UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, DC 20549
                                 FORM 10-K

     (Mark One)

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

                For the fiscal year ended December 31, 1999

                                     OR

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

                     For the transition period from     to

                      COMMISSION FILE NUMBER 000-23427

                   STIRLING COOKE BROWN HOLDINGS LIMITED
           (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              BERMUDA                          NOT APPLICABLE
   (STATE OR OTHER JURISDICTION OF             (IRS EMPLOYER
   INCORPORATION OR ORGANIZATION)          IDENTIFICATION NUMBER)

   VICTORIA HALL, 3RD FLOOR, 11 VICTORIA STREET, HAMILTON HM 11, BERMUDA
                  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                      TELEPHONE NUMBER: (441) 295-7556
            (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

      SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                            TITLE OF EACH CLASS
                            -------------------
                 Ordinary Shares, Par Value $0.25 per share

     Indicate  by check  mark  whether  the  registrant  (1) has  filed all
reports  required  to be filed  by  Section  13 or 15(d) of the  Securities
Exchange  Act of 1934 during the  preceding  12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has
been subject to such filing requirements for the past 90 days. Yes X     No
                                                                  ---

     Indicate by check mark if disclosure of delinquent  filers pursuant to
Item  405 of  Regulation  S-K is not  contained  herein,  and  will  not be
contained,  to the best of registrant's  knowledge,  in definitive proxy or
information  statements  incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. NOT APPLICABLE.

     The  aggregate  market  value of the  shares of all  classes of voting
stock of the registrant held by  non-affiliates  of the registrant on March
15, 2000 was  approximately  $13.8  million  computed upon the basis of the
closing sales price of the Ordinary Shares on the Nasdaq National Market on
that date. For purposes of this  computation,  shares held by directors and
officers  of the  registrant  have been  excluded.  Such  exclusion  is not
intended,  nor shall it be deemed, to be an admission that such persons are
affiliates of the registrant.

     As of March 15, 2000 there were 9,419,972 outstanding Ordinary Shares,
the only class of the registrant's  common stock outstanding,  of $0.25 par
value.

                    DOCUMENTS INCORPORATED BY REFERENCE

     Certain portions of the registrant's  Proxy Statement  relating to its
Annual General Meeting of Shareholders scheduled to be held on May 25, 2000
are incorporated by reference into Part III of this Form 10-K.

     Although  Stirling Cooke Brown Holdings  Limited is a "foreign private
issuer" within the meaning of Rule 3b-4 under the  Securities  Exchange Act
of 1934, as amended,  it is voluntarily  electing to file its Annual Report
for the year ended December 31, 1999 on a Form 10-K.


<PAGE>


                                   INDEX

                                                                       PAGE
                                                                       ----

                                     PART 1

       Item 1   Business................................................  1

       Item 2   Properties.............................................. 10

       Item 3   Legal Proceedings....................................... 11

       Item 4   Submission of Matters to a Vote of Security Holders..... 11

                                     PART II

       Item 5   Market for Registrant's Common Equity and Related
                Stockholder Matters..................................... 12

       Item 6   Selected Financial Data................................. 13

       Item 7   Management's Discussion and Analysis of Financial
                Condition and Results of Operations..................... 14

       Item 8   Financial Statements and Supplementary Data............. 19

       Item 9   Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure..................... 46

                                    PART III

       Item 10  Directors and Executive Officers of the Registrant...... 46

       Item 11  Executive Compensation.................................. 46

       Item 12  Security Ownership of Certain Beneficial Owners and
                Management.............................................. 46

       Item 13  Certain Relationships and Related Transactions.......... 46

                                     PART IV

       Item 14  Exhibits, Financial Statement Schedules and Reports
                on Form 8-K............................................. 47

       Note: All dollar amounts are in U.S.  dollars,  unless  otherwise
       specifically noted.
<PAGE>


                                   PART 1

ITEM 1--BUSINESS

THE COMPANY

Stirling Cooke Brown Holdings  Limited (the "Company") is a Bermuda holding
company incorporated on December 12, 1995, which, through its subsidiaries,
provides insurance services and products. The Company provides its range of
services and products to unaffiliated  insurance and reinsurance companies,
insurance  agents,  and  insureds.  The Company is active  primarily in the
workers'  compensation,  occupational  accident  and health,  and  casualty
insurance markets through its subsidiaries  located in London,  Bermuda and
the United States.

THE COMPANY'S OPERATIONS

The Company's five main business segments are Brokerage,  Program Business,
Underwriting Management,  Insurance and Reinsurance.  Each segment consists
of one or more separate  companies and the results of each segment  reflect
all fees,  income,  and direct  expenses for the companies in that segment.
For  example,  revenues  for  the  insurance  segment  include  all  of the
insurance  company's income including  premiums,  policy issuance fees, and
investment income.

BROKERAGE

The Company's brokerage segment consists of subsidiaries that receive a fee
or commission  for brokering  insurance and  reinsurance  contracts.  These
subsidiaries  specialize in placing  insurance and reinsurance  business in
workers'  compensation,  accident and health, and specialty casualty lines.
The  Company  generates  fees  and  commission-based   revenues  from  this
business.  The  brokerage  segment  generated  revenues of $24.9 million in
1999, $27.1 million in 1998 and $23.4 million in 1997. Price competition in
the U.S.  market  and the  withdrawal  of a number of  reinsurers  from the
market led to a reduction in revenues for the brokerage operations in 1999.
In  addition,  the segment has been  adversely  affected by the  disruption
caused by  widespread  reinsurance  market  disputes and legal  proceedings
involving the Company.

PROGRAM BUSINESS

The Company's program business segment consists of subsidiaries that market
insurance  products and manage insurance programs developed by the Company.
These programs  transfer risk from an insured to insurers and ultimately to
reinsurers  primarily in the workers'  compensation  market.  The segment's
subsidiaries  are integrated to provide a range of business  production and
administrative  services to insurers. The program business segment services
are provided to various  unaffiliated  primary insurers and a Company-owned
primary insurer. This segment primarily consists of managing general agency
("MGA"), program management, third party claims administration ("TPA"), and
loss control and premium  audit  companies.  The program  business  segment
generated  revenues of $22.4 million in 1999,  $27.1  million in 1998,  and
$19.8 million in 1997.  The revenues of this segment  decreased in 1999 due
to a reduction in program  business  premiums  together with a reduction in
fee margins earned on programs as a result of the increasingly  competitive
environment in the U.S. workers' compensation insurance market.

The Company's  MGA  subsidiaries  are  responsible  for marketing  programs
through a network of retail and wholesale  insurance agents.  The MGA's are
also responsible for underwriting,  policy issuance,  policy servicing, and
administration  of the business bound.  The Company's MGA network  includes
offices in Dallas,  Texas;  Bradenton and Boca Raton, Florida; and New York
City, New York.

UNDERWRITING MANAGEMENT

The Company's Managing General Underwriter  ("MGU")  subsidiaries are based
in Bermuda  and are  authorized  primarily  to  underwrite  and  administer
reinsurance  business on behalf of  unaffiliated  insurance and reinsurance
companies.  The MGU's earn fees for providing  underwriting  and associated
administrative   services  relating  to  the  business  underwritten.   The
underwriting management segment generated revenues of $4.1 million in 1999,
$3.6 million in 1998, and $4.2 million in 1997. The Company's  underwriting
management segment experienced  significant  competitive  pressures as 1999
progressed, with a significant reduction in business being renewed. This is
expected to continue during the current year.

INSURANCE

The Company's  insurance segment consists of a New York domiciled  insurer,
Realm National  Insurance  Company ("Realm  National").  Realm National was
acquired by the Company in September 1996 and earns net premiums and policy
issuance fees.  Realm National allows the Company to generate  business and
receive  premiums  and fees from  sources  outside  the  Company's  own MGA
network, to the extent that non-affiliated  MGA's place business with Realm
National.  The  insurance  segment  generated  revenues of $12.6 million in
1999, $11.1 million in 1998, and $5.4 million in 1997. Market conditions in
the workers  compensation  insurance  market in which Realm National writes
the majority of its business  grew  increasingly  competitive  during 1999,
slowing Realm National's rate of growth.

Realm National had shareholders'  equity of approximately  $21.8 million at
December 31, 1999 (1998--$22.5 million,  1997--$21.5 million), net premiums
earned of  approximately  $9.5 million for the year ended December 31, 1999
(1998--$7.7  million,  1997--$2.9 million) and a B+ (Very Good) rating from
A.M. Best Company.  For the year ended December 31, 1999,  Realm National's
gross premiums written were $47.2 million (1998--$48.6 million, 1997--$21.7
million);  net  premiums  written were $8.9  million  (1998--$9.7  million,
1997--$4.0 million), of which $7.9 million (1998--$8.2 million,  1997--$2.3
million) were related to workers'  compensation  insurance and $1.0 million
(1998--$1.5   million,   1997--$1.7   million)  were  related  to  property
insurance.

REINSURANCE

The Company's  reinsurance segment consists of its reinsurance  subsidiary,
Comp Indemnity  Reinsurance  Company  Limited  ("CIRCL").  CIRCL  primarily
reinsures  workers'  compensation and property and general liability risks.
The reinsurance  segment generated  revenues of $3.1 million in 1999, $10.9
million in 1998 and $9.4 million in 1997.  Management  determined  in early
1999 to  cease  underwriting  new  programs  in CIRCL  due to  unfavourable
results,  and, for this  reason,  a number of existing  contracts  were not
renewed for the 1999 year. Accordingly, revenues decreased during the year.

For the year ended December 31, 1999,  CIRCL's gross premiums  assumed were
$3.0 million  (1998--$11.8  million,  1997--$14.1  million),  of which $2.7
million (1998--$6.9 million,  1997--$13.1 million) were related to workers'
compensation  insurance and $0.3 million  (1998--$4.9  million,  1997--$1.0
million)  were related to property  and general  liability  insurance.  Net
premiums  assumed  were  $4.7  million  (1998--$7.7   million,   1997--$9.2
million).

MARKETING

The Company's marketing  strategies vary by business segment. The Company's
program  business  segment markets its workers'  compensation  programs and
other specialty lines to wholesale and retail  insurance agents in the U.S.
through  its MGA's.  Individual  MGA  offices  market  their  services  and
products  through sales  representatives,  targeted direct mail,  local and
regional advertising, seminars, and trade and industry conventions. Given a
general  reliance  on retail  agents  as an  important  source of  business
production,   special  emphasis  is  placed  on  building  and  maintaining
relationships with individual retail agents and on expanding its network of
retail  producers.  To encourage loyalty from the retail agents the Company
seeks to provide a high level of service,  offer  insurance  products  that
satisfy  the needs of clients  and reward  increased  levels of  production
through incentive  compensation  programs. The Company believes that it has
successfully   developed  a  reputation  for  providing   quality  service,
cost-effective  products and strong marketing support, which has enabled it
to  develop  strong  relationships  with its retail  agents and  commercial
customers.

The  Company's   insurance  segment  markets  its  insurance   products  to
independent  insurance  agents  through  unaffiliated  agent  networks  and
through the Company's  own MGA network.  The  Company's  brokerage  segment
markets its services  directly to insurance and reinsurance  companies,  as
well as to insurance agents.

COMPETITION

The business of providing  insurance  services and products to the workers'
compensation  and  property  and  casualty   insurance  markets  is  highly
competitive.  The Company competes with providers of traditional  insurance
coverage  and with  providers of  alternative  market  services  (including
domestic and foreign insurance  companies,  reinsurers,  insurance brokers,
captive insurance companies,  rent-a-captives,  self-insurance  plans, risk
retention groups, state funds, assigned risk pools and other risk-financing
mechanisms).  The  Company  believes  that the key  factors to  effectively
compete in the risk  management  market are  price,  the  ability to tailor
programs to the needs of the  insured,  and the ability to rapidly  develop
new solutions to address changing market  conditions.  The Company believes
that its  services  and products  are  competitively  priced,  and that its
combination of services and products enables it to rapidly develop tailored
programs  and act as a  competitive  provider  of  insurance  services  and
products.  However,  in  periods of soft  insurance  market  conditions  as
existed during 1999, the Company's various business segments are subject to
additional  competitive pressure in generating premium volume. In addition,
the fees that they  charge  for  their  services  come  under  pressure  as
insurers and reinsurers seek to reduce their costs.

Realm  National is rated B+ (Very Good) by A.M.  Best  Company.  In certain
circumstances,  Realm  National  may be at a  competitive  disadvantage  to
insurers with higher ratings.  However,  the Company's MGA's also represent
insurers with higher ratings from A.M. Best Company,  thereby  allowing the
Company's MGA's to remain competitive in circumstances where Realm National
is not selected as the insurer due to its rating.

EMPLOYEES

As of December 31, 1999, the Company had 310 employees.  The service nature
of the Company's business makes its employees an important corporate asset.
While the market for  qualified  personnel  is extremely  competitive,  the
Company believes that its relationship  with its employees is good. None of
the Company's employees is represented by a union.

REGULATION

The  Company's   subsidiaries   that  are  engaged  in  the  insurance  and
reinsurance  segments  (Realm National and CIRCL) are subject to regulation
by  government  agencies in the states and foreign  jurisdictions  in which
they do  business.  The  nature  and  extent of such  regulation  vary from
jurisdiction to jurisdiction,  but typically  involve prior approval of the
acquisition  of  control  of  an  insurance   company  or  of  any  company
controlling  an  insurance  company;  regulation  of  certain  transactions
entered into by an insurance  company with any of its affiliates;  approval
of premium rates and policy forms for many lines of insurance; standards of
solvency  and  minimum   amounts  of  capital  and  surplus  that  must  be
maintained;  establishment  of  reserves  required  to  be  maintained  for
unearned   premium,   losses  and  loss  expense  or  for  other  purposes;
limitations on types and amounts of  investments;  restrictions on the size
of risks which may be insured;  licensing of insurers and agents;  deposits
of securities for the benefit of policyholders;  and the filing of periodic
reports with respect to financial condition and other matters.

Most states  require  property and casualty  insurers  licensed to transact
insurance in the state to become  members of  insolvency  funds or guaranty
associations which generally protect  policyholders  against the insolvency
of such insurers. Members of the fund or association must contribute to the
payment  of  certain  claims  made  against  insolvent  insurers.   Maximum
contributions  required  by law in any one year vary  between  1% and 2% of
annual  premiums  written  by a  member  in that  state.  Assessments  from
insolvency  funds  paid by  Realm  National  in 1997,  1998  and 1999  were
immaterial in relation to the Company's  consolidated financial statements.
The cost of most of these assessments is recoverable  through future policy
surcharges and premium tax deductions.

Realm National also is required to  participate  in various  state-mandated
insurance  facilities or in funding  mandatory  pools,  which are generally
designed to provide  insurance  coverage  for  consumers  who are unable to
obtain insurance in the voluntary  insurance  market.  One such pool is the
multi-state workers'  compensation pool operated by the National Council on
Compensation Insurance. These pools typically require all companies writing
applicable  lines of  insurance  in the  state  for which the pool has been
established  to fund  deficiencies  experienced by the pool based upon each
company's  relative premium writings in that state, with any excess funding
typically  distributed  to the  participating  companies on the same basis.
Total  assessments  incurred by Realm National from all such facilities for
1997,  1998,  and  1999  were  immaterial  in  relation  to  the  Company's
consolidated financial statements.

Realm  National  also  is  subject  to  various  statutory  and  regulatory
restrictions,  generally  applicable to each insurance company in its state
of domicile,  which limit the amount of dividends or distributions  payable
by an insurance company to its shareholders. The restrictions are generally
based on  certain  levels of  surplus,  investment  income,  and  operating
income, as determined under statutory accounting practices.

The New York  Insurance  Law regulates  the  distribution  of dividends and
other payments to the Company by Realm  National.  Under the applicable New
York statute,  unless prior regulatory approval is obtained, an insurer may
not declare or distribute  any dividend to  shareholders,  which,  together
with all  dividends  declared  or  distributed  by it during the  preceding
twelve   months,   exceeds  the  lesser  of  (i)  10%  of  its  surplus  to
policyholders  as  shown by its last  statement  on file  with the New York
Department of  Insurance,  or (ii) 100% of adjusted net  investment  income
during  such  period.  Such  restrictions  or any  additional  subsequently
imposed  restrictions may in the future affect the Company's ability to pay
principal  and interest on its debt,  expenses,  and cash  dividends to its
shareholders.

The National Association of Insurance  Commissioners ("NAIC") has adopted a
methodology for assessing the adequacy of statutory surplus of property and
casualty insurers that includes a risk-based capital requirement. Insurance
companies  are  required  to  calculate  and  report  information  under  a
risk-based  formula that attempts to measure  statutory capital and surplus
needs based on the risks in a  company's  mix of  products  and  investment
portfolio.  The formula is designed to allow state insurance  regulators to
monitor the adequacy of an insurer's capital.  Under the formula, a company
determines its risk-based  capital  ("RBC") by taking into account  certain
risks  related to the  insurer's  assets  (including  risks  related to its
investment  portfolio and ceded reinsurance) and the insurer's  liabilities
(including  underwriting  risks related to the nature and experience of its
insurance  business).  The  RBC  rules  provide  for  different  levels  of
regulatory  attention  depending on the ratio of a company's total adjusted
capital to its  "authorized  control  level" of RBC.  Under the formula,  a
higher ratio reflects a greater adequacy of capital.  Based on calculations
made by the Company,  the RBC level for the Company's insurance  subsidiary
exceeds  levels that would trigger  regulatory  attention.  At December 31,
1999, Realm National's RBC ratio was approximately 416%  (1998--703%),  and
the threshold requiring minimum regulatory involvement was 200%. Therefore,
the Company's  capital exceeded all requirements of the Risk-Based  Capital
Model Act. The NAIC has also developed an Insurance Regulatory  Information
System ("IRIS") to assist state insurance departments in their oversight of
the  financial   condition  of  insurance   companies  operating  in  their
respective states.  IRIS identifies 11 industry ratios and specifies "usual
values" for each  ratio.  Departure  from the usual  values in four or more
ratios  generally  leads  to  inquiries  from  individual  state  insurance
commissioners.  Management believes Realm National's IRIS ratios are in the
normal range and should not be of concern to regulators.

In addition to the oversight of the Company's insurance  subsidiaries,  the
Company,  as the ultimate  parent of a New York  domiciled  insurer  (Realm
National),  is also  subject  to  regulation  under the New York  Insurance
Holding  Company  System  Regulatory Act (the "Holding  Company Act").  The
Holding Company Act contains certain reporting requirements including those
requiring the Company,  as the ultimate parent company, to file information
relating to its capital structure,  ownership,  and financial condition and
general  business  operations  of its insurance  subsidiaries.  The Holding
Company Act contains special reporting and prior approval requirements with
respect to transactions among affiliates.

Realm  National is organized  under the insurance  laws of the State of New
York (the "New York  Insurance  Law").  The New York Insurance Law provides
that the acquisition or change of "control" of a domestic  insurer,  or any
person who controls a domestic insurer,  cannot be consummated  without the
prior approval of the relevant  insurance  regulatory  authority.  A person
seeking to acquire control, directly or indirectly, of a domestic insurance
company, or any person controlling a domestic insurance company,  must seek
approval  and  generally  file  with  the  relevant  insurance   regulatory
authority an application  for change of control  (commonly known as a "Form
A")  containing  certain  information  required  by statute  and  published
regulations  and  provide  a copy of such Form A to the  domestic  insurer.
Under the New York  Insurance  Law,  control  is  presumed  to exist if any
person, directly or indirectly, owns, controls, holds with power to vote or
holds proxies  representing ten percent or more of the voting securities of
any other person.

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

The Company  intends to expand  Realm  National's  licenses and business to
substantially  all of the  remaining  states  in which it is not  currently
licensed.  In order to obtain a license in a given  state,  Realm  National
must  complete  an  application  and  demonstrate   compliance  with  state
licensing  requirements.  The  applicable  insurance  regulatory  authority
reviews the application,  which review may take from three months to two or
more years. If all the requirements are met, a license is issued.

In  determining  whether to issue a license to do business in a state,  the
state's insurance regulatory agency is required by statute or regulation to
consider  a number  of  factors,  largely  for the  purpose  of  protecting
policyholders  within the state.  Typically,  the application  process will
involve a review of the applicant's recent audited and statutory  financial
statements,   and,  in  many  states,   one  or  more  years  of  operating
projections,   to  assess  the   financial   strength  of  the   applicant;
biographical   information   concerning   the  experience  and  fitness  of
directors, officers and major shareholders;  reports of recent examinations
as to the applicant's  compliance record,  finances and market practices in
its state of domicile;  proposed policy forms and rate  schedules;  and the
applicant's  experience in underwriting the line or lines of business to be
offered.

