              (85)
   Depreciation and amortization expense                                         2,892             2,381            1,813
   Change in assets and liabilities:
      Accrued interest and dividends                                                11                88              (79)
      Premiums and other receivables                                           (16,077)           14,071           (8,125)
      Prepaid expenses and other assets                                         (1,646)           (2,263)          (1,253)
      Premiums payable and unearned commissions                                 10,952           (17,235)          18,371
      Accounts payable and accrued liabilities                                   1,633              (311)           2,055
      Unpaid losses and loss expenses                                            4,015             2,402            2,441
      Unearned premium reserves                                                      3             1,367             (251)
      Income taxes payable                                                        (179)             (202)             552
                                                                              --------          --------         --------

      Net cash provided by operating activities                                 11,423             8,359           23,188
                                                                              --------          --------         --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Investments available - for - sale :
   Purchase of fixed maturities                                                (10,270)          (11,560)         (15,012)
   Purchase of equity securities                                                (7,589)           (4,049)            (200)
   Maturities of fixed securities                                                5,109             5,474            4,861
   Sales of fixed securities                                                     3,498             6,094            8,158
   Sales of equity securities                                                    3,280               832              425
Purchase of fixed assets                                                        (3,866)           (1,347)          (2,089)
Acquisition payments                                                            (3,002)           (5,203)          (1,239)
Funds held under deposit contracts:
    Sales of short-term investments                                                                                  173
                                                                              --------          --------         --------

      Net cash used in investing activities                                    (12,840)           (9,759)          (4,923)
                                                                              --------          --------         --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Acquisition debt-repayment                                                        (375)             (375)            (657)
Notes and loan payable-repayment                                                (1,392)           (1,489)          (7,981)
Proceeds from issuance of common stock                                                                35
Acquisition of treasury stock                                                   (1,079)
Payment of dividends                                                              (845)             (847)            (849)
Proceeds from borrowings                                                                                            5,000
Receipts (payments) under deposit contracts                                        304                               (122)
                                                                              --------          --------         --------

      Net cash used in financing activities                                     (2,308)           (3,755)          (4,609)
                                                                              --------          --------         --------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                         (3,725)           (5,155)          13,656
Cash and cash equivalents at beginning of period                                43,238            48,393           34,737
                                                                              --------          --------         --------

Cash and cash equivalents at end of period                                    $ 39,513          $ 43,238         $ 48,393
                                                                              ========          ========         ========


      See notes to consolidated financial statements

                                       F-7
</TABLE>
<PAGE>

                                 KAYE GROUP INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              For the years ended December 31, 2000, 1999 and 1998
                        (in thousands, except per share
                                    amounts)

<TABLE>
<CAPTION>
                                          Common Stock      Common                             Accumulated
                                       ------------------    Stock     Unearned                   Other                   Total
                                       Outstanding   Par      in      Stock Grant  Paid-In  Comprehensive   Retained   Stockholders'
                                         Shares     Value  Treasury  Compensation  Capital      (Loss)      Earnings     Equity
                                       ----------- ------  --------  ------------  -------  -------------   --------   -------------
<S>                                         <C>       <C>     <C>         <C>      <C>            <C>       <C>         <C>
Balance, January 1, 1998                    8,474     $85                          $17,942         $373     $16,768     $35,168

Change in unrealized appreciation,
    net of deferred
    income tax of ($88)                                                                             168                     168
Net income                                                                                                    7,282       7,282
Dividends declared (per share-$0.10)                                                                           (849)       (849)

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

Balance, December 31, 1998                  8,474      85                           17,942          541      23,201      41,769

Change in unrealized depreciation,
    net of deferred
    income tax of $398                                                                             (769)                   (769)
Shares issued - employee stock
    option plan                                 7                                       35                                   35
Shares issued - stock performance plan          5                         ($264)        42                                 (222)
Amortization of unearned restricted stock                                    10                                              10
Net income                                                                                                    7,504       7,504
Dividends declared (per share-$0.10)                                                                           (847)       (847)
Acquisition of treasury stock net of
    reissuances                               (28)            ($229)                                                       (229)

                                       ----------- ------  --------  ------------  -------  -------------   --------   -------------
Balance, December 31, 1999                  8,458      85      (229)       (254)    18,019         (228)     29,858      47,251

Change in unrealized appreciation,
  net of deferred
    income tax of ($11)                                                                              21                      21
Amortization of unearned restricted stock                                      19                                            19
Net income                                                                                                    9,404       9,404
Dividends declared (per share-$0.10)                                                                           (845)       (845)
Reissuance of treasury stock                   23               192                                                         192

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

Balance, December 31, 2000                  8,481     $85      ($37)      ($235)   $18,019        ($207)    $38,417     $56,042
                                       ----------- ------  --------  ------------  -------  -------------   --------   -------------
</TABLE>



                                 KAYE GROUP INC.
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
              For the years ended December 31, 2000, 1999 and 1998
                                 (in thousands)


<TABLE>
<CAPTION>

                                                                               2000         1999        1998
                                                                            -----------  ----------- ------------


<S>                                                                             <C>          <C>          <C>
NET INCOME                                                                      $9,404       $7,504       $7,282
                                                                            -----------  ----------- ------------

Other comprehensive income:

      Unrealized holding gains (losses) arising during
      the period, net of deferred income tax (benefit)
      liability  (2000, $255; 1999, ($482); 1998,  $116                            496         (932)         221

      Less: reclassification adjustment for loss (gains)
      included in net income, net of deferred income tax
      (benefit) liability (2000, $244; 1999, ($84);  1998,  $28                   (475)         163          (53)
                                                                            -----------  ----------- ------------

      Total other comprehensive income                                              21         (769)         168
                                                                            -----------  ----------- ------------

COMPREHENSIVE INCOME                                                            $9,425       $6,735       $7,450
                                                                            -----------  ----------- ------------

</TABLE>


See notes to consolidated financial statements

                                       F-8

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  Years ended December 31, 2000, 1999 and 1998

1) Business

Kaye Group Inc. (the "Company"),  a Delaware  corporation,  is a holding company
which,  through  its  subsidiaries,  is  engaged in a broad  range of  insurance
brokerage,  underwriting  and related  activities.  The Company  operates in two
insurance  business  segments - the  Insurance  Brokerage  Companies  Operations
("Brokerage  Operations"),  comprised of the Retail  Brokerage  Business and the
Program Brokerage Business, and the Property and Casualty Companies Operations.

In addition,  Corporate  Operations  includes those  activities that benefit the
Company in its  entirety  and cannot be  specifically  identified  to either the
Brokerage  Operations or the Property and Casualty  Companies  Operations.  Such
activities  include  debt  servicing  and  public  company  expenses,  including
investor relations costs.

The  Company's  activities  are  conducted  from offices in New York,  New York,
Arcadia,  California,  Westport,  Connecticut,  Woodbury,  New York and Warwick,
Rhode Island.

Insurance Brokerage Companies Operations

The Retail Brokerage  Business operates insurance  brokerage  businesses through
four subsidiaries of the Company, the "Retail Brokerage  Companies".  The Retail
Brokerage  Companies  offers  commercial  clients  a  full  range  of  insurance
brokerage services including  procurement of property/casualty  insurance,  risk
management consulting,  bonding, loss prevention engineering, and group employee
benefit  consulting  services.  In addition,  personal lines and life and health
insurance coverage are placed on behalf of individual clients.

The Retail  Brokerage  Business'  primary  strategy is to service  middle market
companies  and  organizations  just below the  Fortune 500 level for which other
national  brokers  intensely  compete.  Within  this middle  market,  the Retail
Brokerage Business has developed particular expertise and knowledge of the risks
facing a number of industry sectors including health care, real estate,  retail,
manufacturing, houses of worship, law firms, homes for the aged and fine arts.

During  2000,  the  Retail  Brokerage  Business  serviced  approximately  15,000
insureds.  The  Retail  Brokerage  Business  is  compensated  for  its  services
primarily in the form of commissions paid by insurance companies. The commission
is usually a percentage  of the premium paid by the  insured.  Commission  rates
depend upon the type of insurance,  the particular  insurance  company,  and the
role in which the Retail Brokerage  Business acts. In some cases a commission is
shared  with other  agents or brokers  who have  acted  jointly  with the Retail
Brokerage  Business in connection  with the  transaction.  The Retail  Brokerage
Business may also receive from an insurance company a contingent commission that
is generally based on the profitability and volume of business placed



                                       F-9
<PAGE>

with it by the Retail Brokerage Business over a given period of time. The Retail
Brokerage  Business  may also  receive  fees from  insureds in  connection  with
consulting services relating to the marketing of insurance.

Program Brokerage  Corporation ("PBC" or the "Program Brokerage  Business") is a
subsidiary of the Company and operates a wholesale  insurance brokerage business
which offers retail  insurance  agents and brokers  innovative  solutions to the
twin insurance  problems of price and availability of coverage.  It accomplishes
this by organizing  pools of similar risks into specially  designed  alternative
distribution programs through which it places insurance for affinity groups (the
"Programs").