As a holding  company,  the  Company is not  subject  to Bermuda  insurance
regulations.  However,  the Bermuda  Insurance  Act 1978,  as amended  (the
"Insurance  Act"),  which  regulates  the  insurance  business of CIRCL,  a
reinsurance subsidiary of the Company,  provides that no person shall carry
on insurance  business in or from within  Bermuda  unless  registered as an
insurer   under  the   Insurance  Act  by  the  Minister  of  Finance  (the
"Minister").  The  registration of an applicant as an insurer is subject to
its compliance with the terms of its registration and such other conditions
as the Minister may impose from time to time.

In general,  the  regulation  of insurers in Bermuda  relies  heavily  upon
auditors, loss reserve specialists, directors and managers who must certify
that an insurer  meets  minimum  capital and solvency  requirements.  Every
registered  insurer  must  appoint a  government-approved  auditor who will
annually  audit and report on the Statutory  Financial  Statements  and the
Statutory Financial Return of the insurer.

CIRCL is registered  as a Class 3 insurer and, as such:  (i) is required to
maintain a minimum  statutory capital and surplus equal to the greatest of:
(a) $1 million; (b) 20% of the first $6 million of its net premiums written
plus 15% of its net premiums written over $6 million; or (c) 15% of its net
outstanding  losses and loss  expenses;  (ii) is limited  in  declaring  or
paying any dividends  during any financial year with respect to a specified
minimum solvency margin or minimum liquidity ratio or if the declaration or
payment of such  dividends  would  cause it to fail to meet such  margin or
ratio;  (iii) is  prohibited,  without the approval of the  Minister,  from
reducing  by 15% or more its  total  statutory  capital,  as set out in its
previous year's  financial  statements;  and (iv) is required to report its
failure to meet its minimum  solvency margin to the Minister within 30 days
after  becoming aware of such failure or having reason to believe that such
failure  has  occurred.  CIRCL is also  required  to obtain an annual  loss
reserve opinion issued by a government approved loss reserve specialist. At
December  31,  1999,  CIRCL was  required to  maintain a minimum  statutory
capital and surplus of $2.0  million  (1998 - $2.1  million).  At that date
statutory  capital and surplus was $2.9 million  (1998 - $2.3  million) and
the requirement was therefore met.

The Insurance Act provides a minimum  liquidity ratio for general business.
An insurer engaged in general business is required to maintain the value of
its  relevant  assets  at not less than 75% of the  amount of its  relevant
liabilities.  Relevant  assets  include  cash  and  time  deposits,  quoted
investments,  unquoted  bonds and  debentures,  first liens on real estate,
investment  income  due and  accrued,  accounts  and  premiums  receivable,
reinsurance balances receivable and funds held by ceding reinsurers.  There
are certain categories of assets which,  unless  specifically  permitted by
the  Minister,  do not  automatically  qualify as  relevant  assets such as
unquoted equity securities, investments in and advances to affiliates, real
estate and collateral  loans.  The relevant  liabilities  are total general
business  insurance  reserves  and total other  liabilities  less  deferred
income  tax  and  sundry   liabilities   (by   interpretation,   those  not
specifically  defined),  letters of credit and guarantees.  At December 31,
1999,  CIRCL was  required  to maintain  relevant  assets of at least $23.0
million  (1998  -  $25.0  million).  At  that  date  relevant  assets  were
approximately  $33.5 million (1998 - $35.6 million) and the requirement was
therefore met.

A Bermuda-registered  insurer is required to maintain a principal office in
Bermuda and to appoint and maintain a principal  representative  in Bermuda
to oversee the  business of the insurer and to report to the  Minister  and
the Bermuda Registrar of Companies in respect of certain events. Unless the
approval of the  Minister is  obtained,  an insurer may not  terminate  the
appointment   of  its   principal   representative,   and   the   principal
representative may not cease to act as such, unless 30 days notice is given
in writing to the Minister of the intention to do so. Within 30 days of the
principal  representative's  knowing or having  reason to believe  that the
insurer the representative represents is likely to become insolvent or that
an "event"  has  occurred,  the  principal  representative  must  provide a
written report to the Minister  setting out all the particulars of the case
that are  available  to the  representative.  Examples  of such an  "event"
include  failure by the  insurer to comply  substantially  with a condition
imposed upon the insurer by the Minister relating to a solvency margin or a
liquidity or other ratio.

The Minister may appoint an inspector with extensive  powers to investigate
the affairs of an insurer if the Minister believes that an investigation is
required in the interest of the insurer's  policyholders or persons who may
become  policyholders.   In  order  to  verify  or  supplement  information
otherwise  provided to him,  the  Minister may direct an insurer to produce
documents or information  relating to matters  connected with the insurer's
business.

If it appears to the Minister that there is a risk of the insurer  becoming
insolvent,  the  Minister  may  direct the  insurer  not to take on any new
insurance business;  not to vary any insurance contract if the effect would
be to increase the insurer's liabilities;  not to make certain investments;
to realize certain investments;  to maintain in Bermuda, or transfer to the
custody of a Bermuda bank, certain assets; or to limit its premium income.

The Bermuda Government actively encourages foreign investment in "exempted"
entities  like  CIRCL  that are  based in  Bermuda  but do not  operate  in
competition with local businesses. As well as having no restrictions on the
degree of foreign  ownership,  CIRCL is  exempted  from taxes on its income
until March 28, 2016 and is not subject to tax on its  dividends  or to any
foreign exchange  controls in Bermuda.  In addition,  there currently is no
capital gains tax in Bermuda,  and profits can be accumulated by CIRCL,  as
required, without limitation.

Certain of the  Company's  subsidiaries  are also subject to  regulation as
insurance   intermediaries.   Under   the   applicable   regulations,   the
intermediary  is  responsible  as a fiduciary  for funds  received  for the
account of the parties to the insurance or reinsurance  transaction  and is
required  to hold  such  funds in  appropriate  bank  accounts  subject  to
restriction on withdrawals and prohibitions on commingling.

The  Company's  insurance   intermediaries  include  several  MGA's.  MGA's
produce,  underwrite,  administer  business  produced and manage  claims on
behalf of insurance  companies in certain  states,  and they are subject to
regulation under state laws regarding licensure, fiduciary obligations with
respect to premium, and the general management of the insurers' business.

The  activities of Stirling  Cooke Brown  Insurance  Brokers  Limited as an
insurance  broker in the UK require it to be authorized under the Insurance
Brokers  (Registration)  Act of 1977 by the Insurance Brokers  Registration
Council (the  "Council").  Authorization  by this body involves  continuing
compliance  with rules made by the  Council,  which  require,  among  other
things, that the company maintain a minimum level of working capital,  that
it  allocate  not more than a  specified  portion  of its  business  to any
particular  insurance  company  or group of  insurance  companies,  that it
supply  reports  to the  Council,  and  that it  conduct  its  business  in
accordance with the conduct of business rules published by the Council.  It
is a condition to the authorization from the Council that a majority of the
directors of Stirling Cooke Brown Insurance  Brokers Limited are and remain
registered as insurance brokers in the UK.

OUTSTANDING LOSSES AND LOSS EXPENSES

Both Realm National and CIRCL maintain loss reserves to reflect anticipated
future claims and claims expense payments. The Company establishes reserves
for losses and loss adjustment  expenses  related to reported claims on the
basis of the evaluations of independent  claims adjusters and the Company's
own claims staff.  In addition,  reserves are  established for losses which
have occurred but have not yet been reported and for adverse development of
reserves on reported  losses.  The  Company and its  independent  actuaries
estimate claims and claims  expenses  arising for losses that have occurred
but not yet been  reported  based  upon  the  Company's  and the  insurance
industry's experience,  together with statistical  information with respect
to the probable number and nature of such claims.

The  following  table sets forth a  reconciliation  of beginning and ending
reserves for losses and loss adjustment expenses:


           RECONCILIATION OF OUTSTANDING LOSSES AND LOSS EXPENSES

                                        FOR THE YEARS ENDED
                                        -------------------
                                            DECEMBER 31,
                                            ------------
                                      1997       1998       1999
                                    --------   --------   --------
Balance beginning of year........   $ 24,301   $ 36,276   $ 66,117
Less outstanding losses
  recoverable....................    (16,588)   (23,072)   (48,146)
                                    --------   --------   --------
Net balance......................      7,713     13,204     17,971
                                    --------   --------   --------
Incurred related to:
     Current year................     10,174     12,578      8,696
     Prior years.................        777      4,693      3,674
                                    --------   --------   --------
     Total incurred..............     10,951     17,271     12,370
                                    --------   --------   --------
Paid related to:
     Current year................      2,011      3,066      2,830
     Prior years.................      3,449      9,438      7,643
                                    --------   --------   --------
          Total paid............       5,460     12,504     10,473
                                    --------   --------   --------
Net balance.....................      13,204     17,971     19,868
Plus outstanding losses
  recoverable...................      23,072     48,146     73,267
                                    --------   --------   --------
     Balance at end of year......   $ 36,276   $ 66,117   $ 93,135
                                    ========   ========   ========


The adverse  development  during 1999 on prior years primarily reflects the
increase in provisions for doubtful reinsurance  recoveries of $4.2 million
to $6.7  million.  This  provision  is included  in the balance  sheet as a
component of paid and outstanding losses  recoverable from reinsurers.  The
provision is an estimate and amounts not  collectible  from  reinsurers may
ultimately be significantly greater or less than the provision established.

The adverse development during 1998 on prior years primarily  represents an
increase in claims  frequency  on one program and a provision  for doubtful
recoveries of $2.5 million.

The Company's  underwriting  loss ratio (i.e.,  the ratio of net losses and
net loss  expenses  to net  assumed  premium  earned)  for 1999 was  104.4%
(1998--97.2%).

The Company  believes that the provision  for  outstanding  losses and loss
expenses  is  adequate  to cover the  ultimate  net cost of losses and loss
expenses  incurred;  however,  such a  provision  is an  estimate  and  may
ultimately be significantly greater or less than the provision established.
The Company has limited historical loss experience  available to serve as a
basis for the estimation of ultimate losses.

The previous table  represents a  reconciliation  of reserves in accordance
with generally accepted accounting principals ("GAAP"). The following table
reconciles  the difference  between those  reserves and those  contained in
regulatory  filings made by the Company's  subsidiaries  in accordance with
statutory accounting practices ("SAP").


                  RECONCILIATION OF SAP AND GAAP RESERVES

                                                     FOR THE YEARS ENDED
                                                     -------------------
                                                         DECEMBER 31,
                                                         ------------
                                                  1997       1998       1999
                                                --------   --------   --------
                                                     (DOLLARS IN THOUSANDS)

Reserves for losses and loss adjustment
  expenses, end of year SAP..................   $ 13,355   $ 18,024   $ 18,262
Gross-up for ceded reinsurance reserves......     23,072     48,146     73,267
Provision for salvage receivable not
  included on a SAP basis....................       (128)       (30)       (31)
Provision for uncollectible reinsurance......         --         --      1,637
Provision for loss portfolio transfer
  not included in SAP reserves...............        (23)       (23)        --
                                                --------   --------   --------
Reserves for losses and loss adjustment
  expenses, end of year GAAP.................   $ 36,276   $ 66,117   $ 93,135
                                                ========   ========   ========


The following table presents the  development of the Company's  ongoing net
reserves  for 1997  through  1999.  The top  line of the  table  shows  the
estimated  reserve for unpaid losses and loss adjustment  expenses recorded
at the  balance  sheet date for each of the  indicated  years.  This amount
represents the estimated amount of losses and loss adjustment  expenses for
claims that are unpaid at the balance  sheet  date,  including  losses that
have been  incurred  but not yet  reported to the  Company.  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 known about the frequency and severity of claims
for individual years. The "Cumulative  Deficiency" represents the aggregate
change in the  estimates  over all prior  years.  The  Company's  insurance
entities were both purchased in 1996 so,  accordingly,  there has only been
three years'  movement in the Company's  reserves.  It should be noted that
the  following  table  presents  an  analysis  of  loss  and  loss  expense
development.  Therefore,  each amount in the table  includes the effects of
changes in reserves for all prior years.


<PAGE>


               ANALYSIS OF LOSS AND LOSS EXPENSE DEVELOPMENT
                  (NET OF OUTSTANDING LOSSES RECOVERABLE)

                                               FOR THE YEARS ENDED
                                               -------------------
                                                   DECEMBER 31,
                                                   ------------
                                       1996       1997       1998       1999
                                     --------   --------   --------   --------
                                              (DOLLARS IN THOUSANDS)
Gross reserve for losses and
  loss adjustment expenses........   $ 24,301   $ 36,276   $ 66,117   $ 93,135
Less outstanding losses
  recoverable.....................    (16,588)   (23,072)   (48,146)   (73,267)
                                     --------   --------   --------   --------
Net reserve for losses and loss
  adjustment expenses.............      7,713     13,204     17,971     19,868
Reserve re-estimated as of:
     One year later...............      8,490     17,897     21,645         --
     Two years later..............     11,830     22,794         --         --
     Three years later............     13,092         --         --         --
                                     --------   --------   --------   --------
Cumulative deficiency.............     (5,379)    (9,590)    (3,674)        --
                                     --------   --------   --------   --------
Percentage........................     (69.7%)    (72.6%)     (14.7%)       --
                                     --------   --------   --------   --------
Cumulative amount of reserve
  paid through:
     One year later...............      3,449      9,438      7,383         --
     Two years later..............      7,669     14,097         --         --
     Three years later............     10,238         --         --         --


The  increase in reserves  one year later,  two years later and three years
later on 1996,  1997 and 1998  reserves  reflects  primarily an increase in
claims  frequency on one  particular  program that covers bodily injury and
property risks in the construction  industry, and an increase in provisions
for doubtful reinsurance recoveries discussed in Note 8 to the consolidated
financial statements.


<PAGE>


ITEM 2--PROPERTIES

The Company's  head office is located in Hamilton,  Bermuda.  This facility
currently serves as the  headquarters for the financial and  administrative
departments  of the Company and the  Company's  Bermuda  subsidiaries.  The
following table sets forth additional  information concerning the Company's
facilities:

                             APPROXIMATE
                               SQUARE           LEASE
        PROPERTY                FEET          EXPIRATION
---------------------------    ------     ------------------
Hamilton, Bermuda..........     5,900     June 20, 2006
London, England............    12,500     August 10, 2009
Dallas, Texas..............    14,700     August 31, 2003
Dallas, Texas..............    10,500     May 31, 2001
New York, New York.........     7,900     October 31,  2003
New York, New York.........     2,600     September 14, 2004
Bradenton, Florida.........    12,350     June 28, 2008
Boca Raton, Florida........    13,750     January 15, 2005
Southington, Connecticut...     3,300     August 31, 2011


All of the Company's  facilities are leased.  Aggregate  lease payments for
1999 were $2.8 million (1998 - $2.2 million).  The Company anticipates that
it will be able to extend  these  leases as they expire or, if necessary or
desirable, locate substitute facilities on acceptable terms.

ITEM 3--LEGAL PROCEEDINGS

(a) The civil action filed on March 29, 1999 against the Company and others
in the U.S. District Court for the Southern  District of New York,  certain
of its  subsidiaries,  by Odyssey Re (London)  ("Odyssey") was dismissed by
the Court on February 25, 2000. The amended complaint in that case asserted
claims against the Company,  certain of its subsidiaries,  and others under
the Racketeering  Influenced and Corrupt  Organizations (RICO) Act, and for
common law fraud.  The Court dismissed the amended  complaint on the ground
of "forum non conveniens," finding that Odyssey's claims should be asserted
in the English  courts.  There is no  counterpart  to the U.S.  RICO law in
England, nor does English law allow imposition of treble damages.

Odyssey,  which changed its name to Sphere Drake Insurance Limited ("Sphere
Drake")  during  1999,  caused  proceedings  to be  issued  in  the  London
Commercial Courts  (equivalent to a civil complaint in U.S.  jurisdictions)
against  the  Company's  U.K.  subsidiaries,  two former  officers of those
subsidiaries,  and others on February 29, 2000. Neither the Company nor any
of its U.S. or Bermuda  subsidiaries  is named in the action.  Sphere Drake
generally  alleges a conspiracy  to defraud it in  connection  with various
reinsurance contracts.

It is the opinion of  management  that the claims  generally  described  in
Sphere  Drake's  action  are  without  merit and the case will be  defended
vigorously.

(b)  Several  arbitration  proceedings  currently  are  pending  in England
between reinsurers and ceding insurers relating to reinsurance transactions
involving the personal accident excess of loss market in London ("LMX") for
the account years 1993,  1994, 1995 and 1996.  Although neither the Company
nor its  broker  subsidiaries  is a  party  to any of  these  arbitrations,
certain  of the  Company's  subsidiaries  acted as  reinsurance  broker for
ceding insurer clients that are parties to certain of the arbitrations.

In addition,  the Company's  reinsurance  subsidiary is party to one of the
LMX  arbitrations.  This  particular  arbitration has been dormant for some
time.

The reinsurers  generally have alleged that they sustained losses due to an
"artificial"  spiral in the LMX market,  the existence of which, as well as
other  information,  was not  disclosed  to them by the ceding  insurers or
their reinsurance brokers. As a consequence, these reinsurers have asserted
that they are no longer obliged to honor their  reinsurance  agreements and
have suspended payment of claims.

During 1998 and 1999  certain of the  reinsurers  and  reinsureds  that are
parties to the  arbitrations  described  above  issued  proceedings  in the
English courts against one or more of the Company's brokerage  subsidiaries
and one  underwriting  management  subsidiary,  apparently  for the primary
purpose of tolling  the statute of  limitations  pending the outcome of the
arbitration.   In  one  recently   issued   proceeding   against  the  same
subsidiaries, three former officers of the subsidiaries were also named. In
none of these proceedings did the complainant  specify an amount of damages
sought. If one or more reinsurers succeeds in avoiding its contracts in the
pending arbitrations,  it is possible that ceding insurers clients on whose
behalf the Company's broker subsidiaries  placed the reinsurance,  may seek
to pursue a claim for  indemnification  or other claims against one or more
of those subsidiaries. Similarly, if one or more of the reinsurers fails to
avoid its contracts in the pending  arbitrations,  it also is possible that
those  reinsurers may seek to pursue some type of claim against one or more
of those subsidiaries.

The Company  understands that awards already have been made in favor of the
reinsurer   in  two   arbitrations.   However,   based  on  the   Company's
understanding  of the  reasons  given by the  arbitration  panels for their
awards in favor of the  reinsurer  in those  cases,  the  Company  does not
believe  there is any valid basis for its ceding  insurer  clients in those
cases to assert a claim against the Company or its broker subsidiaries.

All U.K. judicial proceedings against the Company's  subsidiaries have been
stayed or held in  abeyance  pursuant  to  standstill  agreements  or court
order,  except for one proceeding  where the subsidiaries are considering a
request for a standstill and except for standstill  agreements  between two
of the Company's subsidiaries and one ceding insurer client, which recently
gave notice of termination of those standstill agreements.

One of the arbitration awards referenced above allowed a reinsurer to avoid
its reinsurance contracts with a Lloyd's syndicate. According to reports in
the London press, that award may have caused the syndicate's liabilities to
increase  beyond the  financial  resources  available  to it and its Names,
requiring  the  syndicate  to avail  itself of the  Lloyd's  Central  Fund.
Thereafter,  Lloyd's  initiated an  investigation of that syndicate and all
"market  participants,"  including the  Company's  U.K.  subsidiaries.  The
investigation  is at an early  stage  and it is  uncertain  when it will be
completed.

The Company  understands  that  substantial  progress has been and is being
made  by  various  market  participants  in  settling  ongoing  reinsurance
disputes, including many of the market participants that are parties to the
arbitrations and other proceedings described above.

Although no  assurances  can be given as to the outcome of the pending U.K.
arbitrations or pending or potential  judicial  proceedings  related to the
LMX spiral  reinsurance  arbitrations and their effect on the Company,  the
Company believes,  based on the information presently available to it, that
any such effect should not have a material  adverse effect on the Company's
financial condition.

(c) The  reinsurance  markets in which the  Company  historically  has been
involved experienced  considerable disruption during 1999, for a variety of
reasons,  including  but not limited to the LMX market  disputes  described
above and other disputes involving the North American workers' compensation
reinsurance market.

One result of this market disruption has been that certain  reinsurers with
whom the Company's broker  subsidiaries placed business on behalf of ceding
insurer clients  suspended claims payments to those clients,  as well as to
the Company's insurance and reinsurance subsidiaries. As a result, a number
of   arbitrations   were  commenced   between  Company  clients  and  their
reinsurers.

In some instances,  disputes or potential  disputes have arisen  concerning
whether   reinsurance   was  properly   placed  by  the  Company's   broker
subsidiaries. In other instances, the Company's ceding insurer clients have
demanded  imdemnification  by  the  Company  if  the  client's  reinsurance
contracts ultimately are avoided by its reinsurers.

Although no assurances  can be given as to the effect on the Company of the
various  disputes  in the  worker's  compensation  reinsurance  market,  or
related  arbitrations,  the  Company  believes,  based  on the  information
presently  available to it, that any such effect should not have a material
adverse effect on the Company's financial condition.

(d) The  Company is  subject to other  litigation  and  arbitration  in the
ordinary course of its business. While any of these proceedings contains an
element of uncertainty,  management presently believes the outcome of these
currently  pending  proceedings  will not have a material adverse effect on
the Company's financial condition.

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

     No matters were submitted to a vote of shareholders  during the fourth
quarter of the fiscal year 1999.


               PRINCIPAL EXECUTIVE OFFICERS OF THE REGISTRANT

The  following  sets forth  certain  information  regarding  the  Principal
Executive Officers of the Company at March 15, 2000.

              NAME          AGE                  POSITION
     ---------------------  ----     ---------------------------------
     Stephen A. Crane.....   54      President, Chief Executive
                                       Officer and Director (1)
     Len Quick............   56      Chief Operating Officer and
                                       Director (1)
     George W. Jones......   45      Chief Financial Officer and
                                       Director (2)
     James Lawless, IV....   45      Senior Vice President, General
                                       Counsel and Corporate Secretary


(1) Term as Director expires at Annual General Meeting in 2000.

(2) Term as Director expires at Annual General Meeting in 2001.

STEPHEN A. CRANE was  appointed as President & Chief  Executive  Officer in
November,  1999.  Prior to joining the  Company,  Mr. Crane served for five
years as President & Chief  Executive  Officer of Gryphon  Holdings Inc., a
specialty property-casualty underwriting organization.

LEN QUICK was appointed as Chief Operating  Officer in July,  1999,  having
previously   served  as  Chief  of  Operations   of  the  Company's   North
American-based subsidiaries from 1997. Between 1994 and 1997, Mr. Quick was
President of the Company's  Dallas based  subsidiary,  North  American Risk
Inc.

GEORGE W.  JONES has been Chief  Financial  Officer  and a Director  of the
Company since it began operations.

JAMES LAWLESS,  IV was appointed as Senior Vice President,  General Counsel
and  Corporate  Secretary  in March 2000.  In the five year period prior to
joining the Company,  Mr.  Lawless  practiced  law in New York with LeBouef
Lamb Green and MacRae, Werner & Kennedy and Battle Fowler LLP.


<PAGE>


                                  PART II

ITEM 5--MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company's  ordinary  shares,  $0.25 par value,  have been quoted on the
Nasdaq  National  Market under the symbol  "SCBHF" since November 26, 1997.
The ordinary  shares were listed in connection  with the Company's  Initial
Public  Offering,  completed in December  1997.  As of March 15, 2000,  the
approximate number of holders of the Company's ordinary shares was 1,000.

The  following  table sets forth the high and low  closing  sale prices per
share of the Company's  ordinary  shares for the calender  quarters of 1998
and 1999:

                                         HIGH         LOW
                                       ---------   ---------
Year ended December 31, 1998
     First Quarter..................   $27 3/4     $23 5/16
     Second Quarter.................   $30         $25 1/4
     Third Quarter..................   $27 7/8     $11 5/8
     Fourth Quarter.................   $20         $11 1/8
Year ended December 31, 1999
     First Quarter..................   $18 3/4     $ 7
     Second Quarter.................   $ 7 1/2     $ 3 1/4
     Third Quarter..................   $ 5 15/16   $ 1 11/32
     Fourth Quarter.................   $ 3 7/32    $ 1 3/8


     The closing market price of the ordinary  shares on March 15, 2000 was
$2 5/8.

     During both 1998 and 1999,  the Company  paid  dividends  of $0.12 per
ordinary  share.  Dividends  are paid  quarterly.  A dividend  of $0.03 per
ordinary  share was declared on March 7, 2000 and will be paid on March 31,
2000 to  shareholders  of record at March 17,  2000.  The  declaration  and
payment of future  dividends is at the discretion of the Company's Board of
Directors  and will depend  upon,  among  other  things,  future  earnings,
capital  requirements,  the general  financial  condition  of the  Company,
general business conditions and other factors. The Company's ability to pay
dividends is partially restricted due to certain insurance regulations. See
"Management  Discussion and Analysis of Financial  Condition and Results of
Operations" and Note 17 to the Consolidated Financial Statements.

     During 1999, the Company purchased 356,400 ordinary shares on the open
market  at a total  cost of  $4,423,000.  These  shares  were  recorded  as
treasury stock at cost.  The Company now holds a total of 443,400  ordinary
shares in treasury at a total cost of $5.7 million.

     Under current  Bermuda law, there is no income tax,  withholding  tax,
captial gains or capital transfer tax on the Company or its shareholders in
respect of the payment of dividends or capital transactions.


<PAGE>


ITEM 6--SELECTED FINANCIAL DATA

The  selected   consolidated   financial  data  below  should  be  read  in
conjunction  with  the  Consolidated  Financial  Statements  and the  notes
thereto presented under Item 8.

<TABLE>
<CAPTION>
                                              AS OF OR FOR THE YEARS ENDED DECEMBER 31,
                                   --------------------------------------------------------------
                                      1995        1996(1)       1997         1998         1999
                                   ----------   ----------   ----------   ----------   ----------
                                      (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                <C>          <C>          <C>          <C>          <C>
INCOME STATEMENT DATA:
Revenues........................   $   19,048   $   47,061   $   65,310   $   85,093   $   67,821
Income (loss) before taxation...        7,154       12,199       15,918       19,808       (8,993)
Taxation........................        2,560        2,281        2,925        3,790       (2,583)
Net income (loss) before
  cumulative effect of a change
  in accounting principle.......        4,594        9,918       12,993       16,018       (6,410)
Cumulative effect of a change
  in accounting principle(2)....            0            0            0            0   $     (307)
Net income (loss)...............   $    4,594   $    9,918   $   12,993   $   16,018   $   (6,717)

BASIC EARNINGS PER SHARE
Net income (loss) per share(3)..   $     1.07   $     1.22   $     1.55   $     1.63   $    (0.71)
Weighted average number of
  ordinary shares outstanding...    4,288,908    8,100,782    8,383,482    9,814,101    9,480,356

DILUTED EARNINGS PER SHARE
Net Income (loss) per share
  assuming dilution(3)..........   $     1.07   $     1.19   $     1.53   $     1.63   $    (0.71)
Weighted average number of
  ordinary shares outstanding
  assuming dilution.............    4,304,098    8,306,610    8,515,473    9,840,159    9,480,356

Dividends per ordinary share....   $     0.53   $     0.00   $     0.00   $     0.12   $     0.12

BALANCE SHEET DATA:
Total assets(4).................   $  103,273   $  235,084   $  406,330   $  649,641   $1,011,409
Long term debt..................            0            0            0            0            0
Ordinary shares subject to
  redemption(5)...................          0       14,457            0            0            0
Total shareholders' equity......   $    7,055   $   29,001   $   83,103   $   97,632   $   84,832

<FN>
(1)  Includes the operations of Realm Investments  Limited from its January
     1996  acquisition  by the Company,  Realm  National from its September
     1996  acquisition  by the Company and the operations of North American
     Risk, Inc. from its July 1996 acquisition by the Company.  All of such
     acquisitions  were  accounted  for  as  purchases.  See  "Management's
     Discussion  and  Analysis  of  Financial   Condition  and  Results  of
     Operations".

(2)  See Note 2(q) of Notes to the Consolidated Financial Statements for an
     explanation  of  the  cumulative  effect  of a  change  in  accounting
     principle.

(3)  See Note 2(l) of Notes to the Consolidated Financial Statements for an
     explanation of the methods used to determine Net Income per share.

(4)  Total assets  comprise  corporate  assets  together with cash held and
     insurance balances receivable in a fiduciary  capacity.  See Note 4 to
     the Consolidated Financial Statements.

(5)  The  ordinary  shares  subject  to  redemption  were  reclassified  to
     shareholders'  equity upon consummation of the Initial Public Offering
     since those shares were no longer redeemable.

</FN>
</TABLE>
<PAGE>


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

The following is a discussion of the  Company's  results of operations  and
financial  condition.  This  discussion  and  analysis  should  be  read in
conjunction  with  the  consolidated  financial  statements  and the  notes
thereto presented under Item 8.

Results of Operations For the Years Ended December 31, 1999, 1998 and 1997.

Net Loss for 1999 was  ($6,717)  compared to 1998 net income of $16,018 and
1997 net income of $12,993.  The  results  for the year were  affected by a
number of different factors. The most significant were costs and provisions
pertaining  to  reinsurance  related  disputes  in which  the  Company  was
involved  during the year,  including  certain  litigation.  Provisions and
costs relating to these disputes amounted to $11.9 milllion pre-tax for the
year.  Results for the year were also  adversely  influenced by significant
costs  relating to the  restructuring  and  consolidation  of the Company's
operations  and  writedowns in connection  with  investments in affiliates.
These  restructuring  charges  and  write-downs  amounted  to $4.3  million
pre-tax  for the  year.  Finally,  and more  generally,  the U.S.  workers'
compensation  insurance  market,  in which the Company conducts most of its
business,  became increasingly competitive as the year progressed,  and the
Company experienced signficant deterioration in some of the market segments
in which it operates.  These difficult  conditions resulted in a diminution
of revenue and shrinkage in operating margins.


                          REVENUES AND NET INCOME

                                           For the Years
                                         Ended December 31,
                                  --------------------------------
                                    1997        1998        1999
                                  --------    --------    --------
                                       (dollars in thousands)

Revenues........................  $ 65,310    $ 85,093    $ 67,821
Expenses........................    49,392      65,285      76,814
                                  --------    --------    --------
Income (loss) before Taxation...    15,918      19,808      (8,993)
Taxation........................    (2,925)     (3,790)      2,583
                                  --------    --------    --------
Net Income (loss) before
  cumulative effect of a
  change  in accounting
  principle.....................    12,993      16,018      (6,410)
Cumulative effect of a
  change in accounting
  principle.....................        --          --         307
                                  --------    --------    --------
Net Income (loss)...............  $ 12,993    $ 16,018    $ (6,717)
                                  ========    ========    ========
Net Income (loss) per
  Share -  Basic................  $   1.55    $   1.63      ($0.71)
Net Income (loss) per Share
  assuming dilution.............  $   1.53    $   1.63      ($0.71)


Revenues of $67.8  million in 1999  represented  a $17.3  million  decrease
versus 1998 revenues of $85.1 million,  which  increased $19.8 million over
1997 revenues of $65.3  million.  Net loss of $6.7 million in 1999 compares
to net income of $16.0  million in 1998,  which  represented a $3.0 million
increase  over  1997 net  income  of $13.0  million.  The 1999  decline  in
revenues  reflected  the  competitive  pressures  caused by the soft market
conditions in the markets in which the Company operates, which affected all
the segments of the Company's  operations.  The decline in revenue was also
caused by the decision by the Company to cease underwriting new business in
its Bermuda-based reinsurance subsidiary. Expenses of $76.8 million in 1999
represent a $11.5 million  increase  over 1998  expenses of $65.3  million,
which increased $15.9 million over 1997 expenses of $49.4 million. The 1999
increase in operating  expenses was primarily due to  restructuring  costs,
costs and provisions  associated with  reinsurance  disputes  involving the
Company or its clients and related litigation,  and an increase in bad debt
provisions.

Basic net loss per share was $0.71 in 1999, as compared to basic net income
of $1.63 in 1998 and  basic  net  income  of $1.55 in 1997  (excluding  the
profit on disposal of subsidiaries  during 1997, basic net income per share
was $1.49  during the year).  Diluted net loss per share was $0.71 in 1999,
as  compared  to diluted net income per share of $1.63 in 1998 and $1.53 in
1997 (excluding the profit on disposal of subsidiaries during 1997, diluted
net income per share was $1.47 during the year).


                     REVENUES AND NET INCOME BY SEGMENT

                           Segment Revenues        Segment Net Income (loss)
                         For the Years Ended          For the Years Ended
                             December 31,                 December 31,
                    ----------------------------  ----------------------------
                      1997      1998      1999      1997      1998      1999
                    --------  --------  --------  --------  --------  --------
                        (dollars in thousands        (dollars in thousands)

Brokerage.......... $ 23,385  $ 27,144  $ 24,879  $  8,591  $ 11,501  $  2,706
Program Business...   19,770    27,119    22,444     3,938     5,187    (2,716)
Underwriting.......
  Management.......    4,174     3,554     4,123     2,491     1,689     1,446
Insurance..........    5,399    11,073    12,557       471     1,169    (2,139)
Reinsurance........    9,382    10,905     3,138        57    (3,357)   (3,402)
Other..............    3,200     5,298       680       370     3,619    (5,383)
                    --------  --------  --------  --------  --------  --------
Total               $ 65,310  $ 85,093  $ 67,821  $ 15,918  $ 19,808  $ (9,488)
                    ========  ========  ========  ========  ========  ========


Brokerage
---------

The Company's brokerage segment consists of subsidiaries that receive a fee
or commission for brokering insurance and reinsurance  contracts.  Revenues
of $24.9  million in 1999  represented  a  decrease  of $2.2  million  from
revenues  of $27.1  million in 1998,  which  increased  $3.7  million  from
revenues of $23.4 million in 1997.  Increasingly  competitive  pressures in
the marketplace and significant  changes in the overall market  environment
led to a reduction in revenues for the brokerage  operations.  The slowdown
in 1999  brokerage  revenues  accelerated  as the year  progressed  and was
affected by the  disruption  caused by certain  market  disputes  and legal
proceedings  in which  the  Company  became  involved  (see  Item 3 - Legal
Proceedings).  To meet this changed market environment, the Company began a
program of restructuring  of its brokerage  operations in the third quarter
of the year.

The  brokerage  segment's  profit of $2.7  million  in 1999  represented  a
decrease of $8.8  million  from  segment  profit of $11.5  million in 1998,
which  increased  $2.9 million from segment profit of $8.6 million in 1997.
The 1999  decrease  in segment  profits  reflects  the  decrease in revenue
combined with an increase in brokerage  segment  expenses.  The increase in
expenses was primarily due to significant  costs and provisions  associated
with reinsurance  disputes involving the Company or its clients and related
litigation,  as well as  restructuring  costs and an  increase  in bad debt
provisions.

Program Business
----------------

The Company's program business segment consists of subsidiaries that market
insurance  products  and  administer  programs  developed  by the  Company.
Program  business  revenues of $22.4 million in 1999 represented a decrease
of $4.7 million from  revenues of $27.1  million in 1998,  which  increased
$7.3  million  from  revenues  of $19.8  million in 1997.  The  decrease in
revenues  during 1999 as compared to 1998 was due to a reduction in program
business  volume  together  with  a  reduction  on fee  margins  due to the
increasingly  competitive  environment  in the U.S.  workers'  compensation
insurance  market.  In addition,  a number of reinsurers  withdrew from the
market,  which led to cancellation  of certain  programs and contributed to
increased  pressure on the  Company's fee margins.  Although  there is some
indication of an increase in pricing, the Company's fee margins continue to
be under pressure.

The program  business  segment loss of $2.7 million in 1999  represented  a
decrease of $7.9 million from segment profit of $5.2 million in 1998, which
increased  $1.3 million from  segment  profit of $3.9 million in 1997.  The
1999 decrease in segment  profits  reflects the decrease in program premium
volume,  together  with reduced fee margins.  During the year,  the Company
began a restructuring of its program segment operations,  which resulted in
the closure of two  offices,  consolidation  of certain  operations,  and a
streamlining  of its remaining  operations to reduce  expenses and increase
efficiencies.

The Company has accelerated its development and increased its investment in
e-commerce to increase the quality and  efficiency of service to its agency
network.  The Company also has expanded its e-commerce focus to develop new
ways to deliver products and services to various market sectors.

Underwriting Management
-----------------------

The Company's  underwriting  management  segment  comprises  companies that
primarily  underwrite  and  administer  reinsurance  business  on behalf of
independent reinsurance companies. Segment revenues of $4.1 million in 1999
represented  an increase of $0.5 million  from  revenues of $3.6 million in
1998,  which  decreased $0.6 million from revenues of $4.2 million in 1997.
This  increase in  revenues  during 1999 was  primarily  due to  additional
earnings  realized  in the first  quarter  of 1999 on  contracts  that were
placed in prior years.

Segment  profit of $1.4  million in 1999  represented  a  decrease  of $0.3
million  from  segment  profit  of $1.7  million  in  1998,  which  in turn
reflected a $0.8 million  decrease  from segment  profit of $2.5 million in
1997. The Company's underwriting management segment continued to experience
significant  competitive  pressures as 1999 progressed,  with a significant
reduction  in business  being  renewed  during the year.  Consequently  the
Company  expects  revenues  and profits for this  segment to decline in the
current year.

Insurance
---------

The Company's  insurance  segment  consists of its wholly owned  U.S.-based
insurance  company,  Realm National  Insurance  Company.  Revenues of $12.6
million in 1999  represented  an increase of $1.5 million from  revenues of
$11.1  million  in 1998,  which  reflected  a $5.7  million  increase  from
revenues of $5.4 million in 1997. Gross written premiums were $47.2 million
in 1999,  which  represented a $1.4 million  decrease from $48.6 million in
1998,  which reflected a $26.9 million increase from $21.7 million in 1997.
Net premiums earned increased to $9.5 million in 1999, which  represented a
$1.8 million  increase  from $7.7 million in 1998,  which  reflected a $4.8
million  increase from $2.9 million in 1997. The remainder of the growth in
revenues is due to an increase in policy  issuance  fees.  Policy  issuance
fees  increased to $2.5 million in 1999,  which  represented a $0.4 million
increase from $2.1 million in 1998, which reflected a $1.3 million increase
from $0.8 million in 1997.

Market  conditions in the workers  compensation  insurance  market in which
Realm  National  writes the  majority  of its  business  grew  increasingly
competitive   during  1999,  slowing  its  rate  of  growth.  In  addition,
cost-effective  reinsurance capacity  significantly  diminished  throughout
1999. This has resulted in Realm National retaining a greater proportion of
its  business  on some  programs  but has also led to the  cancellation  of
certain other programs.  While these competitive  insurance and reinsurance
market  conditions  continue,  they are likely to restrict Realm National's
ability to expand its existing book of business.

Segment loss of $2.1 million in 1999 represented a decrease of $3.3 million
from segment profit of $1.2 million in 1998,  which  increased $0.7 million
from segment  profit of $0.5 million in 1997. The results for the year were
adversely  affected  by a provision  of $2.2  million  against  reinsurance
recoveries and a $0.5 million  accounting  charge following the adoption of
SOP 98-5.

Reinsurance
-----------

The Company's  reinsurance segment consists of its reinsurance  subsidiary,
CIRCL.  CIRCL primarily  reinsures  workers'  compensation and property and
general  liability  risks.  Management  determined  in early  1999 to cease
underwriting  new  programs  in  CIRCL.  As a  result,  revenues  for  1999
decreased  accordingly.  Revenues  of $3.1  million in 1999  represented  a
decrease of $7.8 million from revenues of $10.9  million in 1998,  which in
turn  increased  $1.5  million from  revenues of $9.4 million in 1997.  Net
premiums  earned  are the  largest  component  of  revenues  in CIRCL.  Net
premiums  earned of $2.4  million in 1999  represented  a decrease  of $7.7
million from net premiums  earned of $10.1  million in 1998,  which in turn
reflected a $1.2 million  increase from net premiums earned of $8.9 million
in 1997.

Segment  loss of $3.4  million in 1999 was  consistent  with a loss of $3.4
million in 1998,  which in turn  reflected a decrease of $3.5  million from
segment  profit of $0.1  million in 1997.  The primary  reason for the loss
during 1999 was a $2.1 million  provision against  reinsurance  recoveries.
CIRCL has  experienced  substantial  delays in  collection  of  reinsurance
recoverables   from  certain  of  its   reinsurers.   CIRCL  therefore  has
established a provision in the amount of $4.6 million  against  reinsurance
contracts  with  projected  reinsurance  recoverables  of a total  of $21.4
million.   This  provision  has been  included  in the  balance  sheet as a
component of paid losses recoverable from reinsurers.