The  Program  Brokerage  Business is one of the  leaders in the  application  of
purchasing groups in the commercial insurance market. Approximately 73% of PBC's
premium  volume  was  generated  by its  own  producers  and  approximately  800
unrelated  retail  insurance agent and broker  producers  serving  approximately
10,500  insureds  during  2000.  The  remaining  27% was derived from the Retail
Brokerage  Business.  Approximately  35% of PBC's premium  volume is directly or
indirectly  placed  with two  affiliates,  Old Lyme  Insurance  Company of Rhode
Island, Inc. ("OLRI") and Old Lyme Insurance Company, Ltd. (Bermuda) ("OLB").

Property and Casualty Companies Operations

The Company conducts its property and casualty underwriting business through two
insurance company subsidiaries (the "Insurance  Companies"),  OLRI and OLB. OLRI
is a property  and  casualty  insurance  company  licensed  in Rhode  Island and
eligible  as a  surplus  lines  insurer  in New  York and New  Jersey.  OLB is a
property and casualty insurance company organized and licensed under the laws of
Bermuda.  In states where the Insurance  Companies are not admitted  insurers or
surplus lines insurers, the Insurance Companies underwrite risks through various
reinsurance agreements.

The Insurance  Companies  underwrite  property risks (loss or physical damage to
property)  and OLRI  underwrites  casualty  risks (legal  liability for personal
injury or  damaged  property  of others)  for  insureds  in the  United  States.
Insurance is sold principally  through the Programs marketed by PBC which insure
various   types  of   businesses   and   properties   that  have   similar  risk
characteristics,  such as apartments, condominiums,  cooperatives,  restaurants,
building  maintenance  companies,  automobile  service stations,  retail stores,
funeral homes and pharmacies, among others.

The Insurance Companies' strategy is to underwrite only the first "layer" of the
property  and  casualty  insurance  provided  under the  Programs.  Exposure  to
individual insureds on individual losses is thereby generally limited to between
$10,000 and $25,000 per claim, depending on the Program. Under the Programs, the
Insurance  Companies'  policies are sold in conjunction  with policies issued by
unaffiliated  Program  insurers that provide coverage for losses above the first
layer of risk  underwritten by the Insurance  Companies.  In addition,  OLRI has
issued  policies  on a selected  basis with  limits up to  $3,500,000,



                                       F-10
<PAGE>

with net  retention  on one policy of $100,000 of exposure  and  reinsuring  the
remaining  limits with  unaffiliated  reinsurers  rated A or better by A.M. Best
Company  ("A.M.  Best"),  a major rating agency for  insurers.

The Property and Casualty Companies  Operations  includes Claims  Administration
Corporation  ("CAC"),  a subsidiary of the Company which is responsible  for the
administration  of a large  majority of the claims  submitted  to the  Insurance
Companies.  The administration of claims includes  investigation,  engagement of
legal  counsel,  approval of  settlements  and the making of payments  to, or on
behalf of insureds.  The Insurance Companies pay CAC for its services.  CAC also
provides claims  administration  service to certain of the unaffiliated  Program
insurers for a fee.

2) Significant Accounting Policies

(a) Basis of Presentation

The accompanying  Consolidated Balance Sheets, Statements of Income, Cash Flows,
Stockholders' Equity and Comprehensive Income (the "financial  statements") have
been  prepared in  accordance  with  generally  accepted  accounting  principles
("GAAP") and predominant industry practice.

The  Consolidated  Balance  Sheets  are  presented  on a  segmented  basis  with
inter-company balances eliminated.

The Statements of Income are segmented and present the  consolidated  results of
the Insurance Brokerage  Companies segment,  the Property and Casualty Companies
segment  and the  Corporate  segment.  Intersegment  transactions  have not been
eliminated.  However,  transactions  within  each  segment are  eliminated.  For
details on segment activity refer to Note 19.

The  preparation  of  financial  statements  in  conformity  with GAAP  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 revenue and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

Certain prior year  information  has been  reclassified to conform with the 2000
presentation.



                                       F-11
<PAGE>

(b) Segment Reporting

The  accompanying  consolidated  financial  statements  have been  prepared on a
segmented basis. See Note 1 for segments and their respective operations. Income
before income taxes of the two operating  segments includes expenses incurred by
Corporate on behalf of the  segments,  which are  allocated to operations of the
segments. The allocation is based upon total revenues of each segment except for
the  allocation  of  incentive  compensation  which  is  allocated  based on the
percentage of profits contributed to the Company. Identifiable assets by segment
are those assets used in the  Company's  operations  in each  business  segment.
Corporate  assets  are  principally  cash and  cash  equivalents  and an  equity
security investment.

(c) Commission Income

Commission  income,  together with the related accounts  receivable from clients
and premiums  payable to insurance  carriers,  is recorded  when earned which is
principally  as of the billing date.  Commission  income  related to installment
billing  arrangements is recorded at the date of the initial  billing.  Unearned
commissions  represent  commission  income  that is  earned in  installments  on
multiyear  policies.  Contingent  commissions and commissions on premiums billed
directly by insurance carriers are recorded when collected or known.  Commission
and other  adjustments are recorded when they occur and the Company maintains an
allowance for estimated policy cancellations and commission returns.

(d) Fixed Assets

Furniture, equipment, computer hardware and software, and leasehold improvements
are carried at cost, less accumulated  depreciation  and  amortization  computed
using the  straight-line  method.  Fixed  assets are  depreciated  over  periods
ranging from three to ten years,  and leasehold  improvements are amortized over
the remaining terms of the leases which expire through 2010 or useful life which
ever is shorter.

(e) Intangible Assets

Acquired expiration lists,  covenants not to compete and goodwill are carried at
cost, less accumulated  amortization  which is computed using the  straight-line
method over the estimated useful life of the asset not to exceed twenty years.

(f) Investments

Investments are stated at fair value.  The difference  between the cost and fair
value is reflected as unrealized appreciation or depreciation, net of applicable
deferred income taxes, as a separate component of stockholders' equity. Realized
gains or losses  from the sale of  investments  are  determined  on the basis of
specific identification and are reflected as a component of revenues. Investment
income is recognized when earned.



                                       F-12
<PAGE>

The fair value of fixed maturities and equity securities is based on the closing
price of the investments on December 31.

If a decline  in fair  value of an  investment  is  considered  to be other than
temporary,  the  investment  is  reduced  to its net  realizable  value  and the
reduction is accounted for as a realized  investment loss. In evaluating whether
a decline is other than temporary,  management considers the duration and extent
to which the market value has been less than cost,  the financial  condition and
near-term prospects of the issuer, including events that may impact the issuer's
operations and impair the earnings potential of the investment, and management's
ability and intent to hold an investment for a sufficient period to allow for an
anticipated recovery in fair value.

Investments in equity securities in which the Company does not exert significant
influence  and there is no readily  determinable  fair value are  carried at the
lower of cost or market.

(g) Insurance Premiums Earned

Insurance  premiums  are  recognized  as revenues  ratably over the terms of the
related  policies  in force.  Unearned  premiums  are  established  to cover the
unexpired  portion of premiums  written and are  calculated  using the daily pro
rata method. Premiums earned are net of reinsurance ceded.

(h) Deferred Acquisition Costs

Deferred  acquisition  costs  include  commissions  incurred  by  the  Insurance
Companies  that  vary  with  and are  attributed  to new and  renewal  insurance
policies  or  contracts.  These  costs  are  deferred  and  amortized  over  the
applicable premium recognition period,  generally one year. These deferred costs
have been  limited to the amount  expected to be  recovered  from future  earned
premiums.  Acquisition  costs of $9,450,000,  $8,292,000,  and  $7,630,000  were
amortized to expense in 2000, 1999 and 1998, respectively.

(i) Unpaid Losses and Loss Expenses

The  estimated  liability  for unpaid  losses and loss  expenses  is based on an
evaluation of claims  reported by  policyholders.  A provision which is based on
historical  experience  and modified for current  trends,  is also  included for
losses and loss expenses which have been incurred but not reported.  The methods
of  determining  such  estimates and  establishing  the  resulting  reserves are
continually  reviewed  and  modified  to  reflect  current  conditions,  and any
adjustments are reflected currently in results of operations.


                                       F-13


<PAGE>



(j) Reinsurance

Assumed  reinsurance  premiums  written,   commission,  and  unpaid  losses  are
accounted  for  based  principally  on the  reports  received  from  the  ceding
insurance  companies  and in a manner  consistent  with the terms of the related
reinsurance  agreements.  Liabilities  for  unpaid  losses,  loss  expenses  and
unearned premiums are stated gross of ceded reinsurance  recoverables.  Deferred
acquisition  costs are stated net of the amounts of  reinsurance  ceded,  as are
premiums written and earned,  losses and loss expenses  incurred,  and amortized
acquisition costs.

(k) Income Taxes

The  Company  recognizes  deferred  tax  assets  or  liabilities  for  temporary
differences  between  the  financial  reporting  and tax  basis  of  assets  and
liabilities  based on enacted tax rates.  The  principal  temporary  differences
relate to  deferred  acquisition  costs,  unearned  premiums,  discount  for tax
purposes  of the  unpaid  losses  and loss  expense  reserves,  amortization  of
expiration lists,  accrual adjustment for commission income and unrealized gains
or losses on investments (see Note 8).