Other
-----

Other  includes   primarily  the  Company's  holding  companies  and  other
non-operating  subsidiaries,  as well as income earned from  investments in
non-consolidating affiliates.  Revenues of $0.7 million in 1999 represented
a decrease of $4.6 million from revenues of $5.3 million in 1998,  which in
turn reflected an increase of $2.1 million from revenues of $3.2 million in
1997.  The primary  reason for the  decrease in revenues  during 1999 was a
decline in income earned from  investments in affiliates and a $2.0 million
charge due to a writedown of investments  in  affiliates.  This segment was
also affected by significant  increases in costs and provisions relating to
litigation,  advisory fees and costs relating to the  restructuring  of the
Company.

Liquidity and Capital Resources
-------------------------------

At December 31, 1999,  the Company held cash and  marketable  securities of
$84.8 million, compared to $97.4 million at December 31, 1998. In addition,
the Company held cash in fiduciary  accounts  relating to insurance  client
premiums amounting to $56.8 million at December 31, 1999, compared to $63.9
million at December 31, 1998.  These  decreased  cash balances  reflect the
slow-down in the Company's business  activities for 1999, together with the
net  loss  for the  year.  Of the  $84.8  million  of cash  and  marketable
securities held by the Company at December 31, 1999 (1998--$97.4  million),
$54.3 million (1998--$58.9 million) were held by subsidiaries whose payment
of  dividends  to the  Company was subject to  regulatory  restrictions  or
possible tax  liabilities.  At December 31, 1999, the Company's  investment
portfolio  (at fair  market  value)  totalled  $34.1  million  (1998--$29.2
million).  The portfolio consisted  primarily of U.S. Treasury,  short-term
cash and A-rated corporate debt securities.

During the year ended December 31, 1999, the Company's operating activities
used $4.1 million of net cash,  compared to generating $28.7 million of net
cash during 1998 and $8.1 million in 1997.  The cash  generated  from (used
by)  operating  activities  varies  according to the  Company's  net income
(loss) and the timing of  collections  and  payments of the  Company's  own
insurance and reinsurance balances.

The  increase  of $352.5  million in  insurance  and  reinsurance  balances
receivable,  and the corresponding  increase of $336.4 million in insurance
and reinsurance balances payable, primarily reflects the growth in clients'
claims balances recorded in the Company's broking subsidiaries. As a result
of various disputes between insurers and reinsurers on various  reinsurance
contracts,  a number of the  reinsurers  have  suspended  paying claims due
under the contracts.  The Company's  brokerage and underwriting  management
segment  subsidiaries  experienced a significant  growth in client balances
receivable  and payable  recorded at the end of the year,  reflecting  this
accumulation  of claims due by one party to  another.  These  balances  are
reflected as an asset or  liability,  as the case may be, on the  Company's
balance sheet.

The Company  used $4.4 million  during the year ended  December 31, 1999 to
repurchase 356,400 of its own shares on the open market.

Shareholders'  equity  decreased by $12.8  million,  to $84.8  million,  at
December 31, 1999 from $97.6 million at December 31, 1998, due primarily to
the net loss  incurred for the year,  together  with  purchases of treasury
stock on the open market during the year.

The Company had no outstanding debt at December 31, 1998 and 1999.

Accounting Pronouncements
-------------------------

In December 1997, the AICPA Accounting Standards Executive Committee issued
Statement  of  Position  (SOP) 97-3,  "Accounting  by  Insurance  and Other
Enterprises for Insurance-Related  Assessments". The accounting guidance of
this  SOP  focuses  on  the  timing  of  recognition   and  measurement  of
liabilities for insurance-related assessments. Guidance is also provided on
recording  assets  representing  future  recoveries of assessments  through
premium tax offsets or policy  surcharges.  The SOP is effective for fiscal
years  beginning after December 15, 1998. The Company adopted this standard
effective  January 1, 1999 and it did not have a significant  impact on the
Company's financial position or results of operations.

In June 1999, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement  No.  133".  This  statement  amends  SFAS No.  133 to defer  its
effective date for one year, to fiscal years beginning after June 15, 2000.
Initial application for the Company will begin for the first quarter of the
year 2001.  The Company is currently  reviewing the  potential  impact that
this standard may or may not have on its financial reporting.

During 1998, the AICPA Accounting  Standards Executive Committee issued SOP
98-5,  "Reporting  on the costs of  start-up  activities".  The  accounting
guidance  of this SOP  requires  that the costs of start-up  activities  be
expensed  as  incurred  and any costs that are carried as an asset prior to
adoption of SOP 98-5 would be written off by reporting a cumulative  effect
of a change  in  accounting  principle  in the  statement  of  income as of
January 1, 1999. The cumulative effect of a change in accounting  principle
that was  recorded  in the  statement  of income for 1999 is  approximately
$307,000 (net of tax of $188,000).

In November 1998, the AICPA Accounting Standards Executive Committee issued
SOP 98-7,  "Deposit  accounting:  Accounting for Insurance and  Reinsurance
Contracts that do not transfer  risk".  This statement is effective for all
quarters of fiscal years  beginning  after June 15, 1999. This SOP provides
accounting  guidance for insurance and  reinsurance  contracts  that do not
transfer  risk, as  determined  by the  provisions of SFAS 113. The Company
adopted  this  standard  effective  January  1,  1999 and it did not have a
significant  impact on the  Company's  financial  position  or  results  of
operations.

Year 2000
---------

The Year 2000 issue is the result of computer  programs being written using
two digits rather than four digits to define the  applicable  year.  Any of
the Company's programs or non-information  systems that have date-sensitive
software  may  recognize a date using "00" as the year 1900 rather than the
year  2000.   This  could   result  in  a  major   system   failure  or  in
miscalculations.

In  1997,  the  Company  appointed  individuals  in each  of the  Company's
geographic  regions to review and assess the  Company's  state of readiness
and its ability to process transactions in the Year 2000. These individuals
and the overall  committee that they are a part of are provided guidance to
the  operating  and support  departments,  and  monitored  the  progress of
efforts  made to  address  the Year 2000  issue.  During  1999 the  Company
implemented its plan and prepared its various computer systems and selected
applications  for the Year 2000. This process  involved  taking  inventory,
testing,  evaluating  and  adjusting all known  date-sensitive  systems and
equipment for Year 2000 compliance.  In addition,  the Company reviewed its
essential non-information  technology systems for Year 2000 compliance. The
Company also  consulted  with various  third  parties,  including,  but not
limited  to,   outside   consultants,   outside   service   providers   and
infrastructure  providers to develop  approaches to the Year 2000 issue, to
gain  insight  into  problems  and to  provide  additional  perspective  on
solutions.  Compliance work with respect to the Company's  internal systems
was  completed  during  1999.  In the last  quarter  of 1999,  all  systems
critical to the  Company's  core  businesses  were  retested  and  rollover
testing was performed. The Company is not aware of any significant internal
or external problems occurring to date with respect to the Year 2000 issue.

In the U.S. and  Bermuda,  the  Company's  and its  subsidiaries'  internal
computer  systems and  software  are  relatively  modern and few costs were
incurred to bring those systems into compliance. In the U.K., the Company's
subsidiaries'  internal  systems  and  software  were not as modern and the
majority  of the  Company's  Year 2000  costs in  upgrading  the  Company's
systems and software were incurred in that region. Because of the Year 2000
issue,  one large system in the U.K. was replaced in late 1998.  No further
costs are expected with regard to the Year 2000 issue.

The  Company  continues  to assess its  external  relationships  with third
parties.  During 1999 the Company communicated with its significant vendors
and large  customers  to  determine  the  extent to which the  Company  was
vulnerable to those third parties' failure to remediate their own Year 2000
problems.  Although  there were no problems  noted  following  December 31,
1999, there can be no assurance that the systems of third parties,  such as
utility  companies,   regulatory  bodies,  government  entities,  insurance
related companies or insurance  carriers on which the Company's  operations
rely, will continue to be immune to  post-year-end  Year 2000 problems that
would have a material  adverse effect on the Company's  operating  results.
However, management believes that ongoing communication with and assessment
of third parties will minimize these risks.

The  Company's  insurance  and  reinsurance  subsidiaries  may also have an
underwriting  exposure to the Year 2000 issue.  Although  the  subsidiaries
have not  received  any claims of coverage  from  insureds  based on losses
resulting  from Year 2000 issues,  there can be no assurance  that insureds
will be free from  losses of this type or that these  subsidiaries  will be
free from claims made under their policies.

The total cost of compliance was $0.7 million.  Approximately  $0.5 million
of the cost was related to  reprogramming  or replacement of software,  and
approximately  $0.2 million was related to acquisition  of hardware.  Costs
related to  non-information  technology  were  immaterial.  All of the $0.7
million cost of compliance was incurred as of the end of December 31, 1999.
All of these costs were funded through  operating  cash flows.  Total costs
have not had a material impact on the Company's financial results.

Based on the review of the  Company and its risks,  the  Company  currently
anticipates   minimal  business  disruption  will  occur  as  a  result  of
post-year-end Year 2000 issues. Nonetheless, the Year 2000 issue represents
a  risk  that  cannot  be  assessed  with  precision  nor  controlled  with
certainty.  Possible  consequences of disruptions that could occur include,
but are not limited to, loss of communication  links with  subsidiaries and
insurance   carriers,   loss  of  electric  power,   inability  to  process
transactions or inability to engage in similar normal business  activities.
Furthermore,  failure of  significant  third parties with which the Company
conducts business,  including  insurance  carriers and reinsurers,  to meet
Year 2000  compliance  could have a  materially  detrimental  effect on the
Company.  The Company established a contingency plan for possible Year 2000
issues.  Where  needed,  the Company will revise or adjust its  contingency
plan based on actual testing  experience with its systems and assessment of
outside risks.

NOTE ON FORWARD-LOOKING STATEMENTS

The  Private  Securities  Litigation  Reform  Act of 1995  provides a "safe
harbor"  for  forward-looking  statements.  This Form 10-K,  or any oral or
written  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  identified  by their  use of such  terms  and  phrases  as
"intends,"   "intend,"   "intended,"   "goal,"   "estimate,"   "estimates,"
"expects," "expect,"  "expected,"  "project,"  "projected,"  "projections,"
"plans,"   "anticipates,"    "anticipated,"    "should,"   "designed   to,"
"foreseeable  future,"  "believe,"  "believes" and  "scheduled" and similar
expressions.  Readers are  cautioned  not to place undue  reliance on these
forward-looking  statements,  which speak only as of the date the statement
was made. 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.

Reference is made to the cautionary  statements  contained in Exhibit 99 to
this Form  10-K for a  discussion  of the  factors  that may  cause  actual
results  to differ  from the  results  discussed  in these  forward-looking
statements.

Inflation
---------

The Company does not believe its operations have been  materially  affected
by inflation.  The potential  adverse impacts of inflation  include:  (a) a
decline in the market  value of the  Company's  fixed  maturity  investment
portfolio;  (b) an increase in the ultimate  cost of settling  claims which
remain unresolved for a significant  period of time; and (c) an increase in
the Company's operating expenses.  However, the Company generally holds its
fixed  maturity  investments  to maturity and  currently  believes  that an
acceptable  amount is included in the yield to  compensate  the Company for
the risk of inflation.  Any increase in the cost of settling claims will be
offset by increases in investment income earned and, generally, an increase
in operating expenses resulting from inflation should be matched by similar
increases in  investment  income earned on the  Company's  general  surplus
funds.

ITEM 7A--MARKET RISK

The  Company's   investment   portfolio  is  comprised  of  fixed  maturity
investments,  equity securities, and short term investments.  The Company's
exposure to market risk is primarily  limited to changing  interest  rates,
primarily  in the United  States,  as all fixed  maturity  investments  are
denominated  in  U.S.  dollars.  The  fair  value  of  the  fixed  maturity
investments as at December 31, 1999 was $28.8 million. A change in interest
rates will affect the fair value of the Company's investments and will lead
to fluctuations in "Accumulated Other Comprehensive  Income" on the balance
sheet. The Company does not use derivative financial  instruments to manage
market risk in its portfolio.


<PAGE>


The table below  (expressed in millions of U.S.  dollars)  presents the par
value  amounts  and  related  weighted  average  interest  rates by year of
maturity for the Company's U.S. dollar denominated investment portfolio.

<TABLE>
<CAPTION>
                    2000  2001  2002  2003  2004  2005  2006  2009  2012  2019  TOTAL
                    ----  ----  ----  ----  ----  ----  ----  ----  ----  ----  -----
<S>                 <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>   <C>
Investments Fixed
  Maturity ($)       2.1   4.3   1.7   4.8   9.2   3.7   1.5   1.0   0.5   0.4   29.3
                    ----  ----  ----  ----  ----  ----  ----  ----  ----  ----  -----
Weighted average
  interest rate      6.8%  5.9%  7.5%  5.6%  5.7%  4.1%  7.3%  5.3%  5.6%  6.3%  5.75%
                    ----  ----  ----  ----  ----  ----  ----  ----  ----  ----  -----
</TABLE>


Given the limited value of balances and transactions in foreign currencies,
the Company's  exposure to foreign  currency  movements is considered to be
insignificant.

ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Index to Consolidated Financial Statements and Related Notes:

                                                       PAGE #
                                                       -------
          Reports of Independent Public Accountants...     23
          Consolidated Balance Sheets.................     25
          Consolidated Statements of Income
            and Comprehensive Income .................     26
          Consolidated Statements of Changes in
            Shareholders' Equity......................     27
          Consolidated Statements of Cash Flows.......     28
          Notes to Consolidated Financial Statements..  29-48
<PAGE>
                  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors and Shareholders of
Stirling Cooke Brown Holdings Limited

We have  audited the  consolidated  balance  sheet of Stirling  Cooke Brown
Holdings  Limited and subsidiaries as of December 31, 1999, and the related
consolidated  statements  of income and  comprehensive  income,  changes in
shareholders'  equity  and  cash  flows  for the  year  then  ended.  These
consolidated  financial  statements are the responsibility of the Company's
management.   Our   responsibility  is  to  express  an  opinion  on  these
consolidated  financial  statements  based on our audit.  The  consolidated
financial   statements  of  Stirling  Cooke  Brown  Holdings   Limited  and
subsidiaries  as of  December  31,  1998 and 1997,  were  audited  by other
auditors  whose  report,  dated  March 5, 1999,  expressed  an  unqualified
opinion on those statements.

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

In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all  material  respects,  the  financial  position  of
Stirling Cooke Brown Holdings  Limited and  subsidiaries as of December 31,
1999 and the results of their operations and their cash flows for year then
ended in conformity with accounting  principles  generally  accepted in the
United States.

/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
New York, New York
March 13, 2000
<PAGE>
                        INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of
Stirling Cooke Brown Holdings Limited

We have  audited the  consolidated  balance  sheet of Stirling  Cooke Brown
Holdings  Limited and subsidiaries as of December 31, 1998, and the related
statements    of   income   and    comprehensive    income,    changes   in
shareholders' equity and cash  flows  for each of the years in the two year
period ended December 31, 1998. These consolidated financial statements are
the  responsibility of the Company's  management.  Our responsibility is to
express an opinion on these consolidated  financial statements based on our
audits.

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

In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all  material  respects,  the  financial  position  of
Stirling Cooke Brown Holdings  Limited and  subsidiaries as at December 31,
1998 and the results of their  operations  and their cash flows for each of
the years in the two year period ended  December 31,  1998,  in  conformity
with United States generally accepted accounting principles.


/s/ KPMG
-----------------
KPMG
Hamilton, Bermuda
March 5, 1999
<PAGE>
<TABLE>
<CAPTION>


                   STIRLING COOKE BROWN HOLDINGS LIMITED

                        CONSOLIDATED BALANCE SHEETS

                         DECEMBER 31, 1998 AND 1999
 (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

                                                                                              1998         1999
                                                                                            ---------   ----------
                                         ASSETS
                                         ------
<S>                                                                                         <C>         <C>
Marketable securities, at fair value (Note 5)
     Debt securities (amortized cost, 1998--$16,722, 1999--$29,555)......................   $  17,057   $   28,802
     Equity securities (cost, 1998--$2,384, 1999--$3,340)................................       2,536        4,051
     Short term investments (amortized cost,1998--$9,643, 1999--$1,256)..................       9,643        1,256
                                                                                            ---------   ----------
Total marketable securities..............................................................      29,236       34,109
Cash and cash equivalents (Note 3).......................................................      68,165       50,706
Fiduciary funds-restricted (Notes 3 and 4)...............................................      63,895       56,829
Insurance and reinsurance balances receivable (affiliates, 1998--$9,994, 1999--$Nil)
   (Notes 3, 4 and 18)...................................................................     382,417      734,868
Paid losses recoverable from reinsurers (Note 8) ........................................       8,916       13,293
Outstanding losses recoverable from reinsurers (Notes 8 and 9)...........................      48,146       73,267
Deferred acquisition costs...............................................................       2,286        1,745
Deferred reinsurance premiums ceded (Note 8).............................................      18,711       16,144
Deferred tax asset (Note 12).............................................................       1,755        3,315
Goodwill (Note 2(j)).....................................................................       8,775        8,664
Other assets (Note 6)....................................................................      14,026       12,352
Income taxes receivable (Note 12) .......................................................          --        2,600
Assets related to deposit liabilities (Note 7)...........................................       3,313        3,517
                                                                                            ---------   ----------
          Total assets...................................................................   $ 649,641   $1,011,409
                                                                                            =========   ==========


<CAPTION>
                                      LIABILITIES
                                      -----------
<S>                                                                                         <C>         <C>
Outstanding losses and loss expenses (Note 9)............................................   $  66,117   $   93,135
Unearned premiums........................................................................      25,037       20,959
Deferred income..........................................................................       3,992        4,695
Insurance and reinsurance balances payable (affiliates, 1998--$957, 1999--$Nil)
   (Notes 4 and 18)......................................................................     438,456      774,888
Funds withheld...........................................................................       1,359        9,580
Accounts payable and accrued liabilities.................................................      10,719       19,803
Income taxes payable (Note 12)...........................................................       3,016           --
Deposit liabilities (Note 7).............................................................       3,313        3,517
                                                                                            ---------   ----------
          Total liabilities..............................................................     552,009      926,577
                                                                                            ---------   ----------
Commitments and Contingencies (Notes 16 and 19)

<CAPTION>
                                   SHAREHOLDERS' EQUITY
                                   --------------------

<S>                                                                                         <C>         <C>
Share capital

   Authorized 20,000,000 ordinary shares of par value $0.25 each. Issued and fully paid
   9,863,372 ordinary shares (Note 10)...................................................       2,466        2,466
Additional paid in capital...............................................................      54,167       54,167
Accumulated other comprehensive income (loss)............................................         319        (211)
Retained earnings........................................................................      41,914       34,067
                                                                                            ---------   ----------
                                                                                               98,866       90,502
Less: Ordinary shares in treasury (1998--87,000, 1999--443,400) at cost (Note 10)..........    (1,234)      (5,657)
                                                                                            ---------   ----------
          Total shareholders' equity.....................................................      97,632       84,832
                                                                                            ---------   ----------
          Total liabilities and shareholders' equity.....................................    $649,641   $1,011,409
                                                                                            =========   ==========

                          The accompanying notes are an integral part of these statements
</TABLE>
<PAGE>

<TABLE>
<CAPTION>


                                       STIRLING COOKE BROWN HOLDINGS LIMITED

                            CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                                   YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                                 (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS,
                                              EXCEPT PER SHARE DATA)

                                                                        1997      1998      1999
                                                                      -------- ---------  -------
<S>                                                                    <C>       <C>       <C>
REVENUES

     Risk management fees (Note 2 (g))............................    $ 45,664  $ 55,580  $ 51,012
     Net premiums earned (Note 8).................................      11,790    17,774    11,850
     Net investment income (Note 5)...............................       5,782     8,771     6,714
     Other income (loss) (Notes 2(i)).............................       2,074     2,968    (1,755)
                                                                      --------  --------  --------
          Total revenues..........................................      65,310    85,093    67,821
                                                                      --------  --------  --------
EXPENSES

     Net losses and loss expenses incurred (Notes 2(f) and 9).....      10,951    17,271    12,370
     Acquisition costs............................................       1,344     3,618     3,860
     Depreciation and amortization of capital assets..............       1,199     1,562     1,674
     Amortization of goodwill.....................................         707       740       847
     Salaries and benefits........................................      18,503    22,805    26,478
     Other operating expenses.....................................      16,688    19,289    31,585
                                                                      --------  --------  --------
          Total expenses..........................................      49,392    65,285    76,814
                                                                      --------  --------  --------
Income (loss) before taxation.....................................      15,918    19,808    (8,993)
Taxation (Note 12)................................................       2,925     3,790    (2,583)
                                                                      --------  --------  --------
Net income (loss) before cumulative effect of
     a change in accounting principle.............................      12,993    16,018    (6,410)
Cumulative effect of a change in accounting
     principle, net of tax (Note 2(q)) ...........................                            (307)
                                                                      --------  --------  --------

Net income (loss).................................................    $ 12,993  $ 16,018  $ (6,717)
                                                                      --------  --------  --------

Other comprehensive income (loss), net of tax:
     Unrealized holding gains  (losses) arising during
     the year (net of tax of $130, $130 and $168).................         188       314      (716)
     Less: reclassification adjustments for realized (gains) losses
     included in net income (net of tax of $166, $1 and ($169))...        (272)      (58)      186
                                                                      --------  --------  --------
     Other comprehensive income (loss), net of tax ...............         (84)      256      (530)
     Comprehensive income (loss)..................................    $ 12,909  $ 16,274  $ (7,247)
                                                                      ========  ========  ========

Net income (loss) per share (Note 13).............................    $   1.55  $   1.63  $  (0.71)
                                                                      ========  ========  ========
Net income (loss) per share assuming dilution (Note 13)...........    $   1.53  $   1.63  $  (0.71)
                                                                      ========  ========  ========







                    The accompanying notes are an integral part of these statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                       STIRLING COOKE BROWN HOLDINGS LIMITED

                            CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                                   YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                                 (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS,
                                             EXCEPT PER SHARE DATA)


                                                                      1997       1998       1999
                                                                    --------- ----------   -------
<S>                                                                <C>       <C>         <C>
Ordinary shares of par value $0.25 each
     Balance at beginning of year................................  $  1,500   $  2,466    $ 2,466
     Issuance of shares..........................................       344         --         --
     Options exercised...........................................       150         --         --
     Cancellation of ordinary shares in treasury.................      (100)        --         --
     Reclassification of ordinary shares subject to redemption...       572         --         --
                                                                   --------   --------    -------

     Balance at end of year......................................  $  2,466   $  2,466    $ 2,466
                                                                   --------   --------    -------
Additional paid in capital
     Balance at beginning of year................................  $ 12,319   $ 54,167    $54,167
     Issuance of shares..........................................    26,488         --         --
     Proceeds from exercise of options in excess of par..........     1,475         --         --
     Issuance of shares (conversion of Class A)..................       (72)        --         --
     Reclassification of ordinary shares subject to redemption...    13,957         --         --
                                                                   --------   --------    -------

     Balance at end of year......................................  $ 54,167   $ 54,167    $54,167
                                                                   --------   --------    -------
Notes receivable

     Balance at beginning of year................................  $     --   $     --    $    --
     Receivable on exercise of options...........................    (1,625)        --         --
     Repayment of notes..........................................     1,625         --         --
                                                                   --------   --------    -------

     Balance at end of year......................................  $     --   $     --    $    --
                                                                   --------   --------    -------
Accumulated other comprehensive income (loss)
     Balance at beginning of year................................  $    147   $     63    $   319
     Change in unrealized gain (loss)............................                  256       (530)
                                                                   --------   --------    -------
                                                                        (84)

     Balance at end of year......................................  $     63   $    319    $  (211)
                                                                   --------   --------    -------
Retained earnings

     Balance at beginning of year................................  $ 15,973   $ 27,074    $41,914
     Net income (loss)...........................................    12,993     16,018     (6,717)
     Dividends...................................................       --     (1,178)     (1,130)
     Cancellation of ordinary shares in treasury.................    (1,892)        --         --
                                                                   --------   --------    -------

     Balance at end of year......................................  $ 27,074   $ 41,914    $34,067
                                                                   --------   --------    -------
Treasury stock

     Balance at beginning of year................................  $   (938)  $   (667)   $(1,234)
     Purchase of ordinary shares in treasury.....................    (1,807)      (567)    (4,423)
     Sale of ordinary shares from treasury.......................        86         --         --
     Cancellation of ordinary shares in treasury.................     1,992         --         --
                                                                   --------   --------    -------

     Balance at end of year......................................  $   (667)  $ (1,234)   $(5,657)
                                                                   --------   --------    -------
     Total shareholders' equity..................................  $ 83,103   $ 97,632    $84,832
                                                                   ========   ========    =======

     Dividends per share were $0, $0.12 and $0.12 for the years ended
December 31, 1997, 1998 and 1999, respectively.

                          The accompanying notes are an integral part of these statements

</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                       STIRLING COOKE BROWN HOLDINGS LIMITED

                                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                                 (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

                                                                       1997     1998       1999
                                                                     -------  --------    -------

<S>                                                                  <C>       <C>      <C>
Operating activities
Net income (loss)                                                  $  12,993 $  16,018  $  (6,717)
Adjustments to reconcile net income to net cash provided by
  operating activities:
    Depreciation and amortization of capital assets................    1,199     1,562      1,674
    Net gain on sale of subsidiaries...............................     (478)       --         --
    Amortization of goodwill.......................................      707       740        847
    Amortization of marketable securities..........................      197        68        104
    Net realized (gains)/losses on sale of marketable securities...     (438)      (59)       355
    (Equity in income)/writedown  of affiliates....................   (1,266)   (2,631)     2,018
    (Gains)/losses on sale of capital assets.......................       --       (67)       120
Changes in non-cash operating assets and liabilities:
    Fiduciary funds................................................  (13,245)   (3,671)     7,066
    Insurance and reinsurance balances receivable.................. (115,935) (170,926)  (352,451)
    Paid losses recoverable from reinsurers........................   (2,811)   (5,374)    (4,377)
    Outstanding losses recoverable from reinsurers.................   (6,484)  (25,074)   (25,121)
    Deferred acquisition costs.....................................     (408)   (1,707)       541
    Deferred reinsurance premiums ceded............................   (5,281)   (6,208)     2,567
    Other assets...................................................   (3,620)   (1,405)      (956)
    Income taxes receivable........................................       --        --     (2,600)
    Deferred tax asset.............................................     (801)     (710)    (1,565)
    Assets related to deposit liabilities..........................    1,292      (557)      (203)
    Outstanding losses and loss expenses...........................   11,975    29,841     27,018
    Unearned premiums..............................................    6,672     5,850     (4,078)
    Insurance and reinsurance balances payable.....................  120,887   186,743    336,432
    Funds withheld.................................................      (69)       45      8,221
    Accounts payable and accrued liabilities.......................    2,431     4,467      9,084
    Income taxes payable...........................................      782        58     (3,016)
    Deferred income................................................    1,060     1,139        703
    Deposit liabilities............................................   (1,292)      557        203
                                                                   ---------  --------  ---------
        Net cash provided (used by) by operating activities........    8,067    28,699     (4,130)
                                                                   ---------  --------  ---------
Investing activities

    Purchase of capital assets.....................................   (1,619)   (2,899)    (2,265)
    Sale of capital assets.........................................       88       229      1,083
    Purchase of debt securities....................................     (318)  (12,584)   (24,509)
    Purchase of equity securities..................................   (3,977)   (2,530)    (3,555)
    Purchase of short-term investments, net........................   (5,459)   (4,064)     8,387
    Proceeds on sale of debt securities............................    4,190    10,680     11,469
    Proceeds on sale of equity securities..........................    7,262       658      2,349
    Purchase of subsidiaries, net of cash acquired.................   (1,197)   (1,055)      (735)
    Cash received of upon sale of subsidiaries.....................      861        --         --
    Investments in affiliates......................................     (198)       --         --
    Dividends received from affiliates.............................      593     2,145         --
                                                                   ---------  --------  ---------
        Cash provided (used) by investing activities...............      226    (9,420)    (7,776)
                                                                   ---------  --------  ---------
Financing activities
    Dividends......................................................       --    (1,178)    (1,130)
    Net proceeds from subscriptions to share capital...............   26,832        --         --
    Proceeds from exercise of options..............................    1,625        --         --
    Purchase of ordinary shares in treasury........................   (1,807)     (567)    (4,423)
    Sales of ordinary shares in treasury...........................       86        --         --
                                                                   ---------  --------  ---------
        Cash provided (used) by financing activities...............   26,736   (1,745)     (5,553)
                                                                   ---------  --------  ---------
Increase (decrease) in cash and cash equivalents...................   35,029    17,534    (17,459)
Cash and cash equivalents at beginning of year.....................$  15,602 $  50,631  $  68,165
                                                                   ---------  --------  ---------
Cash and cash equivalents at end of year...........................$  50,631 $  68,165  $  50,706
                                                                   ========= =========  =========
Supplemental disclosure of cash flow information
        Cash paid during the year for income taxes.................$   3,755 $   3,275  $   1,959
                                                                   ========= =========  =========

                          The accompanying notes are an integral part of these statements
</TABLE>
<PAGE>
                   STIRLING COOKE BROWN HOLDINGS LIMITED
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      DECEMBER 31, 1997, 1998 AND 1999
             (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS,
                     EXCEPT SHARE AND PER SHARE DATA)

1.   GENERAL

Stirling Cooke Brown Holdings Limited  ("Stirling  Cooke") was incorporated
in Bermuda on December 12, 1995. Stirling Cooke is a holding company which,
through  its  subsidiaries,   provides  insurance  services  and  products.
Stirling Cooke provides its range of services and products to  unaffiliated
insurance and reinsurance companies,  insurance agents, as well as directly
to  insureds.   Stirling   Cooke  is   primarily   active  in  the  workers
compensation,  occupational  accident  and  health and  casualty  insurance
markets through its  subsidiaries  based in London,  Bermuda and the United
States. In January 1996, Stirling Cooke acquired all the outstanding common
shares of Realm  Investments  Ltd. in exchange  for  1,999,980 of its newly
issued ordinary  shares.  Stirling Cooke also acquired,  in September 1996,
its own United States domiciled  insurance company Realm National Insurance
Company ("Realm  National") which writes insurance  business in the workers
compensation,  occupational  accident  and health and casualty and property
insurance markets.

On  December  2, 1997,  Stirling  Cooke and  certain  selling  shareholders
consummated an initial public  offering of 3,421,250  ordinary  shares.  Of
these shares, 1,375,000 were sold by Stirling Cooke and 2,046,250 were sold
by selling shareholders.  Net proceeds of $26,832 were received by Stirling
Cooke upon consummation of the initial public offering.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The  accompanying   consolidated   financial  statements  are  prepared  in
accordance  with  accounting  principles  generally  accepted in the United
States.  The following are the significant  accounting  policies adopted by
Stirling Cooke:

     a) Basis of presentation

These consolidated financial statements include the financial statements of
Stirling  Cooke and all of its  majority-owned  subsidiaries  (collectively
referred to as the "Company").  All significant  intercompany  balances and
transactions have been eliminated on consolidation. The results of a number
of subsidiaries have been included from the dates of their acquisition.

     b) Use of estimates

The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires management to make estimates and
assumptions for those  transactions  that are not yet complete or for which
the ultimate  effects  cannot be precisely  determined.  Such estimates and
assumptions  affect the  reported  amounts of assets  and  liabilities  and
disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
financial  statements  and the  reported  amounts of revenues  and expenses
during  the  reporting  period.  Actual  results  could  differ  from those
estimates.

     c) Marketable securities

Marketable  securities  comprise  investments in debt and equity securities
and short term investments. All investments are classified as available for
sale in accordance with SFAS 115,  "Accounting  for Certain  Investments in
Debt and Equity Securities".  Accordingly,  these securities are carried at
fair value,  with the  difference  between fair value and cost or amortized
cost being recorded as accumulated other comprehensive income as a separate
component of shareholders' equity, net of applicable deferred income taxes.
Bond  discounts and premiums are amortized  over the remaining  term of the
securities.  Such amortization is included as a component of net investment
income in the consolidated  statements of income. Realized gains and losses
are determined on the basis of specific  identification.  Investment income
is recorded as earned and accrued to the balance sheet date.

     d) Premiums written, assumed and ceded

Premiums  written and assumed are recorded on an accrual basis and included
in income on a pro-rata  basis over the life of the policies or reinsurance
agreements to which they relate,  with the unearned portion deferred in the
consolidated  balance  sheets.  Adjustment  premiums  arising  from premium
audits are recorded in the period in which they are determined. Reinsurance
premiums ceded are similarly  pro-rated  over the terms of the  reinsurance
contract  with the  unearned  portion  being  deferred in the  consolidated
balance sheets as deferred reinsurance premiums ceded.

     e) Acquisition costs

Acquisition  costs  associated  with  the  acquisition  of new  or  renewal
business, including commissions,  premium taxes and brokerage, are deferred
and  amortized to income over the periods in which the premiums are earned.
The method followed in determining the deferred acquisition expenses limits
the amount of the deferral to its realizable value by giving  consideration
to losses and  expenses  expected to be  incurred  as premiums  are earned.
Future  investment  income is also  anticipated  in  determining  whether a
premium deficiency exists.

     f) Losses and loss expenses

Losses and related loss  adjustment  expenses are charged to income as they
are incurred and are net of losses  recovered and  recoverable  of $16,866,
$44,312 and $53,863 for the years ended  December 31,  1997,  1998 and 1999
respectively. Amounts recoverable from reinsurers are estimated in a manner
consistent  with the  underlying  liability  associated  with the reinsured
policy.   Outstanding  losses  recoverable  are  shown  separately  on  the
consolidated balance sheets.

The Company  establishes  reserves for losses and loss adjustment  expenses
related to reported  claims on the basis of the  evaluations of independent
claims adjusters and the Company's own claims staff. In addition,  reserves
are  established  for  losses  which  have  occurred  but have not yet been
reported and for adverse  development of reserves on reported  losses.  The
Company's independent actuaries estimate claims and claims expenses arising
for losses  that have  occurred  but not yet been  reported  based upon the
Company's  and  the   insurance   industry's   experience,   together  with
statistical  information  with respect to the probable number and nature of
such claims. The Company believes that the provision for outstanding losses
and loss  expenses is adequate to cover the ultimate net cost of losses and
loss expenses  incurred;  however,  such a provision is an estimate and may
ultimately be significantly greater or less than the provision established.
The Company has limited historical loss experience  available to serve as a
basis for the estimation of ultimate losses. It is possible that management
will revise the  estimate of  outstanding  losses and loss  expenses in the
future.

     g) Recognition of risk management fees

                                                   FOR THE YEARS ENDED
                                                   -------------------
                                                      DECEMBER 31,
                                                      ------------

                                                 1997       1998      1999
                                               --------- ---------  --------
   Brokerage fees and commissions............    $23,965   $26,968   $24,577
   Managing general agency fees..............     11,391    14,743    10,164
   Underwriting management fees..............      4,022     3,357     3,900
   Program and captive management fees.......      2,876     3,908     2,298
   Loss control and audit fees...............      2,627     4,508     7,577
   Policy issuance fees......................        783     2,096     2,496
                                                 -------   -------   -------
             Total risk management fees......    $45,664   $55,580   $51,012
                                                 =======   =======   =======


          (i)  Brokerage  fees and  commissions  are recorded and earned as
     premiums are billed since  substantially  all placement  services have
     been  provided at that time.  Any  subsequent  adjustments,  including
     adjustments due to policy cancellations,  premium rate adjustments and
     profit commissions are recognized in risk management fees when advised
     by the client.

          (ii) Managing  general  agency fees are included  within  program
     business segment revenue,  and are reported net of commission  expense
     to agents and are initially  recorded as of the effective  date of the
     related  insurance policy and are recognized in income over the period
     of the underlying policy (which is typically one year). Fee income for
     claims handling services are recognized in income over the period that
     services are  performed in accordance  with the Company's  contractual
     obligations,  typically  ranging  up  to  five  years,  based  on  the
     Company's estimation of expected claims handling  requirements in each
     accounting period.  Such estimation is based upon industry  standards.
     Any  subsequent  adjustments,  including  adjustments  due  to  policy
     cancellation and premium adjustments, are recorded when advised by the
     client  or agent.  The  portion  that will be earned in the  future is
     deferred and reported as deferred income in the  consolidated  balance
     sheets.

          (iii)  Underwriting  management  fees are initially  recorded and
     earned when the premium is billed in  accordance  with terms of trade.
     Fee income for claims  handling  services is recognized in income over
     the  period  that  services  are  performed  in  accordance  with  the
     Company's contractual obligations.  Such fees are recognized in income
     over the period that contractual services are performed,  typically up
     to five years,  based on the Company's  estimation of expected  claims
     handling  requirements in each accounting  period.  Such estimation is
     based upon the Company's claims handling experience over recent years.
     Any  subsequent  adjustments,  including  adjustments  due  to  policy
     cancellations  and premium  adjustments,  are recorded when advised by
     the client or agent.  The portion of recorded fees that will be earned
     in the future is  deferred  and  reported  as  deferred  income in the
     consolidated balance sheets.

          (iv)  Program and captive  management  fees are  included  within
     program business segment revenue, and are initially recorded as of the
     effective date of the insurance  policy or, in the case of installment
     premiums, when the installment is billed and are earned in income over
     the period of the  underlying  policy (which is typically one year) in
     proportion to the level of services  provided in  accordance  with the
     Company's  contractual  obligations.  Any subsequent  adjustments  are
     recognized in income when advised by the client or agent.  The portion
     of  recorded  management  fees that  will be  earned in the  future is
     deferred and reported as deferred income in the  consolidated  balance
     sheets.

          (v) Loss  control  and audit  fees are  included  within  program
     business segment revenue, and comprise claims administration handling,
     loss and safety  control  fees and premium  audit fees.  Such fees are
     recorded as the fees are billed and are  recognized in income over the
     period that services are  performed in  accordance  with the Company's
     contractual obligations,  typically ranging up to five years depending
     on the type of service provided,  based on the Company's estimation of
     expected claims handling  requirements in each accounting period. Such
     estimation is based upon industry standards.  The proportion that will
     be earned in the future is deferred and reported as deferred income in
     the consolidated balance sheets.

          (vi) Policy  issuance fees are recorded as the premium is written
     and earned over the  applicable  policy period (which is typically one
     year).  The  unearned  portion is included  in deferred  income in the
     consolidated balance sheet.

     h) Cash and cash equivalents

The Company  considers time deposits with original  maturity dates of three
months or less to be equivalent  to cash.  Fiduciary  funds are  restricted
from use and are not considered cash equivalents.

     i) Investments in affiliates

The Company's  investments  in affiliated  companies  that are not majority
owned or  controlled  are  accounted  for  using the  equity  method if the
Company is able to exert significant  influence upon such companies.  Other
investments in affiliates are carried at cost. Investments in affiliates of
$1,982  and  $198  for  the  years  ended   December  31,  1998  and  1999,
respectively,  are recorded in other assets.  The Company's equity share in
the net income of affiliates,  for the years ended December 31, 1997,  1998
and 1999 of  $1,266,  and $2,631 and $Nil  respectively,  which,  for 1999,
included  $2,018 of  write-downs  to  recognize  a decrease in the value of
several of their equity  holdings,  is included in other income  (loss) for
those years.  Dividends received from affiliated  companies of $593, $2,145
and $Nil  during  1997,  1998 and 1999,  respectively,  are  recorded  as a
reduction in the carrying value of the investment.

     j) Goodwill

Goodwill  in the  amounts of $8,775 and $8,664 at December  31,  1998,  and
1999, respectively, represents the excess of purchase price over fair value
of net assets acquired. Goodwill is amortized on a straight-line basis over
the expected periods to be benefited,  generally 5 to 20 years. Accumulated
amortization  at  December  31,  1998  and  1999  was  $1,870  and  $2,717,
respectively.  The Company assesses the  recoverability  of this intangible
asset by determining  whether the amortization of the goodwill balance over
its remaining life can be recovered through  undiscounted  future operating
cash flows of the acquired operation. The amount of goodwill impairment, if
any, is measured based on projected  discounted future operating cash flows
using a discount rate reflecting the Company's average cost of funds.

     k) Capital assets and depreciation

Capital   assets  are  stated  at  cost  less   accumulated   depreciation.
Depreciation is calculated using the straight-line method over four to five
years, which are the estimated useful lives of the related assets.

     l) Earnings per share

Earnings per share have been  calculated  in accordance  with  Statement of
Financial  Accounting Standards No. 128. Net income per share is calculated
by dividing  income  available  to ordinary  shareholders  by the  weighted
average number of ordinary shares outstanding.  Shares held in treasury are
not considered outstanding for purposes of the computation.  Net income per
share  assuming  dilution  is  computed by  dividing  income  available  to
ordinary shareholders by the weighted average number of ordinary shares and
potentially  dilutive securities such as stock options. The dilutive effect
of options is reflected in the  computation  by application of the treasury
stock method.

     m) Income taxes

Under the asset and  liability  method  used by the  Company as outlined in
SFAS No.  109,  "Accounting  for  Income  Taxes",  deferred  tax assets and
liabilities are recognized for the future tax consequences  attributable to
temporary   differences  between  the  consolidated   financial  statements
carrying  amounts of existing assets and  liabilities and their  respective
tax bases.  A valuation  allowance  is provided for a portion or all of the
deferred  tax assets when it is more  likely than not that such  portion or
all such deferred assets will not be realized.

     n) Foreign exchange

The United  States  Dollar is the Company's  functional  currency.  Foreign
currency  monetary  assets and liabilities are translated at exchange rates
in effect at the balance sheet date.  Fixed assets and deferred  income are
translated at their historical  exchange rates.  Foreign currency  revenues
and expenses are  translated at exchange rates in effect at the date of the
transaction.  Net  exchange  gains  (losses)  of $311,  $223 and ($117) are
included in other income for the years ended  December  31, 1997,  1998 and
1999, respectively.

     o) Derivative financial instruments

During  the  year,  the  Company  was a party to  transactions  in  certain
derivative financial  instruments,  specifically,  forward foreign exchange
contracts which are used to manage foreign  currency  exposures on non-U.S.
dollar denominated  assets and liabilities.  The Company does not engage in
derivatives for any other purpose. The Company's policy on such derivatives
is that  forward  foreign  exchange  contracts  are  recorded at their fair
value, and the fair values of open contracts are based on the quoted market
prices of forward contracts with similar maturities. Changes in fair values
are  recognized in other income as  appropriate  in the period in which the
changes occur. Amounts receivable or payable on open positions are recorded
in other assets or accounts payable and accrued liabilities as appropriate.
See Note 14(c).

     p) Stock compensation plans

As  permitted  by FASB  Statement  No.  123,  "Accounting  for  Stock-Based
Compensation",  the  Company  has  elected to continue to account for stock
option grants in accordance with APB Opinion No. 25,  "Accounting for Stock
Issued to Employees", and, accordingly, recognizes compensation expense for
stock option  grants to the extent that the fair value of the stock exceeds
the exercise  price of the option at the  measurement  date.  Any resulting
compensation expense is recorded over the shorter of the vesting or service
period.

     q) Accounting pronouncements

In December 1997, the AICPA Accounting Standards Executive Committee issued
Statement  of  Position  (SOP) 97-3,  "Accounting  by  Insurance  and Other
Enterprises for Insurance-Related  Assessments". The accounting guidance of
this  SOP  focuses  on  the  timing  of  recognition   and  measurement  of
liabilities for insurance-related assessments. Guidance is also provided on
recording  assets  representing  future  recoveries of assessments  through
premium tax offsets or policy  surcharges.  The SOP is effective for fiscal
years  beginning after December 15, 1998. The Company adopted this standard
effective  January 1, 1999 and it did not have a significant  impact on the
Company's financial position or results of operations.