(l) Cash and Cash Equivalents

Cash and cash  equivalents  include  money  market  funds  and  certificates  of
deposit,  including  funds  held  in a  fiduciary  capacity  for  the  Insurance
Brokerage  Companies,  with a  maturity  of three  months or less.  The  Company
maintains  cash with banks in excess of federally  insured limits and is exposed
to the credit risk from this concentration of cash.




                                       F-14


<PAGE>


(m) Earnings Per Share

Basic  earnings per share are  calculated by dividing net income by the weighted
average number of common shares outstanding.  Diluted earnings per share include
the effect of all potentially dilutive securities. Earnings per common share has
been compiled below (in thousands, except per share amounts):

                                     2000                1999              1998
                                     ----                ----              ----

Net income (numerator)              $9,404              $7,504            $7,282
                                    ------              ------            ------

Weighted average common shares and effect of dilutive shares used in the
computation of earnings per share:

<TABLE>
<S>                                                   <C>                <C>                <C>
         Average shares outstanding-basic             8,470              8,460              8,474
         Effect of dilutive shares                      143                170                119
                                                      -----              -----              -----
        Average shares outstanding - diluted
              (denominator)                           8,613              8,630              8,593
                                                      -----              -----              -----

Earnings per common share:
         Basic                                        $1.11              $0.89              $0.86
         Diluted                                      $1.09              $0.87              $0.85
</TABLE>

Options to purchase 594,250,  219,250 and 161,450,  common shares at prices from
$7.50 to $11.63,  $7.88 to $11.63 and $7.06 to $11.63 per share were outstanding
at December 31, 2000, 1999 and 1998, respectively,  but were not included in the
computation  of earnings per diluted  share for the  respective  years,  because
their  exercise  price was greater  than the average  market price of the common
shares.  Theses options expire through November 16, 2009,  December 10, 2008 and
December 31, 2007, respectively.

(n) Capitalized Software Policy

Capitalized   computer   software  costs   (included  in  fixed  assets  on  the
Consolidated  Balance  Sheets)  consist  of  costs  to  purchase  software.  All
capitalized software costs are amortized on a straight line method over a period
of three or five years.  Amortization expense charged to operations was $547,630
in 2000, $425,265 in 1999 and $199,272 in 1998.

(o) Accounting Policy for Stock Compensation Plans

The Company applies Accounting  Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees"  and related  interpretations  in accounting  for its
stock based compensation plans.  Accordingly,  no compensation  expense has been
recognized  for its  Stock  Option  Plan as the  exercise  price of the  options
equaled the market price of the stock at the date of grant. Compensation expense
has been recognized for the Stock  Performance Plan based on the market price at
the date of the award.



                                       F-15
<PAGE>

(p) Fair Value of Financial Instruments

The carrying amounts  reported in the  Consolidated  Balance Sheets for cash and
cash equivalents,  receivables and premiums payable approximate those assets and
liabilities fair values due to the short-term nature of the instruments.

3) Changes in Accounting Policies

(a) Newly Adopted Accounting Standards

In December 1999, the  Securities and Exchange  Commission  ("SEC") issued Staff
Accounting  Bulletin  ("SAB")  No.  101 which  provides  guidance  for  applying
generally  accepted  accounting  principles  relating  to the  timing of revenue
recognition  in  financial  statements  filed  with  the  SEC.  The  Company  is
recognizing  revenue in  accordance  with SAB No. 101 and maintains an allowance
for policy cancellations and commission returns.

(b) Accounting Standards Not Yet Adopted

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  ("SFAS") No. 133 (as amended),  Accounting for
Derivative  Instruments  and Hedging  Activities.  This  statement  requires all
derivatives to be recognized as either assets or liabilities in the statement of
financial position and to be measured at fair value. This statement is effective
for all fiscal  quarters and fiscal years beginning after December 31, 2000. The
statement is not expected to have a material impact on the financial position of
the Company.

4) Acquisitions

Effective January 1, 1999, the Company,  through one of its insurance  brokerage
subsidiaries,  Kaye Insurance  Associates,  Inc. ("KIA"),  purchased the assets,
including  customer  lists,  and certain  liabilities of Woodbury,  N.Y. - based
broker Seaman,  Ross & Wiener,  Inc. ("SRW") and related entities for an initial
purchase  price of  $2,422,000  in cash and  $500,000  in stock of the  Company.
Additional  payments of  $4,458,000 in cash and $292,000 in stock of the Company
have been made through December 31, 2000. The total purchase price is contingent
on future  billings  related to the acquired  customer  lists and will  increase
significantly  from  the  initial  purchase  price.  This  acquisition  is being
accounted for using the purchase method of accounting.  Accordingly,  intangible
assets (including customer lists) of approximately $7,700,000 resulting from the
allocation of the preliminary  purchase price and payments made through December
31, 2000, are being amortized by using the straight-line method over a period of
not more than twenty years.

During 1998,  the Company  acquired  certain  assets and  liabilities of Florida
Insurance  Associates,  Inc. ("FIA"),  Daniel V. Keane Agency, Inc. ("DVK"), and
Laub Group of  Florida,  Inc.  ("LGF")  for cash of  $275,000,  $1,452,0000  and
$201,000,  respectively,  paid



                                       F-16

<PAGE>

through  December 31, 2000 and estimated  amounts  payable in future  periods of
$656,000  (DVK).  The total acquired  intangible  assets  (including  expiration
lists) was $2,108,000 for DVK. These  acquisitions  were accounted for under the
purchase  method.  During the first half of 2000, the Brokerage  Operations sold
the  majority of the  operations  of LGF at no gain or loss,  as well as certain
assets and liabilities of FIA.

5) Funds Held in Fiduciary Capacity

Premiums collected by the Insurance  Brokerage Companies but not yet remitted to
insurance carriers are approximately $25,374,000 and $25,610,000 at December 31,
2000 and 1999,  respectively,  some of which are  restricted as to use by law in
certain  states  in which  the  Insurance  Brokerage  Companies  operate.  These
balances are held in cash and cash  equivalents.  The  offsetting  obligation is
recorded in premiums payable.

6) Investments

Net investment  income for the years ended  December 31, 2000,  1999 and 1998 is
derived from the following sources (in thousands):

                                           2000       1999      1998
                                           ----       ----      ----

Insurance Brokerage Companies
Cash and cash equivalents                $ 1,339    $ 1,374    $ 1,846
                                         -------    -------    -------

Property and Casualty Companies
Fixed maturities                           2,089      2,176      2,031
Equity securities                             34         45         67
Cash and cash equivalents                    729        532        791
Other                                        340        259         98
                                         -------    -------    -------
Total investment income                    3,192      3,012      2,987
Investment expenses                          (65)       (63)       (67)
                                         -------    -------    -------
                                           3,127      2,949      2,920
                                         -------    -------    -------
Corporate
Cash and cash equivalents                    107        206        (31)
                                         -------    -------    -------

Net investment income                    $ 4,573    $ 4,529    $ 4,735
                                         =======    =======    =======


Net  realized  gains or losses  and the  change in  unrealized  appreciation  or
depreciation on investments for the years ended December 31, 2000, 1999 and 1998
are summarized below (in thousands):

                                       F-17

                                             2000           1999      1998
                                             ----           ----      ----
Net realized gains (losses):
   Fixed maturities:
         Gross realized gains                $14             $37          $85
         Gross realized losses              (108)            (13)


    Equity securities:
         Gross realized gains              1,142               4
         Gross realized losses              (244)            (44)
                                         -------        --------     --------
Net realized gain (loss) on investments     $804            $(16)         $85
                                         =======        ========     ========

Change in unrealized appreciation
(depreciation):
   Fixed maturities                       $1,044         $(1,586)        $ 47
   Equity securities                      (1,012)            419          209
                                        --------        --------     --------
 Net change in unrealized
     Appreciation (depreciation)             $32         $(1,167)        $256
                                         =======        ========     ========



The composition, cost (amortized cost for fixed maturities) and estimated market
values of the Company's  investments at December 31, 2000 and 1999 are presented
below.

<TABLE>
<CAPTION>
                                                                                                 Aggregate
                                                             Gross Unrealized Holding              Fair
                                         Cost                   Gains        Losses                Value
                                      ---------                 -----        ------              --------
                                                                  (in thousands)
2000

<S>                                    <C>                  <C>               <C>                 <C>
Fixed Maturities:
      U.S. Government (a)              $ 3,792              $ 48              $  (6)              $ 3,834
      States (b)                        35,804               287               (263)               35,828
      Corporate                          3,561                39                (30)                3,570
                                       -------              ----              -----               -------

Total fixed maturities                 $43,157              $374              $(299)              $43,232
                                       -------              ----              -----               -------

Equity Securities:
      Common Stock                     $ 8,648              $ 12              $(594)              $ 8,066
      Preferred Stock                      270               193                                      463
                                       -------              ----              -----               -------

Total equity securities                $ 8,918              $205              $(594)              $ 8,529
                                       -------              ----              -----               -------
</TABLE>



                                       F-18
<PAGE>


<TABLE>
<CAPTION>
                                                                                                           Aggregate
                                                                        Gross Unrealized Holding             Fair
                                                                     ----------------------------          ---------
                                                  Cost                Gains             Losses               Value
                                                ----------            -----             ------               -----
                                                                           (in thousands)
<S>                                             <C>                  <C>               <C>                  <C>
1999

Fixed Maturities:
      U.S. Government (a)                       $  3,351             $    6            $   (132)            $  3,225
      States (b)                                  35,247                 53                (836)              34,464
      Corporate                                        7              3,615                 (67)               3,615
                                                --------             ------            --------             --------
Total fixed maturities                          $ 42,273             $   66            $ (1,035)            $ 41,304
                                                --------             ------            --------             --------
Equity Securities:
      Common Stock                              $  4,066             $  838            $   (215)            $  4,689
      Preferred Stock                                 50                 --                  --                   50
                                                --------             ------            --------             --------
Total equity securities                         $  4,116             $  838            $   (215)            $  4,739
                                                --------             ------            --------             --------
</TABLE>

(a) Includes U.S. Government agencies and authorities
(b) Includes municipalities and subdivisions

The  amortized  cost  and   estimated  market  value   of   fixed  maturities at
December 31, 2000, by  contractual  maturity  date,  are listed below.  Expected
maturities may differ from contractual maturities because borrowers may have the
right to call or prepay obligations with or without penalties.

<TABLE>
<CAPTION>
                                                                          (in thousands)
                                                   Amortized Cost      Aggregate Fair Value
                                                  ------------------   ---------------------

<S>                                                      <C>                   <C>
Due in one year or less                                  $3,030                $3,035

Due after one year through five years                    19,497                19,683

Due after five years through ten years                   18,898                18,790

Due after ten years                                       1,732                 1,724
                                                        -------               -------

Total                                                   $43,157               $43,232
                                                        =======               =======
</TABLE>

Fixed  maturities  and cash and cash  equivalents  carried  at  market  value of
$3,510,000 and $3,422,000,  in 2000 and 1999, respectively,  were on deposit for
governmental  authorities,  as  required  by  law.  Fixed  maturities  and  cash
equivalents  carried at market value of $27,328,000  and $22,270,000 in 2000 and
1999,   respectively,   have  been  deposited  in  trust  funds  or  pledged  to
collateralize  the  obligations of OLRI to ceding  companies  under  reinsurance
agreements. In addition, OLB maintained a bank letter of credit in the amount of
$700,000 at December 31, 2000 and 1999. The Company's  short term  investment of
cash is maintained  principally with seven banks and three  institutional  money
market  funds.  To control  this risk,  the  Company  utilizes  only high credit
quality financial  institutions.  Additionally,  under the insurance laws of the
State of Rhode Island,  where



                                       F-19
<PAGE>

OLRI is domiciled,  insurers and  reinsurers  are  restricted as to the types of
investments  they may purchase and the  concentration of risk they may accept in
any one issuer or group of issuers.  The Company  complies  with such laws which
insure  that the  concentration  of risk in its  investment  portfolio  is at an
acceptable and authorized level.

7) Notes Payable

Notes payable consist of the following in thousands at December 31:
<TABLE>
<CAPTION>

                                                                              2000            1999
                                                                              ----            ----
<S>                                                                          <C>            <C>
Insurance Brokerage:
Note payable, due through 7/1/2002, interest
    at prime                                                                 $   656        $ 1,031
Finance company note, due through 6/24/02, interest at 7.75%                     185            320
Finance company note, due through 2000, interest at
    Prime rate plus 1/2%                                                          --             17
Current portion                                                                 (521)          (527)
                                                                             -------        -------
Notes payable -- long term                                                   $   320        $   841
                                                                             =======        =======

Corporate:
Term loan, due through 6/24/2002, interest at 7.8%                           $ 2,071        $ 3,311
Current portion                                                               (1,343)        (1,241)
                                                                             -------        -------
Notes payable -- long term                                                   $   728        $ 2,070
                                                                             =======        =======
</TABLE>

The note  payable,  at 9%, due through July 1, 2002,  represents  debt  incurred
related to the DVK acquisition.

The 7.8% Term Loan due  through  June 24,  2002 is  secured  by the stock of the
Property and Casualty Companies.  Certain covenants exist on this loan, the most
significant being the requirement to maintain a minimum GAAP net worth,  minimum
statutory surplus in the Insurance  Companies,  a fixed ratio of net premiums to
surplus and a minimum debt service  coverage.  At December 31, 2000, the Company
was in compliance with the convenants under the loan agreement.

In addition,  the Company has  available a $4,500,000  revolving  line of credit
through  April 30, 2001 at LIBOR plus 175 basis  points or the bank's base rate.
The line is also secured by the stock of the  Property  and Casualty  Companies.
The proceeds are  available for general  operating  needs and  acquisitions.  At
December 31, 2000, no amount was outstanding on the revolving line of credit.  A
quarterly fee is assessed in the amount of .05% on the unused balance.

The Company  maintains  a $700,000  letter of credit and has  established  trust
funds in order to satisfy the  collateral  requirements  of certain  reinsurance
agreements as of December 31, 2000 and 1999.  The letter of credit is secured by
certain cash deposits.



                                       F-20
<PAGE>

Based on the borrowing rates currently available to the Company for bank loans
with similar terms and average maturities, the fair value of the notes payable
at December 31, 2000 and 1999 approximates their carrying value.

Interest expense in the accompanying consolidated statements of income for the
years ended December 31, 2000, 1999 and 1998 was $1,104,000, $1,091,000 and
$492,000, respectively.

8) Income Taxes

The  Company  and its  wholly  owned  domestic  subsidiaries  are party to a Tax
Allocation  Agreement (the "Agreement").  The Agreement requires these companies
to file a U.S.  consolidated income tax return. The Agreement also provides that
each member of the group will compute its separate tax liability or benefit on a
separate return basis and pay or receive such amounts to or from the Company.

The Company's  effective  income tax rate for the years ended December 31, 2000,
1999 and 1998 differs from the statutory  rate on ordinary  income before income
taxes as follows (in thousands, except percentages):



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

                                                                    % of                        % of                         % of
                                                                   Pretax                      Pretax                       Pretax
                                                       Amount      Income          Amount      Income         Amount        Income
                                                       ------      ------          ------      ------         ------        ------
<S>                                                   <C>            <C>          <C>            <C>          <C>             <C>
Income taxes computed at the
statutory rate                                        $ 4,634        34.0%        $ 3,648        34.0%        $ 3,588         34.0%

Increase (decrease) in taxes
resulting from:

        Tax-exempt investment income                     (519)       (3.8)           (507)       (4.7)           (456)        (4.3)

        State and local income taxes
          and other                                       110         0.8              84         0.8             1.3          1.3
                                                      -------        ----         -------        ----         -------        -----

Provision for income taxes                            $ 4,225        31.0%        $ 3,225        30.1%        $ 3,272         31.0%
                                                      =======        ====         =======        ====         =======         ====
</TABLE>


The source of the significant temporary differences and the related deferred tax
effects are as follows:


                                       F-21
<PAGE>

<TABLE>
<CAPTION>
                                        2000             1999             1998
                                        ----             ----             ----
                                                    (in thousands)

<S>                                     <C>              <C>              <C>
Expiration lists                        $268             $395             $394
Accrual adjustment                       167               60              (85)
Unearned premium reserves                 31              (71)              10
Deferred acquisition costs               (88)             133               (6)
Loss reserve discount                   (220)            (353)            (246)
Other                                    180             (200)            (217)
                                         ---            -----            -----
Deferred tax expense (benefit)          $338            $ (36)           $(150)
                                        ====            =====            =====
</TABLE>



The components of the net deferred tax assets and liabilities, in the
accompanying consolidated balance sheets at December 31, 2000 and 1999, are as
follows:


                                                     2000         1999
                                                     ------       ----
                                                      (in thousands)
Deferred tax assets:
         Loss and loss expense reserves             $1,869        $1,649
         Unearned premium reserves                     867           898
         Other                                         346           525
         Unrealized losses on investments              107           118
         Expiration lists                                            152
                                                    ------        ------
                                                      (116)
         Total deferred tax asset                    3,073         3,342
                                                    ------        ------

Deferred tax liabilities:
         Deferred acquisition costs                  1,378         1,466
         Other accrual adjustments                   1,206         1,038
                                                     -----         -----

         Total deferred tax liability                2,584         2,504
                                                     -----         -----

Net deferred tax asset                                $489          $838
                                                      ====          ====

Management  believes it is more likely than not that all deferred tax assets are
realizable based upon the past earnings history of the Company.