In June 1999, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards (SFAS) No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement  No.  133".  This  statement  amends  SFAS No.  133 to defer  its
effective date for one year, to fiscal years beginning after June 15, 2000.
Initial application for the Company will begin for the first quarter of the
year 2001.  The Company is currently  reviewing the  potential  impact that
this standard may or may not have on its financial reporting.

During 1998, the AICPA Accounting  Standards Executive Committee issued SOP
98-5,  "Reporting  on the costs of  start-up  activities".  The  accounting
guidance  of this SOP  requires  that the costs of start-up  activities  be
expensed  as  incurred  and any costs that are carried as an asset prior to
adoption of SOP 98-5 would be written off by reporting a cumulative  effect
of a change  in  accounting  principle  in the  statement  of  income as of
January 1, 1999. The cumulative effect of a change in accounting  principle
that was recorded in the statement of income for 1999 is approximately $307
(net of tax of $188).

In November 1998, the AICPA Accounting Standards Executive Committee issued
SOP 98-7,  "Deposit  Accounting:  Accounting for Insurance and  Reinsurance
Contracts that do not transfer  risk".  This statement is effective for all
quarters of fiscal years  beginning  after June 15, 1999. This SOP provides
accounting  guidance for insurance and  reinsurance  contracts  that do not
transfer  risk, as  determined  by the  provisions of SFAS 113. The Company
adopted  this  standard  effective  January  1,  1999 and it did not have a
significant  impact on the  Company's  financial  position  or  results  of
operations.

3.   LETTERS OF CREDIT AND ASSETS HELD IN TRUST

In the normal course of insurance and reinsurance  operations the Company's
bankers  have  issued  letters of credit  totalling  $13,141 and $18,604 at
December  31,  1998 and 1999,  respectively  in favor of  ceding  insurance
companies.   At  December   31,  1998  and  1999,   $13,141  and   $18,604,
respectively,  of cash and cash  equivalents were pledged as collateral for
these letters of credit.

One of the Company's subsidiaries is registered with the Society of Lloyd's
as a registered  Lloyd's Broker. As required by Lloyd's Brokers Byelaw (No.
5 of 1988),  the  subsidiary  has entered into a trust deed under which all
insurance  broking  account  assets are subject to a floating  lien held in
trust  for  the  Society  of  Lloyd's  for  the  benefit  of the  insurance
creditors.  Insurance  and  reinsurance  balances  payable  covered  by the
floating  lien at  December  31, 1998 and 1999,  amounted  to $139,216  and
$741,932, respectively, including relevant creditors of other subsidiaries.
The  purpose  of the  trust  deed is to  provide  security  to the  Lloyd's
Broker's  insurance  creditors  in the event of the Brokers  insolvency  by
creating a charge over the Broker's insurance  transaction assets. The lien
becomes  enforceable only in the event the Lloyd's Broker becomes insolvent
or breaches  Lloyd's  solvency rules or regulations.  The assets which were
subject to this floating lien at December 31, 1998 and 1999 were:

                                                          1998      1999
                                                        --------  --------
                Fiduciary funds.......................   $22,797   $43,432
                Insurance and reinsurance balances
                  receivable..........................   117,753   702,828
                                                        --------  --------
                                                        $140,550  $746,260
                                                        ========  ========

4.   FIDUCIARY ASSETS AND LIABILITIES

In its various capacities as an insurance intermediary, the Company acts as
a conduit for  insurance and  reinsurance  premiums from insureds and other
intermediaries,  and after  deducting its risk  management  fee and,  where
appropriate,  surplus lines taxes and stamping fees,  remits the premium to
the respective insurance company or underwriter.  Additionally, the Company
acts as a conduit for loss  payments.  Pending the remittance of such funds
to the insurance  company or underwriter in accordance  with the applicable
insurance contract, the Company holds collected funds in its own segregated
bank  accounts and is entitled to any accrued  interest on such funds.  The
obligation  to remit these funds is recorded as insurance  and  reinsurance
balances  payable on the Company's  balance sheet. The period for which the
Company holds such funds is dependent  upon the date the insured remits the
payment of the  premium to the Company and the date the Company is required
to forward such payment to the insurer.

5.   MARKETABLE SECURITIES

     a)   The cost or amortized cost and estimated fair value of marketable
          securities held as 'available for sale' are as follows:

<TABLE>
<CAPTION>
                                                                          1998
                                                               ----------------------------
                                                           COST/     GROSS     GROSS   ESTIMATED
                                                           -----     -----     -----   ---------
                                                         AMORTIZED UNREALIZED UNREALIZED  FAIR
                                                         --------- ---------- ----------  ----
                                                            COST     GAINS     LOSSES    VALUE
                                                            ----     -----     ------    -----

<S>                                                      <C>         <C>       <C>       <C>
U.S. Treasury securities and obligations of
  U.S. Government agencies  ...........................  $  5,694    $  152    $  --     $ 5,846
Foreign government.....................................        29         1       --          30
Obligations of states and political subdivisions.......     6,897        90       --       6,987
Corporate securities...................................     4,102        92       --       4,194
                                                         --------    ------    -----     -------
Debt securities........................................    16,722       335       --      17,057
Equity securities......................................     2,384       152       --       2,536
Short term investments.................................     9,643       --        --       9,643
                                                         --------    ------    -----     -------
          Total........................................  $ 28,749    $  487    $  --     $29,236
                                                         ========    ======    =====     =======

<CAPTION>
                                                                          1999
                                                               ----------------------------
                                                           COST/     GROSS     GROSS   ESTIMATED
                                                           -----     -----     -----   ---------
                                                         AMORTIZED UNREALIZED UNREALIZED  FAIR
                                                         --------- ---------- ----------  ----
                                                            COST     GAINS     LOSSES    VALUE
                                                            ----     -----     ------    -----

<S>                                                      <C>         <C>       <C>       <C>
U.S. Treasury securities and obligations of
  U.S. Government agencies  ...........................  $  8,996    $   25    $   149   $ 8,872
Foreign government.....................................        30        --        --         30
Obligations of states and political subdivisions.......     7,687        --        191     7,496
Corporate securities...................................    12,842       107        545    12,404
                                                         --------    ------    -------   -------
Debt securities........................................    29,555       132        885    28,802
Equity securities......................................     3,340       887        176     4,051
Short term investments.................................     1,256                          1,256
                                                         --------    ------    -------   -------
          Total........................................  $ 34,151    $1,019     $1,061   $34,109
                                                         ========    ======    =======   =======
</TABLE>

Deferred  tax  liabilities  of $168 and $169 at December 31, 1998 and 1999,
respectively,  have been provided  against  unrealized  gains on marketable
securities  held as "available for sale",  which have been presented net as
accumulated other comprehensive income within shareholders' equity.

     b) The amortized cost and estimated  fair value of debt  securities by
contractual  maturity are shown in the following table.  Actual  maturities
may differ from contractual maturities because borrowers may have the right
to call or prepay obligations with or without call or prepayment penalties.

                                                         1999
                                                    ----------------
                                                  AMORTIZED  ESTIMATED
                                                  ---------  ---------
                                                     COST   FAIR VALUE
                                                     ----   ----------
        Due in one year or less.................. $ 2,082      $ 2,080
        Due after one year through five years....  20,179       19,621
        Due after five years through ten years...   6,314        6,155
        Due after ten years through twenty years.     965          946
                                                  -------      -------
                                                  $29,540      $28,802
                                                  =======      =======

     c) Proceeds from sales of investments in debt  securities  during 1998
and 1999 were $10,680 and  $11,469,  respectively.  Proceeds  from sales of
investments in equity securities during 1998 and 1999 were $658 and $2,349,
respectively.  There was $0 of realized  losses and $59 of  realized  gains
during 1998.  There was $587 of realized  losses and $232 of realized gains
during 1999.

     d) At December 31, 1998 and 1999, debt securities  having an amortized
cost of $2,878 and $3,971,  respectively,  were on deposit with  government
authorities as required by law.

     e)  At  December  31,  1998  and  1999,   there  were  no   individual
investments,  other than investments in U.S. Government  securities,  which
exceeded 10% of shareholders' equity.

     f) Net  investment  income by  source,  including  realized  gains and
losses, is as follows:

<TABLE>
<CAPTION>
                                                                  1997     1998     1999
                                                                -------- -------- --------
<S>                                                              <C>       <C>     <C>
        Debt securities......................................    $ 1,029   $  731  $ 1,488
        Equity securities....................................         70       52    (166)
        Cash, cash equivalents and short-term investments....      4,754    8,068    5,537
        Other   .............................................          2       16       13
                                                                 -------   ------  -------
        Total investment income..............................      5,855    8,867    6,872
        Less applicable expenses.............................         73       96      158
                                                                 -------   ------  -------
             Net investment income...........................    $ 5,782  $ 8,771  $ 6,714
                                                                 =======  =======  =======
</TABLE>


6.   CAPITAL ASSETS

Included within other assets are capital assets as follows:

<TABLE>
<CAPTION>
                                           1998                            1999
                                ------------------------           -----------------------
                                       ACCUMULATED  NET BOOK              ACCUMULATED  NET BOOK
                                       -----------  --------              -----------  --------
                              COST     DEPRECIATION   VALUE      COST     DEPRECIATION  VALUE
                              ----     ------------   -----      ----     ------------  -----
<S>                          <C>          <C>       <C>          <C>       <C>          <C>
Furniture and fixtures...    $1,732        $   875  $   857      $1,845     $ 1,026   $   819
Computer equipment.......     4,598          2,409    2,189       3,789       1,917     1,872
Office equipment.........       973            483      490         964         522       442
Motor vehicles...........     1,321            482      839         849         217       632
          Total..........    $8,624        $ 4,249  $ 4,375      $7,447     $ 3,682   $ 3,765
                             ======        =======  =======      ======     =======   =======
</TABLE>

7. DEPOSIT LIABILITIES AND RELATED ASSETS

Certain  of  the   Company's   reinsurance   contracts,   referred   to  as
rent-a-captive  programs,  do not satisfy the  conditions  for  reinsurance
accounting as the maximum exposure to loss is fully funded by premium, cash
and other collateral and indemnity agreements. Accordingly, these contracts
are  accounted  for as deposit  liabilities.  The  assets  related to these
programs  represent funds under management as the insured retains the risks
and rewards of  ownership.  Such assets are  recorded as assets  related to
deposit  liabilities  in the  consolidated  balance  sheets.  These  assets
comprised cash and  short-term  deposits at December 31, 1998 and 1999. The
Company  receives  a fee based on a  percentage  of  premiums  written  and
investment income earned for structuring and providing  ongoing  management
of the programs.

In addition,  deposit  liabilities  and related  assets  include $2,687 and
$2,980 of deposits  received  from  customers  as  security  for the timely
payment of premiums  for  workers'  compensation  insurance at December 31,
1998 and 1999,  respectively.  The  deposit is  restricted  from use by the
Company,  and is the property of the  customer.  The deposit is refunded to
the customer after the policy expires or is canceled and all claims related
to the insurance  policy have been settled.  The interest  income earned by
these restricted  deposit accounts is the property of the customer,  and is
therefore excluded from the Company's operating results.

8.   REINSURANCE ASSUMED AND CEDED

The Company  accounts for reinsurance  assumed and ceded in accordance with
SFAS 113 "Accounting and Reporting for  Reinsurance of  Short-Duration  and
Long-Duration  Contracts".  Net  premiums  earned  are  the  result  of the
following:

<TABLE>
<CAPTION>
                                                                  1997          1998      1999
                                                                 -------      --------   -------
<S>                                                              <C>          <C>        <C>
          Premiums written...................................    $21,743      $48,625    $47,216
          Premiums assumed...................................     14,115       11,806      2,952
          Change in unearned premiums........................     (6,672)      (5,850)     4,389
                                                                 -------      -------    -------
          Premiums earned....................................     29,186       54,581     54,557
                                                                 -------      -------    -------
          Premiums ceded.....................................     22,677       43,015     40,140
          Change in deferred reinsurance premiums ceded......     (5,281)      (6,208)     2,567
                                                                 -------      -------    -------
          Net premiums ceded.................................     17,396       36,807     42,707
                                                                 -------      -------    -------
          Net premiums earned................................    $11,790      $17,774    $11,850
                                                                 =======      =======    =======
</TABLE>

The Company,  in the ordinary course of business,  reinsures  certain risks
with other  companies.  Such  arrangements  serve to enhance the  Company's
capacity to write business and limit the Company's maximum loss on large or
unusually hazardous risks.

Reinsurance  contracts do not relieve the Company from its  obligations  to
policyholders.  Failure of  reinsurers  to honor  their  obligations  could
result in losses to the Company;  consequently,  allowances are established
for amounts  deemed  uncollectible.  The Company  evaluates  the  financial
condition  of its  reinsurers  and monitors  concentrations  of credit risk
arising  from  similar   geographic   regions,   activities,   or  economic
characteristics  of the  reinsurers to minimize its exposure to significant
losses from reinsurer insolvencies. The Company has experienced substantial
delays in  collection  of  reinsurance  recoverables  from  certain  of its
reinsurers and has commenced  arbitration  against one of these reinsurers.
Management  believes that approximately  $6,742 (1998 - $2,500) of paid and
outstanding losses recoverable from reinsurers may prove  uncollectible and
has  established  a provision  for doubtful  recoveries  accordingly.  This
provision of $6,742 against  reinsurance  recoveries of $32,346  represents
management's best estimate at this time of a shortfall in recoveries.  This
provision  is  included in the  balance  sheet as a  component  of paid and
outstanding   losses   recoverable  from   reinsurers.   The  provision  is
necessarily  an estimate and amounts not  collectible  from  reinsurers may
ultimately   be   significantly   greater  or  lesser  than  the  provision
established.  It is possible that  management  will revise this estimate in
the future.  Any  subsequent  differences  arising  will be recorded in the
period in which they occur.

At December  31, 1999 there were  amounts  due from three  reinsurers  that
totaled  $52,039.  These  reinsurers  are rated  `Superior' by A.M.  Best. At
December 31, 1998 there was an amount due from one  reinsurer  that totaled
$17,276, which was in excess of 10% of the Company's shareholders' equity.

The Company recognizes  reinsurance  recoveries when the associated loss is
booked.

Realm National, a subsidiary of the Company,  writes workers  compensation,
property and general liability business.  Workers'  compensation  comprises
the largest proportion of Realm National's written premium. With respect to
1999 and prior years,  this business was subject to quota share reinsurance
whereby Realm National retained 25% of the first $1,000. A portion of Realm
National's  retention under its quota share treaties was further  protected
by common  account  excess  coverages  that reduced  Realm  National's  net
retention to $3 or $5. In addition,  Realm National  purchased  excess loss
coverages on an occurrence basis to limits between $50,000 and $100,000.

Realm  National  also  writes  property  risks  and  purchased  a  property
reinsurance program related to 1999 and prior years whereby it retained 25%
of the first  $1,000  on any one risk and  purchased  facultative  per risk
reinsurance  for limits above $1,000.  In addition,  Realm  National's  net
retention  was further  protected  by a per risk excess of loss cover which
reduced the maximum loss on any one risk to $125.

With  respect to its general  liability  risks Realm  National  purchased a
reinsurance  program  whereby it retained  25% of the first $300 on any one
risk and purchased facultative per risk excess reinsurance for limits above
$300 to $1,000.

Comp Indemnity  Reinsurance Company Limited ("CIRCL"),  a subsidiary of the
Company,   assumed  various  quota  shares  of  workers'  compensation  and
employers'  liability on both a primary and excess basis.  CIRCL's exposure
under the  reinsurance  contracts  assumed is limited in most  instances to
between $25 to $300 for workers' compensation and $1,000 per occurrence for
employers liability and in some instances is subject to an annual aggregate
limit  based on various  percentages  of  original  gross  written  premium
income.  CIRCL  further  limited  its  exposure  through  the  purchase  of
reinsurance protection for certain risks covering losses in excess of $1 to
$3  for  workers'  compensation  and  $50  per  occurrence  for  employers'
liability.

CIRCL also assumed  bodily injury,  difference in conditions,  and property
risks on a general  liability  treaty  covering  risks in the  construction
industry.  CIRCL's  exposure  under the  reinsurance  contracts  assumed is
limited in most  instances to $250 per  occurrence.  CIRCL  limited in most
instances this exposure through the purchase of reinsurance covering losses
in excess of $63 per occurrence.  In addition,  CIRCL  purchased  aggregate
reinsurance  with limits  based on various  percentages  of original  gross
written premium income.

Management  decided in early 1999 to cease underwriting any new programs in
CIRCL due to unfavourable  results and a number of existing  contracts were
not renewed for the 1999 year.

9.   OUTSTANDING LOSSES AND LOSS EXPENSES

Outstanding losses and loss expenses relate to the insurance  activities of
CIRCL and Realm National.

The changes in  outstanding  losses and loss  expenses  are  summarized  as
follows:

                                                  1997      1998        1999
                                                 -------   -------    -------
     Balance beginning of year................   $24,301   $36,276    $66,117
     Less outstanding losses recoverable......   (16,588)  (23,072)   (48,146)
                                                 -------   -------    -------
     Net balance                                   7,713    13,204     17,971
                                                 -------   -------    -------
     Incurred related to:
               Current year...................    10,174    12,578      8,696
               Prior years....................       777     4,693      3,674
                                                 -------   -------    -------
               Total incurred.................    10,951    17,271     12,370
                                                 -------   -------    -------
     Paid related to:
               Current year...................     2,011     3,066      2,830
               Prior years....................     3,449     9,438      7,643
                                                 -------   -------    -------
                    Total paid................     5,460    12,504     10,473
                                                 -------   -------    -------
     Net balance                                  13,204    17,971     19,868
     Plus outstanding losses recoverable......    23,072    48,146     73,267
                                                 -------   -------    -------
               Balance at end of year.........   $36,276   $66,117    $93,135
                                                 =======   =======    =======

The adverse  development  during 1999 on prior years primarily reflects the
increase in provisions for doubtful reinsurance  recoveries of $4.2 million
to $6.7 million discussed in Note 8. The adverse development during 1998 on
prior years  primarily  represents  an increase in claims  frequency on one
particular  program that covers  bodily  injury and  property  risks in the
construction  industry  and a provision  for  doubtful  recoveries  of $2.5
million discussed in Note 8.