OLB, as a Bermuda domiciled company, is not subject to federal income taxes but,
rather,  the Company is subject to federal  income taxes based on OLB's  taxable
income for the entire year. Accordingly, the Company includes the taxable income
of OLB in its  separate  company  income  for  tax  purposes,  but  for  segment
reporting the income is included with the Property and Casualty  Companies.  OLB
has received an undertaking  from the Bermuda  Government  exempting it from all
taxes  computed on profit or income,  or  computed on any capital  asset gain or
appreciation until 2016.




                                       F-22
<PAGE>


9) Lease Commitments and Rentals

Minimum annual rental commitments under various non-cancelable  operating leases
for office space and equipment are as follows (in thousands):

                            Years Ending December 31,

                       2001    .....................   $3,329
                       2002  .......................    1,324
                       2003  .......................      982
                       2005  .......................      923
                       Thereafter  .................    4,311
                                                      ------
                                                       11,818
                  Sub-lease rental income...........     (491)
                                                       ------
                  Net rental commitments............  $11,327
                                                      -------


Leases  for office  space  include  various  escalation  clauses,  none of which
individually or in the aggregate are material.  Escalation clauses are accounted
for on a  straight-line  basis over the remaining life of the lease.  The leases
also contain  provisions for the payment of certain operating  expenses and real
estate taxes.

Rent expense for the years ended  December 31, 2000,  1999 and 1998  amounted to
$3,324,000,  $3,242,000 and  $2,928,000,  respectively,  net of sublease  rental
income of $174,000, $48,000 and $48,000, respectively.

10) Defined Contribution Plan

Substantially  all  officers  and  employees  of the  Company  are  entitled  to
participate in a qualified retirement savings plan (defined  contribution plan).
The cost to the Company was $434,000  $406,000  and $255,000 for 2000,  1999 and
1998, respectively.

11) Commitments and Contingencies

In the ordinary course of business, the Company and its subsidiaries are subject
to various  claims  and  lawsuits  consisting  primarily  of alleged  errors and
omissions  in  connection  with the  placement of  insurance.  In the opinion of
management,  the ultimate  resolution of all asserted and  potential  claims and
lawsuits will not have a material effect on the consolidated  financial position
and results of operations of the Company.

As licensed brokers,  the Insurance  Brokerage Companies are or may become party
to administrative inquiries and at times to administrative proceedings commenced
by state insurance  regulatory bodies.  Certain subsidiaries were involved in an
administrative  investigation  commenced  in  1992  by the  New  York  Insurance
Department  ("Department")  relating to how  property  insurance  policies  were
issued for the Residential Real Estate Program. As a result, the manner in which
policies are structured for certain  clients in this Program was altered,  which
has not had a material  adverse  effect on this  Program.  While the Company had
discussions with the Department regarding settlement of such investigation, this
matter has not been  pursued for several  years.  If the matter is not closed or
settled,   the  Department  could  institute  formal  proceedings   against



                                       F-23
<PAGE>

the  subsidiaries  seeking  fines or  license  revocation.  Management  does not
believe the resolution of this issue will have a material  adverse effect on the
Company.

12) Reinsurance

The components of net written and net earned insurance  premiums were as follows
for the years ended December 31, 2000, 1999 and 1998:

                                2000               1999             1998
                                ----               ----             ----
                                            (in thousands)
Written premiums:
Direct                        $8,988            $12,120          $11,586
Assumed                       23,139             16,668           13,207
Ceded                         (2,099)              (967)            (255)
                             -------              -----          -------
Net written premiums         $30,028            $27,821          $24,538
                             =======            =======          =======

Earned premiums:
Direct                       $11,070            $11,576          $11,652
Assumed                       21,054             15,846           13,392
Ceded                         (1,638)              (642)            (355)
                             -------            ---------        -------
Net earned premiums          $30,486            $26,780          $24,689
                             =======            =======          =======


OLRI  assumes   reinsurance  under  arrangements  with  unaffiliated   insurance
companies.  The Insurance Brokerage Companies produce the business assumed under
these arrangements. The business has limits varying from $25,000 to $100,000 per
occurrence.  Claim  liabilities  under these  agreements  are secured with fixed
maturity securities and cash and cash equivalents,  which are deposited in trust
funds.  Approximately  $27,328,000  and  $22,270,000 as of December 31, 2000 and
1999, respectively, are held in these trust funds. In addition, OLB maintained a
bank letter of credit in the amount of $700,000 at December 31, 2000 and 1999 to
satisfy the reinsurance collateral requirement. OLRI underwrites a small book of
business  with  limits up to  $3,500,000  with net  retention  on one  policy of
$100,000 and reinsures the balance on an excess of loss basis to other  insurers
or reinsurers.

Under the terms of the reinsurance agreements, loss and loss adjustment expenses
recovered  (incurred) in 2000, 1999 and 1998 were  $2,174,857,  $(451,000),  and
$409,000,  respectively.  Commissions  earned on reinsurance ceded in 2000, 1999
and 1998 were $347,000, $148,000 and $45,000, respectively. Reinsurance has been
placed  with  PXRE  Reinsurance  Company  and The  Hartford  Stream  and  Boiler
Inspection and Insurance Co. which are rated A or better by A.M. Best.

A contingent  liability  exists with respect to reinsurance  ceded,  which would
become an ultimate  liability of OLRI in the event that the  assuming  companies
were unable to meet their obligations under the reinsurance  agreements in force
at December 31, 2000.



                                       F-24
<PAGE>

13) Unpaid Losses and Loss Expenses

The following table sets forth a  reconciliation  of the changes in the reserves
for losses and loss expenses, including paid losses and loss expenses:

<TABLE>
<CAPTION>

                                                               Years Ended December 31,
                                                        ------------------------------------

                                                         2000             1999             1998
                                                         ----             ----             ----
                                                                      (in thousands)

<S>                                                   <C>              <C>              <C>
Balance at January 1,                                 $23,969          $21,567          $19,126
         Less: reinsurance recoverables                (2,678)          (3,220)          (2,811)
                                                      -------          -------          -------
         Net balance                                   21,291           18,347           16,315
                                                      -------          -------          -------
Incurred related to:
         Current year                                  13,340           10,410            8,461
         Prior years                                   (1,070)            (656)              35
                                                      -------          -------          -------
         Total incurred                                12,270            9,754            8,496
                                                      -------          -------          -------
Paid related to:
         Current year                                   2,809            2,188            1,877
         Prior years                                    7,368            4,622            4,587
                                                      -------          -------          -------
         Total paid                                    10,177            6,810            6,464
                                                      -------          -------          -------

Net balance at December 31,                            23,384           21,291           18,347
         Add: reinsurance recoverables                  4,600            2,678            3,220
                                                      -------          -------          -------
         Balance                                      $27,984          $23,969          $21,567
                                                      =======          =======          =======
</TABLE>

2000 and 1999 incurred provisions increased over prior year's amounts due to the
growth of liability  business.  Incurred  provision  reductions in 2000 and 1999
relating to prior years were due to redundant  property and  liability  reserves
established  in those  years.  Paid losses in 2000 and 1999 for both current and
prior years  increased over the prior year's amount due to the overall growth in
business.


                                       F-25
<PAGE>


14) Statutory Financial Information and Dividend Restrictions

The Insurance  Companies file separate  financial  statements in accordance with
accounting  practices  prescribed  or  permitted  by  the  insurance  regulatory
authorities  where they are  domiciled.  These  statutory  accounting  practices
("SAP") differ in certain  respects from GAAP.  These  differences are primarily
comprised of the  accounting  for prepaid  acquisition  costs,  deferred  income
taxes, and fixed maturity and equity investments.

The  following  is  a  reconciliation   of  net  income  and  surplus  regarding
policyholders in accordance with SAP as reported to the Rhode Island and Bermuda
insurance  regulatory  authorities  to net income and capital as  determined  in
conformity with GAAP.

<TABLE>
<CAPTION>

                                                 Statutory Surplus /
                                                Stockholders' Equity           Net Income for years ended
                                                 as of December 31,                   December 31,
                                               ------------------------    -----------------------------------------
                                                   2000           1999         2000           1999            1998
                                                   ----           ----         ----           ----            ----
                                                                       (in thousands)
<S>                                            <C>             <C>             <C>            <C>            <C>
Consolidated amount in accordance with GAAP    $ 56,042        $ 47,251        $ 9,404        $ 7,504        $ 7,282


Deficit (equity) in net assets and net loss
(income) of non-insurance companies             (14,782)        (10,083)        (1,658)          (226)          (141)
                                               --------        --------        -------        -------        -------

Combined amount in accordance with GAAP          41,260          37,168          7,746          7,278          7,141

Deferred acquisition costs                       (4,053)         (4,313)           260           (392)            18

Non-admitted assets, deferred income taxes
and other                                        (1,898)           (341)          (278)          (241)          (292)
                                               --------        --------        -------        -------        -------

Combined amount in accordance with SAP         $ 35,309        $ 32,514        $ 7,728        $ 6,594        $ 6,918
                                               ========        ========        =======        =======        =======
</TABLE>

The Insurance  Companies are currently subject to various regulations that limit
the maximum  amount of dividends  ultimately  available  to the Company  without
prior approval of insurance  regulatory  authorities.  Under SAP,  approximately
$3,811,000 of statutory  surplus is available for  distribution  in 2001 without
prior regulatory approval.

In 1998, the National  Association of Insurance  Commissioners  ("NAIC") adopted
the Codification of Statutory Accounting Principles guidance, which will replace
the current  Accounting  Practices and  Procedures  manual as the NAIC's primary
guidance on statutory accounting.  The new accounting guidance becomes effective
January 1, 2001 and has been adopted by the State of Rhode Island.





                                       F-26
<PAGE>


15) Related Party Transactions

The  administrative  support  for  OLB is  provided  by  International  Advisory
Services,  Ltd. ("IAS"),  an insurance  management company located in Bermuda. A
director  of IAS  is an  officer  of  OLB  and  is a  director  of the  Company.
Management  fees  paid to IAS  under a  service  contract  for the  years  ended
December  31,  2000,   1999  and  1998  were   $20,000,   $20,000  and  $30,000,
respectively.


A  director  of the  Company is also a  director  of, and had shared  beneficial
ownership  of more  than ten  percent  of the  outstanding  common  stock of Sun
Television and Appliances,  Inc. ("Sun TV"). In 1994, Sun TV and a subsidiary of
the Company entered into two agreements whereby the Company's  subsidiary agreed
to assume  certain  service  contracts  that  were sold by Sun TV to its  retail
customers (the  "Agreement")  and contracted  with Sun TV to have Sun TV provide
repair services under certain service contracts. The Board of Directors believes
that the agreements were commercially reasonable.  On September 11, 1998, Sun TV
filed  bankruptcy  petitions  under  Chapter  11 of  the  Bankruptcy  Code.  The
Company's  subsidiary  filed a proof of claim on March 11,  1999 for any and all
amounts that are due and owing under the Agreement.

16) Dividends and Treasury Stock

The Board of Directors of the Company  declared annual dividends of $845,000 and
$847,000  for the years ended  December  2000 and 1999,  respectively,  of which
$212,000 was unpaid at December 31, 2000 and 1999.

In December  1998,  the Board of Directors  authorized for a two year period the
repurchase, at management's discretion, of up to 300,000 shares of the Company's
Common Stock.  The Company's  repurchases of shares of Common Stock are recorded
as  treasury  stock and result in a  reduction  of  stockholders'  equity.  When
treasury shares are reissued the Company uses a first-in,  first-out  method and
the excess of re-issuance  price over  repurchase cost is treated as an increase
of paid-in capital.  Net  issuances/(purchases)  of treasury stock for the years
ended December 31, 2000 and 1999 amounted to 23,176 shares and (27,657)  shares,
respectively.  Treasury  shares at December 31, 2000 and 1999  amounted to 4,481
and 27,657 shares, respectively at a cost of approximately $37,000 and $229,000.

17) Stock Performance and Stock Option Plans

On December 30, 1997, the Company adopted a Stock  Performance Plan, under which
up to 350,000 shares of the Company's common stock may be granted and awarded to
key  employees.  The grant of stock under this plan is contingent  upon criteria
established by the  Compensation  Committee of the Company's Board of Directors.
Awards  are  based  on  performance  targets  of the  Company's  stock  based on
increases  in the market value of the  Company's  common stock from the price on
the date the stock is initially granted by the Company.  Shares must be granted,
awarded,  and vested  before  participants  take full  title to the  performance
stock. Awards vest on the occurrence of any of the following events, (i) fifteen
years of continuous service with the Company from the date shares are granted to
the participant, (ii) death or disability of the participant,  (iii) immediately
before a change of control (as defined under the plan),  (iv)  attaining the age
of 65, or (v)  immediately  before a sale or merger (as defined under the plan).
During 2000 and 1999,  $0 and 26,016  shares of  performance  stock were granted
under this plan,  respectively.  During July 1999,  the Company  awarded  33,844
shares of  restricted  stock  from  shares  previously  granted  under the Stock
Performance  Plan to certain key  employees.  The



                                       F-27
<PAGE>

market value of these shares awarded totaled approximately $264,000 and has been
recorded  as  unearned  stock  grant  compensation  (net of  amortization)  as a
separate  component of  stockholders'  equity.  Unearned  compensation  is being
amortized to expense on a straight-line basis over the remaining vesting period.
At December 31, 2000 and 1999, no performance stock under this plan was vested.

In addition to the Stock  Performance Plan, the Company has a stock option plan.
Under the option plan a total of  1,350,000  shares of common stock are reserved
for issuance. The option plan provides for the granting to directors, executives
or other key employees (including  officers) of the Company  non-qualified stock
options (NQO's) or incentive stock options (ISO's) within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended. The Compensation Committee
determines  the terms of the options  including  the exercise  price,  number of
shares subject to option and exercisability. The exercise price of all ISO's and
NQO's under the plan is  generally  at least the fair market value of the common
stock of the  Company  on the date of  grant.  A  summary  of the  stock  option
activity and related information consists of the following:

<TABLE>
<CAPTION>


                                                   2000                           1999                   1998
                                     ----------------------------------------------------------------------------------------
                                                         Weighted-Average          Weighted-Average          Weighted-Average
                                                           Exercise                  Exercise                  Exercise
                                            Shares           Price       Shares        Price        Shares       Price
                                     ----------------------------------------------------------------------------------------

<S>                                         <C>            <C>          <C>            <C>          <C>            <C>
Outstanding  at  beginning  of year         993,000        $   6.70     659,200        $   6.15     624,850        $   6.12
Granted                                     144,250            7.41     361,800            7.63      54,500            6.46

Exercised                                                                (6,900)           5.06

Forfeited                                    (7,540)           5.94     (21,100)           5.93     (20,150)           7.88
                                          ---------                    --------                     -------
Outstanding at end of year                1,129,710        $   7.55     993,000        $   6.70     659,200        $   6.15
                                          ---------                    --------                     -------
Options exercisable at year end             544,060                     341,300                     232,900
                                          ---------                    --------                     -------
Weighted-average fair value
of options granted during the year         $   3.09                    $   2.34                     $  2.17
                                          ---------                    --------                     -------

</TABLE>


                                       F-28


<PAGE>


The following table summarizes  information about the stock options  outstanding
at December 31, 2000:

<TABLE>
<CAPTION>

                                 Options Outstanding                          Options Exercisable
                   ----------------------------------------------      --------------------------------

                      Number       Weighted-Average  Weighted-Average     Number          Weighted-
                   Outstanding      Remaining         Exercise         Exercisable    Average Exercise
Exercise Prices    at 12/31/00    Contractual Life     Price           at 12/31/00         Price
                   ------------ ------------------- ---------------  -------------    ----------------

<S>                <C>                 <C>             <C>              <C>              <C>
  $ 11.63                500            3.09 years    $    11.63           500          $    11.63

  $ 10.91              5,000            3.06          $    10.91         5,000          $    10.91

  $ 10.00             75,500            2.62          $    10.00        75,500          $    10.00

  $  8.43             39,750            4.81          $     8.43        39,750          $     8.43

  $  8.24             20,000            8.82          $     8.24         4,000          $     8.24

  $  8.24             48,500            8.83          $     8.24         9,700          $     8.24

  $  8.03             15,000            6.83          $     8.03         9,000          $     8.03

  $  7.88             15,000            4.70          $     7.88        15,000          $     7.88

  $  7.50            252,500            8.95          $     7.50        50,500          $     7.50

  $  7.50            122,500            9.37          $     7.50        24,500          $     7.50

  $  7.50                750            9.88          $     7.50            --                  --

  $  7.41                160            8.12          $     7.41           160          $     7.41

  $  7.38             40,000            8.15          $     7.38         8,000          $     7.38

  $  7.07              1,000            9.78          $     7.07            --                  --

  $  7.06             10,000            5.37          $     7.06         8,000          $     7.06

  $  6.90             20,000            9.83          $     6.90            --                  --

  $  6.64              5,000            7.00          $     6.64         3,000          $     6.64

  $  6.60             21,800            7.94          $     6.60         8,900          $     6.60

  $  6.17             20,000            7.83          $     6.17         8,000          $     6.17

  $  5.06            156,750            6.15          $     5.06        95,550          $     5.06

  $  5.00            250,000            6.12          $     5.00       173,000          $     5.00

  $  4.97             10,000            6.50          $     4.97         6,000          $     4.97
                   ---------                                          --------
                   1,129,710            6.99 years    $     7.55       544,060          $     6.58
                   =========                                          ========
</TABLE>


Unless otherwise specified, the options vest and are exercisable at the rate of
20% per year and terminate ten years from date of grant. At December 31, 2000,
1999 and 1998, 544,060, 341,300 and 232,900 options were exercisable and there
were 220,290, 0, and 40,800 options available for future grants, respectively.