10.   SHARE CAPITAL AND ADDITIONAL PAID IN CAPITAL

The  Company's  authorized  share  capital at  December  31,  1998 and 1999
comprised  20,000,000  ordinary  shares  of par value  $0.25  each of which
9,863,372  ordinary  shares  were  issued  and  fully  paid at  that  date.
Outstanding  shares  at  December  31,  1998 and 1999  were  9,776,372  and
9,419,972  respectively,  which  were net of 87,000  and  443,400  treasury
shares respectively.

During 1996, the Company issued 2,000,000  ordinary shares and 25 Class "A"
non-voting  shares to a private  investor  group.  The  2,000,000  ordinary
shares  and  related  25 Class "A"  shares  were  subject  to a put  option
whereby,  after 2004,  the holders of such shares  could  request  that the
Company  repurchase  the shares for fair market value at that date. As such
shares  were  subject  to  redemption  at the  option  of the  holder,  the
aggregate subscription price was classified outside of shareholders' equity
as at December 31, 1996.  The put option expired upon the  consummation  by
the Company of an Initial  Public  Offering  ("IPO") in  December  1997 and
accordingly the shares were reclassified into shareholders'  equity at that
date.

In April 1997, the Company  purchased 213,732 of its ordinary shares from a
founding  shareholder for a total cost of $1,141. Such shares were recorded
as treasury stock at cost.

In June 1997, the Company  reissued  16,000 ordinary shares of its treasury
stock for a total subscription price of $86.

On June 30, 1997, the remaining 400,516 ordinary shares held in treasury at
that date were cancelled. The excess cost of treasury shares over their par
value was recorded as a deduction from retained earnings.

On June 30, 1997,  the Company  increased its  authorized  share capital to
20,000,000  ordinary  shares  of  par  value  $0.25  each  and  effected  a
four-for-one  stock split whereby each of the Company's  ordinary shares of
par value $1.00 each was  divided  into four  ordinary  shares of par value
$0.25 each.

On June 30,  1997,  certain  shareholders  exercised  options  to  purchase
600,000  ordinary  shares in the Company  (see Note 11 to the  consolidated
financial   statements)   at  an   exercise   price  of  $2.71  per  share.
Contemporaneously,  288,888 ordinary shares of par value of $0.25 each were
issued  to  the  holders  of the  Class  "A"  shares  pursuant  to  certain
anti-dilution  rights,  and the Class "A" shares  were  repurchased  by the
Company for nominal  consideration.  The $72 excess of the par value of the
ordinary  shares issued over the original par value of the Class "A" shares
was recorded as a deduction from  additional  paid-in-capital.  On the same
date the Company  loaned the  shareholders  $1,625,  an amount equal to the
aggregate  exercise  price of the  options.  Such loans were  evidenced  by
promissory  notes,  bearing interest at 7% per annum until maturity in June
1998 or  earlier in the event of early  repayment.  Included  within  notes
receivable  were  $325,  $866 and $109 due from  Messrs.  Cooke,  Brown and
Jones,  respectively.  The  loans  were  repaid  in full in  December  1997
following the  successful  completion of the IPO of the Company's  ordinary
shares.

On  December  2,  1997,  the  Company  and  certain  Selling   Shareholders
consummated the IPO of 3,421,250 ordinary shares at $22 per share. Of these
shares  1,375,000  were  sold by the  Company  and  2,046,250  were sold by
Selling  Shareholders.  The Company  received net proceeds of $26,832 after
deducting  underwriting  commissions  of  $2,117  and  expenses  of  $1,301
relating to the issue.

In December 1997, under a put and call option  originally  granted in April
1997,  the Company  purchased  40,000  ordinary  shares for a total cost of
$667.  These  shares were held as treasury  stock at December  31, 1998 and
1999.

In October  1998,  the Company  purchased a further  47,000 of its ordinary
shares on the open market for a total cost of $567.  These shares were held
as treasury stock at cost at December 31, 1998 and 1999.

In the first quarter of 1999,  the Company  purchased a further  356,400 of
its  ordinary  shares on the open market for a total cost of $4,423.  These
shares were held as treasury stock at cost at December 31, 1999.

11.  STOCK OPTIONS

Employees  and  directors  have been granted  options to purchase  Ordinary
Shares in the Company. These options have been issued in three series:

     i) Options issued to Employees--Shareholders

In  1996,  the  Company  granted   600,000  options  to  certain   employee
shareholders  replacing  an earlier  agreement  entered  into in 1995.  The
options  had an  exercise  price of $2.71 per share,  which  reflected  the
estimated  fair value of the shares at the original grant date. The options
were fully  vested at the grant date and were able to be  exercised  at any
time prior to January 23, 2003.

          On June 30, 1997, the  shareholders  exercised  these options and
          purchased  600,000  ordinary shares in the Company at an exercise
          price of $2.71.

     (ii) Options issued under Equity Incentive Plan

          On November  25, 1997  the  Company  granted 300,000  options  to
certain employees.

          The  options  have an  exercise  price  of $22 per  share,  which
          reflected  the  estimated  fair  value of the shares at the grant
          date.  The options vest ratably over a three-year  period and may
          be exercised at any time prior to November 25, 2007.  At December
          31, 1999,  186,750 of these options remained  outstanding (1998 -
          300,000).  The  balance of the shares were  forfeited  during the
          year.

     (iii) Options issued to Officers and Directors

          On  October 26, 1999  the  Company  granted  285,000  options  to
certain officers and directors.

          The  options  have an  exercise  price of $2.31 per share,  which
          reflected  the  market  price of the  shares  on that  date.  The
          options  vest  ratably  over  a  three-year  period  and  may  be
          exercised  at any time prior to October  26,  2009.  All of these
          options were outstanding at December 31, 1999.

In accordance  with the  provisions of FASB  Statement No. 123, the Company
applies APB Opinion 25 and related  interpretations  in accounting  for its
stock option plans and accordingly,  recognizes  compensation cost based on
the  intrinsic  value of the options at the grant date.  If the Company had
elected  to  recognize  compensation  cost  based on the fair  value of the
options  granted at the grant date as  prescribed  by SFAS 123,  net income
(loss) and  earnings  (loss) per share would have been  adjusted to the pro
forma amounts indicated in the table below:

<TABLE>
<CAPTION>
                                                                      1997      1998      1999
                                                                    ---------- -------- --------
<S>                                                                   <C>      <C>      <C>
      Net income (loss)--as reported..............................    $12,993  $16,018  $(6,717)
      Net income (loss)--pro forma.................................   $12,926  $14,820  $(6,606)
      Net income (loss) per share--as reported.....................    $ 1.55   $ 1.63   $(0.71)
      Net income (loss) per share--pro forma.......................    $ 1.54   $ 1.51   $(0.70)
      Net income (loss) per share assuming dilution--as reported...    $ 1.53   $ 1.63   $(0.71)
      Net income (loss) per share assuming dilution--pro forma.....    $ 1.52   $ 1.51   $(0.70)
</TABLE>

These pro forma compensation costs may not be representative of those to be
expected  in  future  years  due to the  timing  of  option  issuances  and
pro-ration of the  corresponding  compensation  costs.

The fair value of each option  grant is  estimated on the date of the grant
using the Black-Scholes option pricing model with the following assumptions
used:

            Expected dividend yield..........       4.5%
            Expected stock price volatility..     87.46%
            Risk-free interest rate..........      6.72%
            Expected life of options.........   10 years

The fair value of options  granted  during 1999 was $1.25 per share.  There
were no options  granted  during  1998.  The fair value of options  granted
during 1997 was $6.59 per share.

12.  TAXATION

Under current  Bermuda law, the Company is not required to pay any taxes in
Bermuda on either  income or capital  gains.  The Company  has  received an
undertaking  from the  Minister of Finance in Bermuda  that in the event of
any such taxes being  imposed the Company  will be exempted  from  taxation
until the year 2016.

Total income tax expense  (benefit) for the years ended  December 31, 1997,
1998 and 1999 was allocated as follows:

<TABLE>
<CAPTION>
                                                                       1997     1998     1999
                                                                     -------- -------- --------
<S>                                                                    <C>      <C>     <C>
        Income (loss) from continuing operations....................   $2,925   $3,790  $(2,583)
        Effect of change in accounting method (Note 2(q))...........       --       --     (188)
                                                                       ------   ------  -------
                                                                       $2,925   $3,790  $(2,771)
                                                                       ======   ======  =======
</TABLE>

Income  tax  expense  (benefit)  attributable  to  income  from  continuing
operations consists of:

<TABLE>
<CAPTION>
                                                   CURRENT      DEFERRED       TOTAL
                                                   -------      --------       -----

<S>                                              <C>           <C>           <C>
      Year ended December 31, 1997
           U.S. Federal and State..............  $    934      $  (809)      $   125
           Foreign (U.K.)......................     2,800           --         2,800
                                                 --------      -------       -------
                                                 $  3,734      $  (809)      $ 2,925
                                                 --------      -------       -------
      Year ended December 31, 1998
           U.S. Federal and State..............  $  1,324      $  (753)      $   571
           Foreign (U.K.)......................     3,219           --         3,219
                                                 --------      -------       -------
                                                   $4,543      $  (753)      $ 3,790
                                                 ========      =======       =======
      Year ended December 31, 1999
           U.S. Federal and State..............  $ (1,377)     $(1,432)      $(2,621)
           Foreign (U.K.)......................        38          --             38
                                                 --------      -------       -------
                                                 $(1,339)      $(1,432)      $(2,583)
                                                 ========      =======       =======
</TABLE>

Income  tax  expense  (benefit)  attributable  to  income  from  continuing
operations and change in accounting method was $2,925,  $3,790 and ($2,771)
for the years ended  December 31,  1997,  1998 and 1999  respectively,  and
differed from the amounts  computed by applying the U.S. federal income tax
rate of 34% to income before taxation as a result of the following:

<TABLE>
<CAPTION>
                                                              1997       1998        1999
                                                            --------   ---------   --------
<S>                                                          <C>         <C>        <C>
       Computed expected tax expense benefit...........      $5,412      $6,888     $(3,226)
       Foreign income not subject to US taxes..........      (2,305)     (2,988)        420
       Foreign income subject to tax at foreign rates..        (200)        (99)          3
       Change in valuation allowance...................         (86)       (104)         --
       Miscellaneous permanent differences.............          98          94          21
       Deferred U.S. interest witholding tax...........         --          --          351
       State taxes.....................................          80          79       (340)
       Utilization of acquired net operating losses....         (74)        (80)        (0)
                                                             ------      ------     -------
       Actual tax expense benefit......................      $2,925      $3,790    $(2,771)
                                                             ======      ======    ========
</TABLE>

The tax  effects of  temporary  differences  that give rise to  significant
portions  of the  deferred  tax  assets and  deferred  tax  liabilities  at
December 31, 1998 and 1999, are presented below:

<TABLE>
<CAPTION>
                                                                                1998      1999
                                                                              --------  --------
<S>                                                                           <C>       <C>
      Deferred tax assets:
           Deferred revenue.................................................  $ 1,220   $ 1,114
           Discount on unearned premiums and outstanding loss reserves......      459       540
           Deferred interest deductions.....................................      280        67
           Allowance for doubtful accounts..................................       --     1,636
           Restructuring reserve............................................       --       229
           State net operating loss carryover...............................       --       150
           Other............................................................       --        60
                                                                              -------   -------
                                                                                1,959     3,796
      Deferred tax liabilities:
           Deferred policy acquisition costs................................      --       (287)
           Unrealized investment gains......................................     (168)     (169)
           Other............................................................      (36)      (25)
                                                                              -------   -------
           Net deferred tax asset...........................................  $ 1,755    $3,315
                                                                              =======   =======
</TABLE>

There was no valuation allowance for deferred tax assets as of December 31,
1998 or 1999, as  management  believes that it is more likely than not that
the deferred tax assets will be realized.  However,  the amount of deferred
tax assets could be reduced in the near term if estimates of taxable income
are reduced.

The  Company  has  not   recognized  a  deferred  tax   liability  for  the
undistributed  earnings of its United  States  subsidiaries.  (A 30% tax is
generally  imposed in the United States on dividends  paid by United States
corporations  to  non-United  States  shareholders).  The Company  does not
expect  those  unremitted  earnings  to become  taxable in the  foreseeable
future.  A deferred  tax  liability  will be  recognized  when the  Company
expects  that it will  recover  those  undistributed  earnings in a taxable
manner,  such as the  receipt of  dividends.  The  deferred  tax  liability
relating  to these  unremitted  earnings,  which is not  recognized  by the
Company, is approximately $542, $986 and $2,442 at December 31, 1997, 1998,
and 1999, respectively.

13.  EARNINGS PER SHARE

Earnings per share have been calculated in accordance with SFAS 128:

<TABLE>
<CAPTION>
                                                                     1997        1998         1999
                                                                   ---------   ---------   ----------

<S>                                                               <C>          <C>          <C>
         Net Income (Loss).....................................   $   12,993   $   16,018   $   (6,717)
                                                                  ==========   ==========   ==========
         Weighted average number of ordinary shares
            outstanding........................................    8,383,482    9,814,101    9,480,356
                                                                  ----------   ----------   ----------
         Net income (loss) per share...........................   $     1.55   $     1.63  ($     0.71)
                                                                  ----------   ----------   ----------
         Income (loss) available to ordinary shareholders......   $   12,993   $   16,018  ($    6,717)
                                                                  ==========   ==========   ==========
         Weighted average number of ordinary shares
            outstanding........................................    8,383,482    9,814,101    9,480,356
         Plus: incremental shares from assumed exercise of
            options............................................      131,991       26,058           --
                                                                  ----------   ----------   ----------
         Adjusted weighted average number of ordinary
            shares outstanding.................................    8,515,473    9,840,159    9,480,356
                                                                  ----------   ----------   ----------
         Net income (loss) per share assuming dilution.........   $     1.53   $     1.63   $    (0.71)
                                                                  ==========   ==========   ==========
</TABLE>

See Notes 10 and 11 to the  consolidated  financial  statements for further
discussion of share capital and share option transactions.

14.  FINANCIAL INSTRUMENTS

     a) Fair value

The carrying  values of all financial  instruments,  as defined by SFAS 107
and as recorded in the consolidated balance sheets,  approximate their fair
value.  The  Company  does  not  have  any  significant  off-balance  sheet
financial  instruments.  The following methods and assumptions were used by
the Company in estimating fair values:

     Cash and cash equivalents and fiduciary funds: The carrying values for
cash and cash  equivalents  and fiduciary  funds  approximated  fair market
values due to the short-term maturities of these instruments.

     Marketable  securities:  The fair values of debt and equity securities
are based on quoted  market  prices and dealer  quotes at the  consolidated
balance sheet dates.

     Deposit  liabilities  and related assets:  Underlying  assets comprise
mainly cash and deposits.  The carrying values for deposit  liabilities and
related  assets  approximated  fair  market  values  due to the  short-term
maturities of these instruments.

     Other assets and  liabilities:  The fair values of all other financial
instruments,  as defined by SFAS 107, approximate their carrying values due
to their short-term nature.

The estimates of fair values  presented herein are subjective in nature and
are not  necessarily  indicative  of the  amounts  that the  Company  would
actually realize in a current market exchange. Any differences would not be
expected to be material.  Certain amounts such as prepaid  expenses,  other
assets,  goodwill and deferred expenses,  deferred fee income,  outstanding
losses  recoverable  from  reinsurers,  and  outstanding  losses  and  loss
expenses are excluded from fair value disclosure. Thus the total fair value
amounts cannot be aggregated to determine the underlying  economic value of
the Company.

     b) Concentrations of credit risk and provision for doubtful accounts

The Company's financial  instruments exposed to possible  concentrations of
credit risk consist primarily of its cash and cash equivalents, outstanding
losses  recoverable from reinsurers and insurance and reinsurance  balances
receivable.

The  Company  maintains  a  substantial   portion  of  its  cash  and  cash
equivalents in two financial  institutions  which the Company  considers of
high credit quality.

Concentrations  of credit risk with respect to other financial  instruments
are to some  extent  limited  due to the number of  reinsurers,  agents and
customers  comprising the Company's  receivable  base. At December 31, 1999
there were  amounts due from three  reinsurers  that  totaled  $52,039,  as
discussed  in Note 8. As at December  31, 1999,  management  believes  that
approximately  $6,742  (1998 -  $2,500)  of  paid  and  outstanding  losses
recoverable from reinsurers may prove  uncollectible  and has established a
provision for doubtful accounts accordingly, as discussed in Note 8.

     c) Forward foreign exchange contracts

The  Company's  functional  currency is the U.S.  dollar;  however,  as the
Company  operates  internationally,  it has  exposure to changes in foreign
currency  exchange  rates.  These  exposures  include  net cash  inflows on
non-U.S. dollar-denominated transactions.

To manage the Company's  exposure to these risks,  the Company  enters into
forward foreign  exchange  contracts in the currencies to which the Company
is exposed.  These contracts generally involve the exchange of one currency
for another at some  future  date.  The  Company had no notional  principal
amounts outstanding at December 31, 1998 and 1999,  respectively,  relating
to contracts to buy British Pounds  Sterling in the future.  A net realized
gain  (loss)  of  $(22),  $182 and $0 is  included  in other  income in the
consolidated  statements of income in respect of such contracts  during the
years ended December 31, 1997, 1998 and 1999, respectively.

15.  SEGMENTAL INFORMATION

(a)  The  Company  has five  main  business  segments;  Brokerage,  Program
     Business,  Underwriting Management,  Insurance,  and Reinsurance.  The
     brokerage  segment  comprises  subsidiaries  that  receive  a  fee  or
     commission  for brokering  insurance and  reinsurance  contracts.  The
     program business segment comprises  subsidiaries that market insurance
     products and manage  programs  developed by the Company.  Underwriting
     Management  companies  are  authorized to  underwrite  and  administer
     reinsurance   business  on  behalf  of   unaffiliated   insurance  and
     reinsurance   companies.   The  insurance  and  reinsurance   segments
     represent  companies that underwrite and retain,  subject to their own
     reinsurance,  certain  insurance  and  reinsurance  risks,  and  their
     revenues include premiums earned on insurance and reinsurance polices,
     investment  income  and  policy  issuance  fees.  Other  includes  the
     Company's  holding  companies,  group services  companies,  and income
     earned from investments in affiliated  companies(1997 - $1,266, 1998 -
     $2,631,  1999 - $Nil).  Intercompany  transactions  are recorded under
     normal terms of trade.  Adjustments and eliminations to revenue are in
     respect  of   intersegment   revenues  that  are   eliminated  at  the
     consolidated  level.   Adjustments  and  eliminations  to  assets  are
     primarily in respect of  intersegment  insurance  balances  receivable
     that are eliminated at the consolidated level.

<TABLE>
<CAPTION>
                                                                                                          Adj. and
                                          Program     Underwriting                                        --------
                            Brokerage     Business    Management     Insurance    Reinsurance   Other    eliminations   Total
                            ---------     --------    ------------   ---------    -----------   -----    ------------   -----

DECEMBER 31, 1997
<S>                            <C>          <C>            <C>           <C>          <C>       <C>       <C>           <C>
  Revenues                      23,385       19,770         4,174         5,399        9,382     3,200           --      65,310
  Income before tax              8,591        3,938         2,491           471           57       370           --      15,918
  Assets                       249,334       22,465        32,038        58,306       40,452    35,029      (31,294)    406,330

DECEMBER 31, 1998
  Revenues                      27,144       27,119         3,554        11,073       10,905     5,798         (500)      85,093
  Income (loss) before tax      11,501        5,187         1,689         1,169       (3,357)    3,619           --      19,808
  Assets                       462,420       35,015        38,179        94,843       58,761    47,123      (86,700)     649,641

DECEMBER 31, 1999
  Revenues                      24,879       22,444         4,123        12,557        3,138       680           --      67,821
  Income (loss) before tax       2,706        2,716         1,446        (2,139)      (3,402)   (5,383)          --      (9,488)
  Assets                       787,818       34,927        88,975       112,916       54,758    35,199     (103,184)  1,011,409
</TABLE>


     (b)  Summarized  financial   information  by  geographic  location  of
subsidiary  for the years  ended  December  31,  1997,  1998 and 1999 is as
follows:
<TABLE>
<CAPTION>

                                                                                  Adjustments &
                                                                                  -------------
                                           Bermuda          U.K        U.S.A.      eliminations    Consolidated
                                           -------          ---        ------      ------------    ------------
<S>                                        <C>           <C>          <C>         <C>                <C>
REVENUES FOR THE YEAR ENDED
   December 31, 1997                        21,326        22,459       22,262         (737)           65,310
   December 31, 1998                        27,485        23,632       34,713         (737)           85,093
   December 31, 1999                        13,355        20,295       34,582         (411)           67,821

IDENTIFIABLE ASSETS AT THE YEAR ENDED
   December 31, 1997                       119,066       250,668       85,066      (48,410)          406,330
   December 31, 1998                       178,489       477,639      127,851     (134,338)          649,641
   December 31, 1999                       221,492       793,641      151,671     (172,449)          994,355
</TABLE>

     (c)  The  Company's  Program  Business  companies  market  and  manage
insurance  products  and  programs  developed  by the  Company on behalf of
independent  insurance  carriers.  In addition,  the  Company,  through its
brokerage  operations and managing general  underwriters provide additional
business and services to certain of these independent insurance carriers in
respect of these products and other insurance and reinsurance policies. For
the year ended December 31, 1997, 1998 and 1999 revenues  received from one
independent  insurance  carrier  approximately  accounted for the following
percentage of total revenues.