Had the compensation cost for the Company's stock based  compensation plans been
determined  based on the fair  value at the grant date for  awards  under  those
plans  consistent  with the method of SFAS No. 123, the Company's net income and
earnings  per share would have been reduced to the pro forma  amounts  indicated
below (in thousands, except per share amounts):



                                       F-29
<PAGE>

<TABLE>
<CAPTION>
                                                               2000            1999           1998
                                                               ----            ----           ----
<S>                                     <C>                   <C>             <C>            <C>
Net Income                              As reported           $9,404          $7,504         $7,282
                                        Pro forma              9,159           7,361          7,167

Earnings per share -- basic             As reported            1.11            .89            .86
                                        Pro forma              1.08            .87            .85

Earnings per share -- diluted           As reported            1.09            .87            .85
                                        Pro forma              1.06            .85            .84
</TABLE>

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions:  (i) dividend
yield of 1.3%, (ii) expected  volatility range of 45%, (iii) risk-free  interest
rate of 6.63%, and (iv) expected life of 5 years.

18) Quarterly Financial Information (Unaudited)

The following quarterly financial information for each of the three months ended
March 31, June 30,  September 30 and  December  31, 2000 and 1999 is  unaudited.
However,  in the opinion of management,  all  adjustments  (consisting of normal
recurring  adjustments)  necessary  for a fair  presentation  of the  results of
operations for such periods, have been made.

<TABLE>
<CAPTION>

                                                            For the three months ended
----------------------------------------------------------------------------------------------------------------
                                                      (in thousands, except for per share)

                                       March 31,            June 30,         September 30,        December 31,
                                       ---------            --------         -------------        ------------
                                     2000      1999      2000      1999      2000      1999      2000      1999
----------------------------------------------------------------------------------------------------------------

<S>                                <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Revenues                           $17,375   $16,083   $20,644   $17,739   $18,937   $16,599   $21,442   $18,323
------------------------------------------------------------------------------------------- --------------------
Net income                         $ 1,622   $ 1,359   $ 2,917   $ 2,123   $ 2,349   $ 1,723   $ 2,516   $ 2,299
----------------------------------------------------------------------------------------------------------------
Earnings per share:
         Basic                     $  0.19   $  0.16      0.34      0.25      0.28      0.20      0.30      0.27
         Diluted
                                      0.19      0.16      0.34      0.25      0.27      0.20      0.29      0.27
----------------------------------------------------------------------------------------------------------------
Weighted average shares
outstanding:
         Basic
                                     8,461     8,460     8,466     8,448     8,473     8,460     8,479     8,464
         Diluted
                                     8,669     8,605     8,570     8,590     8,610     8,655     8,625     8,667
----------------------------------------------------------------------------------------------------------------
</TABLE>






                                       F-30
<PAGE>



19) Business Segments

The Company operates in two insurance business segments, the Insurance Brokerage
Companies  and the  Property  and Casualty  Companies.  In  addition,  Corporate
Operations include those activities that benefit the Company in its entirety and
cannot be specifically identified to either the Insurance Brokerage Companies or
the Property and Casualty Companies.  Such activities include debt servicing and
public company expenses,  including  investor  relations costs. The identifiable
segment  assets,  operating  profits and income before income taxes and minority
interests  are  shown  on  the  accompanying  consolidated  balance  sheets  and
statements of income.

The following table is a summary of certain other segment information for the
years ended December 31, 2000, 1999 and 1998:


                            Business Segments -- 2000
--------------------------------------------------------------------------------
                                            Insurance           Property &
(in thousands)                              Brokerage           Casualty
--------------------------------------------------------------------------------
Revenue from external sources                 $38,935            $30,486
Revenue from other segments                     3,131                 76
Depreciation and amortization expense           2,857              9,466
Interest income from other segments                                  275
Capital expenditures                            3,866


                            Business Segments -- 1999
--------------------------------------------------------------------------------
                                            Insurance           Property &
(in thousands)                              Brokerage           Casualty
--------------------------------------------------------------------------------
Revenue from external sources                 $33,158            $26,780
Revenue from other segments                     4,221                 72
Depreciation and amortization expense           2,355              8,309
Interest income from other segments                                  192
Capital expenditures                            1,347


                            Business Segments -- 1998
--------------------------------------------------------------------------------
                                            Insurance           Property &
(in thousands)                              Brokerage           Casualty
--------------------------------------------------------------------------------
Revenue from external sources                 $31,324             $24,689
Revenue from other segments                     4,032                  69
Depreciation and amortization expense           1,792                7,651
Capital expenditures                            2,089


The foreign operations set forth below,  relate solely to the operations of OLB,
and its wholly owned subsidiary Park Brokerage,  and business assumed from third
party  insurance  companies.  All such  risks  assumed  originate  in the United
States.


                                                   2000
                             ---------------------------------------------------
                                  Foreign         Domestic              Total
                             ---------------------------------------------------
                                               (in thousands)
Consolidated Revenues             $1,589          $76,809                $78,398
Income before income taxes           805           12,824                 13,629
Identifiable assets                3,063          169,948                173,011



                                       F-31
<PAGE>

<TABLE>
<CAPTION>
                                                  1999                                 1998
                                     --------------------------------   ----------------------------------
                                      Foreign    Domestic     Total        Foreign    Domestic     Total
                                     --------------------------------   ----------------------------------
                                                                  (in thousands)

<S>                                   <C>        <C>        <C>            <C>        <C>         <C>
Consolidated  Revenues                $1,717     $67,027    $68,744        $2,092     $62,919     $65,011
Income before income taxes             1,055       9,674     10,729         1,169       9,385      10,554
Identifiable assets                    2,648     146,564    149,212         2,936     157,647     160,583
</TABLE>

There were no material inter-company revenue transactions between OLB and OLRI.

20)  Supplemental Cash Flow Disclosures
<TABLE>
<CAPTION>

                                                            2000          1999         1998
                                                            ----          ----         ----
                                                                    (in thousands)
<S>                                                         <C>           <C>          <C>
Cash paid during the period for:
         Interest expense                                   $1,097        $968         $501
         Income taxes                                       $4,066      $3,463       $2,870

Non-cash investing and financing activities:
         Stock issued under Stock Performance Plan                        $222

Details of acquisitions:
         Purchase payments including outstanding
           payable                                          $4,225      $7,784       $5,196
         Amounts contingently payable                         (656)     (1,578)      (3,300)
         Reissuance of treasury stock                         (192)       (628)
         Acquisition debt repayment                           (375)       (375)        (657)
                                                            ------      ------

         Cash paid for acquisitions                         $3,002      $5,203       $1,239
                                                            ------      ------       ------
</TABLE>


                                       F-32
<PAGE>


21) Subsequent Event

On January 20, 2001, the Company reported that Hub International Limited ("Hub")
had entered into a definitive  agreement to acquire the Company through a merger
transaction.

          Upon the merger,  each  holder of the  Company's  shares will  receive
$14.00 per share  consisting  of cash of $9.33 and $4.67  principal  amount of 5
year 8.50% subordinate convertible debentures of Hub. Hub has the right to amend
the merger  consideration by replacing any or all of the convertible  debentures
with an equal amount of cash.  Completion of this  transaction,  anticipated  to
occur in the second  quarter of 2001, is subject to the receipt of  satisfactory
applicable regulatory  approvals,  approval of the merger by the shareholders of
the Company,  compliance with applicable  legal and regulatory  requirements and
standard closing  conditions.  The holders of approximately 55% of the shares of
the Company,  under individual  agreements,  have agreed to vote in favor of the
merger,  and have granted Hub an irrevocable  option to purchase their shares of
the Company in the event that the merger is not completed.

Immediately  prior to the transaction all outstanding stock options shall become
vested,  and in return for their  cancellation,  the  holders  of  options  will
receive a cash payment;  and in return for the  cancellation  of all outstanding
and awarded Performance Stock Shares, the holders will receive a cash payment at
a later date.  On  completion  of the  transaction,  the Company  will record an
expense of approximately  $2,400,000  related to the cancellation of the awarded
shares of the Stock Performance Plan.

In addition,  as a result of the  transaction,  the Company  will incur  related
expenses of approximately $2.5 million during the period January 1, 2001 through
completion of the transaction.






                                       F-33


<PAGE>

                                                                    Schedule II


                                 KAYE GROUP INC.
                              (Parent Company Only)
                            Condensed Balance Sheets
                        As of December 31, 2000 and 1999
                   (in thousands, except par value per share)

<TABLE>
<CAPTION>

                                                                                        2000             1999
                                                                                     --------          ----------
ASSETS

<S>                                                                                  <C>                 <C>
Cash and  cash equivalents                                                           $    138            $  1,233
Prepaid expenses and other assets                                                          59                 153
Investments:
     Equity securities, at market (cost: 2000, $308, and 1999, $243)                      320                 243
Deferred income taxes                                                                      67                  93
Due from subsidiaries                                                                   2,427                 890
Investment in subsidiaries                                                             55,543              48,616
                                                                                     --------            --------

       Total assets                                                                  $ 58,554            $ 51,228
                                                                                     --------            --------


LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Accounts payable and other liabilities                                               $    254            $    300
Note payable                                                                            1,343               1,241
Income taxes payable                                                                      187                 366
                                                                                     --------            --------

Total current liabilities                                                               1,784               1,907
Note payable - long term                                                                  728               2,070
                                                                                     --------            --------

       Total liabilities                                                                2,512               3,977
                                                                                     --------            --------

STOCKHOLDERS' EQUITY

Preferred stock, $1.00 par value; 1,000 shares authorized;
       none issued or outstanding
Common stock, $.01 par value; 20,000 shares authorized;
       (2000, 8,481; 1999,  8,458 shares issued and outstanding)                           85                  85
Paid-in capital                                                                        18,019              18,019
Unearned stock grant compensation                                                        (235)               (254)
Common stock in Treasury, shares at cost (2000, 4; 1999, 28)                              (37)               (229)
Unrealized appreciation (depreciation) of investments, net of deferred
       income tax provision(benefit) , (2000, ($107); 1999, ($118))                      (207)               (228)
Retained earnings                                                                      38,417              29,858
                                                                                     --------            --------

       Total stockholders' equity                                                      56,042              47,251
                                                                                     --------            --------


           Total liabilities and stockholders' equity                                $ 58,554            $ 51,228
                                                                                     --------            --------
</TABLE>



              The condensed financial statements should be read in
           conjunction with the consolidated financial statements and
                    notes thereto and the accompanying notes.


                                     F - 34


<PAGE>


                                                                    Schedule II


                                 KAYE GROUP INC.
                              (Parent Company Only)
                         Condensed Statements of Income
              For the years ended December 31, 2000, 1999 and 1998
                                 (in thousands)

<TABLE>
<CAPTION>
                                                              2000                1999                 1998
                                                            -------             --------             ---------
REVENUES:

<S>                                                         <C>                  <C>                  <C>
       Net investment income (loss)                         $   107              $   206              $    (31)
       Equity in income of subsidiaries                      14,236               11,148                11,342

EXPENSES:

       Other operating expenses                                 480                  309                   314
       Interest expense                                         234                  316                   443
                                                            -------              -------              --------

Income before income taxes                                   13,629               10,729                10,554

       Provision for income taxes                             4,225                3,225                 3,272
                                                            -------              -------              --------

NET INCOME                                                  $ 9,404              $ 7,504              $  7,282
                                                            -------              -------              --------

</TABLE>



                    The condensed financial statements should
             be read in conjunction with the consolidated financial
            statements and notes thereto and the accompanying notes.

                                     F - 35


<PAGE>


                                                                    Schedule II


                                 KAYE GROUP INC.
                              (Parent Company Only)
                       Condensed Statements of Cash Flows
              For the years ended December 31, 2000, 1999 and 1998
                                 (in thousands)

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

<S>                                                                         <C>                <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                                           $  9,404           $ 7,504           $ 7,282

Adjustment  to reconcile  net income to net cash
provided by (used in) operating activities:
       Deferred income tax benefit                                                21               (93)             (150)
       Restricted stock compensation                                              19                10
       Equity in net income of subsidiaries                                  (10,214)           (8,115)           (7,826)
       Dividends received from subsidiaries                                    3,900             3,886             4,060
       Realized (gain) loss on investment                                        (64)              274
       Change in assets and liabilities:
           Prepaid expenses and other assets                                      94                95               (20)
           Due from subsidiaries                                              (1,537)            1,228             1,294
           Accounts payable and other liabilities                                (46)             (211)             (263)
           Income taxes payable                                                 (179)             (202)              552
                                                                             -------           -------           -------

       Net cash provided by operating activities                               1,398             4,376             4,929
                                                                             -------           -------           -------

CASH FLOWS FROM FINANCING ACTIVITIES:
       Payment of dividends                                                     (845)             (847)             (849)
       Notes payable-repayment                                                (1,240)           (1,145)           (7,575)
       Reissuance (acquisition) of treasury stock                                192              (571)
       Proceeds from borrowing                                                                                     5,000
       Capital contribution to subsidiary                                       (600)             (950)           (1,200)
                                                                             -------           -------           -------

       Net cash used in financing activities                                  (2,493)           (3,513)           (4,624)
                                                                             -------           -------           -------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                       (1,095)              863               305

Cash and cash equivalents at beginning of period                               1,233               370                65
                                                                             -------           -------           -------

Cash and cash equivalents at end of period                                  $    138           $ 1,233           $   370
                                                                             -------           -------           -------


SUPPLEMENTAL CASH FLOW DISCLOSURES

Cash paid during the period for:
       Interest expense                                                     $    234           $   316           $   480
       Income taxes                                                         $  4,066           $ 3,463           $ 2,870

</TABLE>





                    The condensed financial statements should
             be read in conjunction with the consolidated financial
            statements and notes thereto and the accompanying notes.


                                     F - 36


<PAGE>

                                                                    Schedule II


                                 KAYE GROUP INC.
                              (Parent Company Only)
                     Notes to Condensed Financial Statements



1.   Condensed Financial Statements

     Certain information and footnote disclosures normally included in financial
     statements  prepared  in  accordance  with  generally  accepted  accounting
     principles  have been  condensed  or omitted.  It is  suggested  that these
     condensed  financial  statements be read in conjunction  with the Company's
     consolidated financial statements and the notes thereto.


2.   Significant Accounting Policies

     The Company carries its investment in subsidiaries under the equity method.
     All other accounting policies are consistent with those of the Company on a
     consolidated basis.


                                     F - 37


<PAGE>


                                                                     Schedule IV

                                KAYE GROUP INC.
                                  REINSURANCE
              For The Years Ended December 31, 2000, 1999 and 1998
                                 (in thousands)

<TABLE>
<CAPTION>
===================================================================================================

     Column A       Column B        Column C          Column D         Column E        Column F

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

                                                                                      Percentage
   Insurance          Gross      Ceded To Other      Assumed from                     of Amount
Premiums Earned       Amount        Companies      Other Companies     Net Amount   Assumed to Net
---------------------------------------------------------------------------------------------------

<S>                  <C>             <C>               <C>              <C>               <C>
     2000            $11,070         $1,638            $21,054          $30,486           69%

     1999            $11,576         $  642            $15,846          $26,780           59%

     1998            $11,652         $  355            $13,392          $24,689           54%
</TABLE>




                                      F-38





<PAGE>



                                                                     Schedule VI

                                 KAYE GROUP INC.
       SUPPLEMENTAL INFORMATION CONCERNING INSURANCE COMPANIES OPERATIONS
              For the years ended December 31, 2000, 1999 and 1998
                                 (in thousands)


<TABLE>
<CAPTION>
================================================================================================================================

Column A       Column B       Column C        Column D     Column E   Column F   Column G         Column H          Column I

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

                                                                                              Claims and Claim
                             Reserves For                                                    Adjustment Expenses
                            Unpaid Claims     Discount                                       Incurred Related to   Amortization
Affiliation     Deferred      And Claim        If Any                              Net           (1)      (2)      Of Deferred
   With        Acquisition    Adjustment     Deducted In    Unearned  Earned    Investment     Current   Prior     Acquisition
Registrant        Costs       Expenses        Column C      Premiums  Premiums    Income        Year     Years        Costs
--------------------------------------------------------------------------------------------------------------------------------

<S>               <C>          <C>                          <C>        <C>       <C>          <C>      <C>           <C>
Foreign             $149          $246          N/A            $709     $1,459     $130          $348     ($88)        $307
Domestic           3,904        27,738          N/A          12,988     29,027    2,924        12,992     (982)       9,143
             -------------------------------------------------------------------------------------------------------------------

2000              $4,053       $27,984          N/A         $13,697    $30,486   $3,054       $13,340  ($1,070)      $9,450
             ===================================================================================================================

Foreign             $152          $260          N/A            $725     $1,598     $119          $375    ($144)        $335
Domestic           4,161        23,709          N/A          12,969     25,182    2,678        10,035     (542)       7,957
             -------------------------------------------------------------------------------------------------------------------

1999              $4,313       $23,969          N/A         $13,694    $26,780   $2,797       $10,410    ($656)      $8,292
             ===================================================================================================================

Foreign             $193          $295          N/A            $916     $1,957     $135          $313      $95         $414
Domestic           3,728        21,272          N/A          11,411     22,732    2,453         8,148      (60)       7,216
             -------------------------------------------------------------------------------------------------------------------

1998              $3,921       $21,567          N/A         $12,327    $24,689   $2,588        $8,461      $35       $7,630
             ===================================================================================================================

<CAPTION>

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

Column A      Column J      Column K    Column L

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


                 Paid
                Claims
Affiliation   and Claim                  Other
   With       Adjustment   Premiums    Operating
Registrant     Expenses     Written     Expenses
--------------------------------------------------

<S>            <C>          <C>         <C>
Foreign           $272       $1,443       $218
Domestic         9,905       28,584      2,947
            --------------------------------------

2000           $10,177      $30,027     $3,165
            ======================================

Foreign           $296       $1,408        $66
Domestic         6,514       26,414      2,847
            --------------------------------------

1999            $6,810      $27,822     $2,913
            ======================================

Foreign           $317       $1,742       $102
Domestic         6,147       22,796      2,178
            --------------------------------------

1998            $6,464      $24,538     $2,280
            ======================================
</TABLE>



                                      F-39