<TABLE>
<CAPTION>
                                       Program     Underwriting
                                       -------     ------------
                         Brokerage     Business    Management    Insurance  Reinsurance    Other     Total
                         ---------     --------    ----------    ---------  -----------    -----     -----

<S>                        <C>          <C>           <C>           <C>         <C>      <C>       <C>
December 31, 1997           22%          79%           89%           0%          83%      30%       51%
December 31, 1998           19%          71%           94%           0%          74%      11%       43%
December 31, 1999           19%          70%           91%           0%          72%       0%       39%
</TABLE>

The loss of this  carrier  could  have a  material  adverse  effect  on the
Company.  However, the Company believes that, subject to market conditions,
the availability of alternative underwriting capacity at Realm National and
other  independent  insurance  carriers  would  reduce the impact of such a
loss.

16.  COMMITMENTS

Future minimum lease payments under  non-cancelable  operating leases as at
December 31, 1999 are as follows:

                       2000..................    $ 2,885
                       2001..................      2,671
                       2002..................      2,232
                       2003..................      1,930
                       2004..................      1,422
                       2005 and thereafter...      3,929
                                                 -------
                                                 $15,069
                                                 -------

Total rental expense for the years ended December 31, 1997,  1998 and 1999,
was $1,894, $2,191, and $2,787, respectively.

Certain lease commitments are subject to annual adjustment under escalation
clauses, for real estate taxes and the landlord's operating expenses.  Such
adjustments will not be material to the Company.

17.  STATUTORY SURPLUS AND DIVIDEND RESTRICTIONS

The Company's  ability to pay dividends is subject to certain  restrictions
including the following:

          a) The  Company is subject  to a 30%  withholding  tax on certain
     dividends and interest received from its United States subsidiaries.

          b) Under New York law, Realm National may pay cash dividends only
     from earned surplus  determined on a statutory basis.  Further,  Realm
     National is restricted  (on the basis of the lower of 10% of statutory
     surplus at the end of the preceding twelve-month period or 100% of the
     adjusted net investment income for the preceding  twelve-month period)
     as to the  amount of  dividends  it may  declare  or pay in any twelve
     month period  without the approval of the Insurance  Department of the
     State of New York.

     Realm  National  did not have any  earned  surplus  available  for the
     payment  of  dividends  in 1998 and  1999  due to its  statutory-basis
     accumulated  deficit.  Additionally,  $21 and $23 of statutory surplus
     has been  segregated as special funds as of December 31, 1998 and 1999
     and will not become available for dividend payments until earned.

     Realm National's  total capital and surplus and net income  determined
     on a New York statutory basis are as follows:

                                                          1998      1999
                                                        --------   -------
          Total capital and surplus at December 31,...   $18,889   $17,177
          Net income for year ended December 31,......     $ 663     $ 219

          c) The NAIC has a model law  which  establishes  certain  minimum
     risk-based   capital  ("RBC")   requirements   for   property-casualty
     insurance companies. The RBC calculation serves as a benchmark for the
     regulation of insurance companies by state insurance  regulators.  The
     calculation  specifies various formulas and weighting factors that are
     applied to financial  balances or various  levels of activity based on
     the   perceived   degree  of  risk  and  are  set  forth  in  the  RBC
     requirements.  The capital of Realm  National as of December  31, 1998
     and 1999 exceeded the amount calculated using the RBC requirements.

          d)  The  Company's  Bermuda  reinsurance  subsidiary,  CIRCL,  is
     required by its license to maintain capital and surplus greater than a
     minimum  statutory amount determined as the greater of a percentage of
     outstanding losses and loss expenses (net of reinsurance  recoverable)
     or a given fraction of net written premiums.  At December 31, 1998 and
     1999, respectively, CIRCL was required to maintain a minimum statutory
     capital and surplus of $2,135 and $2,024.  Accordingly,  approximately
     $2,024 of contributed surplus and retained earnings is restricted from
     distribution.

     CIRCL's total  surplus and net loss determined  on a Bermuda statutory
basis is as follows:

                                                            1998      1999
                                                          --------   -------
      Total surplus at December 31......................  $ 2,304    $2,857
      Net loss for year ended December 31...............  $(3,558)  ($5,227)

     CIRCL is also required to maintain a minimum  liquidity  ratio whereby
     the value of its  relevant  assets are not less than 75% of the amount
     of its  relevant  liabilities.  Certain  categories  of  assets do not
     qualify as relevant assets under the statute. At December 31, 1998 and
     1999, respectively,  CIRCL was required to maintain relevant assets of
     at least  $25,000  and  $23,000.  At that date  relevant  assets  were
     approximately  $35,600 and $33,500 and the minimum liquidity ratio was
     therefore met.

18.  RELATED PARTY TRANSACTIONS

     a) Amounts due from/to affiliates are interest-free and unsecured with
no fixed terms of repayment.

     b) Goldman,  Sachs & Co. acted as a  co-managing  underwriter  for the
Company's  IPO  completed  in December  1997,  from which the  underwriters
received aggregate  underwriting discounts of $5.3 million from the Company
and selling shareholders.

     Goldman,  Sachs & Co. or certain of its  affiliates  maintain  certain
contractual  relationships  with the Company and have  provided  investment
banking  services  to the  Company.  Goldman,  Sachs  & Co.  also  provides
investment  management  services to Realm National  pursuant to a Corporate
Account  Agreement dated December 24, 1996 and received  customary fees and
expenses of approximately $32 during 1999 (1998 - $20) for such services.

19.  CONTINGENCIES

(a) The civil action  filed on March 29, 1999 against the Company,  certain
of its subsidiaries, and others in the U.S. District Court for the Southern
District of New York by Odyssey Re (London)  ("Odyssey")  was  dismissed by
the Court on February 25, 2000. The amended complaint in that case asserted
claims against the Company,  certain of its subsidiaries,  and others under
the Racketeering  Influenced and Corrupt  Organizations (RICO) Act, and for
common law fraud.  The Court dismissed the amended  complaint on the ground
of "forum non conveniens," finding that Odyssey's claims should be asserted
in the English  courts.  There is no  counterpart  to the U.S.  RICO law in
England, nor does English law allow imposition of treble damages.

Odyssey,  which changed its name to Sphere Drake Insurance Limited ("Sphere
Drake")  during  1999,  caused  proceedings  to be  issued  in  the  London
Commercial Courts  (equivalent to a civil complaint in U.S.  jurisdictions)
against  the  Company's  U.K.  subsidiaries,  two former  officers of those
subsidiaries,  and others on February 29, 2000. Neither the Company nor any
of its U.S. or Bermuda  subsidiaries are named in the action.  Sphere Drake
generally  alleges a conspiracy  to defraud it in  connection  with various
reinsurance contracts.

It is the opinion of  management  that the claims  generally  described  in
Sphere  Drake's  action  are  without  merit and the case will be  defended
vigorously.

(b)  Several  arbitration  proceedings  currently  are  pending  in England
between reinsurers and ceding insurers relating to reinsurance transactions
involving the personal accident excess of loss market in London ("LMX") for
the account years 1993,  1994, 1995 and 1996.  Although neither the Company
nor its  broker  subsidiaries  are a party  to any of  these  arbitrations,
certain  of the  Company's  subsidiaries  acted as  reinsurance  broker for
ceding insurer clients that are parties to certain of the arbitrations.

In addition,  the Company's  reinsurance  subsidiary is party to one of the
LMX  arbitrations.  This  particular  arbitration has been dormant for some
time.

The reinsurers  generally have alleged that they sustained losses due to an
"artificial"  spiral in the LMX market,  the existence of which, as well as
other  information,  was not  disclosed  to them by the ceding  insurers or
their reinsurance brokers. As a consequence, these reinsurers have asserted
that they are no longer obliged to honor their  reinsurance  agreements and
have suspended payment of claims.

During 1998 and 1999  certain of the  reinsurers  and  reinsureds  that are
parties to the  arbitrations  described  above  issued  proceedings  in the
English courts against one or more of the Company's brokerage  subsidiaries
and one  underwriting  management  subsidiary,  apparently  for the primary
purpose of tolling  the statute of  limitations  pending the outcome of the
arbitrations.   In  one  recently  issued   proceeding   against  the  same
subsidiaries, three former officers of the subsidiaries were also named. In
none of these proceedings did the complainant  specify an amount of damages
sought.  If one or more  reinsurers  succeed in avoiding their contracts in
the pending  arbitrations,  it is possible that ceding insurers clients, on
whose behalf the Company's broker subsidiaries placed the reinsurance,  may
seek to pursue a claim for  indemnification  or other claims against one or
more of those  subsidiaries.  Similarly,  if one or more of the  reinsurers
fails  to avoid  its  contracts  in the  pending  arbitrations,  it also is
possible  that  those  reinsurers  may seek to  pursue  some  type of claim
against one or more of those subsidiaries.

The Company  understands that awards already have been made in favor of the
reinsurer   in  two   arbitrations.   However,   based  on  the   Company's
understanding  of the  reasons  given by the  arbitration  panels for their
awards in favor of the  reinsurer  in those  cases,  the  Company  does not
believe  there is any valid basis for its ceding  insurer  clients in those
cases to assert a claim against the Company or its broker subsidiaries.

All U.K. judicial proceedings against the Company's  subsidiaries have been
stayed or held in  abeyance  pursuant  to  standstill  agreements  or court
order,  except for one proceeding  where the subsidiaries are considering a
request for a standstill and except for standstill  agreements  between two
of the Company's subsidiaries and one ceding insurer client, which recently
gave notice of termination of those standstill agreements.

One of the arbitration awards referenced above allowed a reinsurer to avoid
its reinsurance contracts with a Lloyd's syndicate. According to reports in
the London press, that award may have caused the syndicate's liabilities to
increase  beyond the  financial  resources  available  to it and its Names,
requiring  the  syndicate  to avail  itself of the  Lloyd's  Central  Fund.
Thereafter,  Lloyd's  initiated an  investigation of that syndicate and all
"market  participants,"  including the  Company's  U.K.  subsidiaries.  The
investigation  is at an early  stage  and it is  uncertain  when it will be
completed.

The Company  understands  that  substantial  progress has been and is being
made  by  various  market  participants  in  settling  ongoing  reinsurance
disputes, including many of the market participants that are parties to the
arbitrations and other proceedings described above.

Although no  assurances  can be given as to the outcome of the pending U.K.
arbitrations or pending or potential  judicial  proceedings  related to the
LMX spiral  reinsurance  arbitrations and their effect on the Company,  the
Company believes,  based on the information presently available to it, that
any such effect should not have a material  adverse effect on the Company's
financial condition.

(c) The  reinsurance  markets in which the  Company  historically  has been
involved experienced  considerable disruption during 1999, for a variety of
reasons,  including  but not limited to the LMX market  disputes  described
above and other disputes involving the North American workers' compensation
reinsurance market.

One result of this market disruption has been that certain  reinsurers with
whom the Company's broker  subsidiaries placed business on behalf of ceding
insurer clients  suspended claims payments to those clients,  as well as to
the Company's insurance and reinsurance subsidiaries. As a result, a number
of   arbitrations   were  commenced   between  Company  clients  and  their
reinsurers.

In some instances,  disputes or potential  disputes have arisen  concerning
whether   reinsurance   was  properly   placed  by  the  Company's   broker
subsidiaries. In other instances, the Company's ceding insurer clients have
demanded  imdemnification  by  the  Company  if  the  client's  reinsurance
contracts ultimately are avoided by its reinsurers.

Although no assurances  can be given as to the effect on the Company of the
various  disputes  in the  worker's  compensation  reinsurance  market,  or
related  arbitrations,  the  Company  believes,  based  on the  information
presently  available to it, that any such effect should not have a material
adverse effect on the Company's financial condition.

(d) The  Company is  subject to other  litigation  and  arbitration  in the
ordinary course of its business. While any of these proceedings contains an
element of uncertainty,  management presently believes the outcome of these
currently  pending  proceedings  will not have a material adverse effect on
the Company's financial condition.

20.  QUARTERLY FINANCIAL DATA--UNAUDITED

<TABLE>
<CAPTION>
                                                       FIRST     SECOND    THIRD     FOURTH
                                                       -----     ------    -----     ------
                                                     QUARTER   QUARTER   QUARTER    QUARTER
                                                     -------   -------   -------    -------
                                                        (i)       (i)       (i)       (i)
YEAR ENDED DECEMBER 31, 1998                            ---       ---       ---       ---
<S>                                                  <C>       <C>       <C>       <C>
     Total revenues ............................     $19,989   $22,245   $20,925   $21,934
     Net income.................................       3,987     4,025     4,129     3,877
     Net income (loss) per share................        0.41      0.41      0.42      0.40
     Net income (loss) per share assuming dilution   $  0.40   $  0.41   $  0.42   $  0.40

<CAPTION>
YEAR ENDED DECEMBER 31, 1999
<S>                                                  <C>       <C>       <C>        <C>
     Total revenues ............................     $23,551   $20,620   $14,323    $9,327
     Net income.................................       3,631       978    (2,572)   (8,754)
     Net income (loss) per share................        0.38      0.10     (0.27)    (0.92)
     Net income (loss) per share assuming dilution   $  0.38   $  0.10    ($0.27)  ($ 0.92)

<FN>
(i)  As  discussed  in Note 8, the Company  recorded a provision  of $2,500
     against paid and outstanding losses recoverable from reinsurers during
     the fourth quarter of 1998. The Company  recorded a further  provision
     of  $500  against  paid  and  outstanding   losses   recoverable  from
     reinsurers  during  the first  quarter of 1999,  and a further  $3,742
     during the fourth quarter of 1999.
</FN>
</TABLE>
<PAGE>
ITEM  9--CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On  April  29,  1999,  the  Company  engaged  Arthur  Andersen  LLP  as its
independent accountant. The Company's independent accountant for the fiscal
year ended December 31, 1998 was KPMG ("KPMG").

During the Company's  fiscal years ended December 31, 1997 and 1998 and the
interim  period  subsequent  to the fiscal year ended  December  31,  1998,
neither the Company nor any person on the Company's behalf consulted Arthur
Andersen LLP, regarding either:

     (i)  the   application   of  accounting   principles  to  a  specified
          transaction,  either completed or proposed,  or the type of audit
          opinion  that  might  be  rendered  on  the  Company's  financial
          statements;  and no written or oral  advice was  provided  to the
          Company,  that Arthur  Andersen  LLP  concluded  was an important
          factor  considered  by the  Company in  reaching a decision as to
          accounting, auditing, or financial reporting issues; or

     (ii) any matter that was the subject of a disagreement or a reportable
          event,  as those items are defined under  Regulation  ss. 229.304
          (17 C. F. R. ss. 229.304)

On April  20,  1999,  KPMG  notified  the  Company  that it would  not seek
re-election  as auditors to the  Company  for the year ended  December  31,
1999.

KPMG's reports on the Company's financial statements for each of the fiscal
years ended  December 31, 1997 and 1998 did not contain an adverse  opinion
or a  disclaimer  of  opinion  and were not  qualified  or  modified  as to
uncertainty, audit scope, or accounting principles.

During the Company's fiscal years ended December 31, 1997 and 1998, and the
subsequent  interim  period  preceding  KPMG's  declination,  there were no
disagreements  between  the  Company  and KPMG on any matter of  accounting
principles or practices,  financial statement disclosure, or auditing scope
or procedure which, if not resolved to the satisfaction of KPMG, would have
caused KPMG to make a reference to the subject  matter of  disagreement  in
connection with KPMG's report.

During the Company's  fiscal years ended December 31, 1997 and 1998 and the
subsequent interim period preceding KPMG's declination:

     (a)  KPMG  did not  advise  the  Company  that the  internal  controls
          necessary   for  the  Company  to  develop   reliable   financial
          statements do not exist;
     (b)  KPMG did not  advise the  Company  that  information  has come to
          KPMG's  attention that has led it to no longer be able to rely on
          management's representations, or that has made it unwilling to be
          associated with the financial statements prepared by management;
     (c)  (1)  KPMG  did not  advise  the  Company  of the  need to  expand
          significantly  the scope of its audit,  or that  information  had
          come to KPMG's  attention  during  such  period  that if  further
          investigated   may  (i)   materially   impact  the   fairness  or
          reliability  of either a  previously  issued  audit report or the
          underlying  financial  statements,  or the  financial  statements
          issued or to be issued covering the fiscal periods  subsequent to
          the date of the most recent  financial  statements  covered by an
          audit  report  (including  information  that may  prevent it from
          rendering  an  unqualified   audit  report  on  those   financial
          statements),  or  (ii)  cause  it  to be  unwilling  to  rely  on
          management's   representations   or  be   associated   with   the
          registrant's financial statements; and (2) KPMG did not so expand
          the scope of its audit or conduct such further investigation; and
     (d)  (1) KPMG did not advise the Company that  information has come to
          KPMG's  attention  that it has concluded  materially  impacts the
          fairness or reliability  of either (i) a previously  issued audit
          report  or the  underlying  financial  statements,  or  (ii)  the
          financial  statements  issued or to be issued covering the fiscal
          period  subsequent  to the  date  of the  most  recent  financial
          statements  covered  by an audit  report  (including  information
          that,  unless resolved to the  accountant's  satisfaction,  would
          prevent it from  rendering an  unqualified  audit report on those
          financial  statements),  and (2) KPMG did not advise the  Company
          that due to KPMG's  declination to seek  re-election,  or for any
          other reason,  accounting issues have not been resolved to KPMG's
          satisfaction prior to declination to seek re-election.


                                  PART III

ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Certain of the  information  required by this item is included in Part 1 of
this Form 10-K.

The  remainder  of this item is omitted  because  the  information  will be
contained in a definitive proxy  statement,  which involves the election of
directors,  to be filed with the  Securities  and Exchange  Commission  not
later than 120 days after  December 31, 1999.  Such  information  is hereby
incorporated by reference.


ITEM 11--EXECUTIVE COMPENSATION

This  item is  omitted  because  the  information  will be  contained  in a
definitive proxy statement, which involves the election of directors, to be
filed with the Securities  and Exchange  Commission not later than 120 days
after  December  31,  1999.  Such  information  is hereby  incorporated  by
reference.


ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

This  item is  omitted  because  the  information  will be  contained  in a
definitive proxy statement, which involves the election of directors, to be
filed with the Securities  and Exchange  Commission not later than 120 days
after  December  31,  1999.  Such  information  is hereby  incorporated  by
reference.


ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Certain of the  information  required  by this item is  included in Part 2,
Item 8 of this Form 10-K.

The  remainder  of this item is omitted  because  the  information  will be
contained in a definitive proxy  statement,  which involves the election of
directors,  to be filed with the  Securities  and Exchange  Commission  not
later than 120 days after  December 31, 1999.  Such  information  is hereby
incorporated by reference.
<PAGE>


                                  PART IV

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

     (A) EXHIBITS

         EXHIBIT NO.                  DESCRIPTION
--------------------  -----------------------------------------------------
          3.l       Memorandum of Association of the Company (1)

          3.2       Bye-Laws of the Company (1)

          4.1       Shareholders' Agreement, dated as of January 24, 1996,
                    among the Management Shareholders (as defined therein),
                    Bridge Street Fund 1995, L.P., Goldman Sachs & Co.
                    Verwaltungs GmbH (for GS Capital Partners II German
                    Civil Law Partnership), GS Capital Partners II, L.P.,
                    GS Capital Partners Offshore, L.P., Stone Street Fund
                    1995, L.P. and the Company (1)

          4.2       Registration Rights Agreement, dated January 24, 1996,
                    between the Company, the Management Shareholders (as
                    defined therein) and the Investors (as defined therein)
                    (1)

          10.1      Stirling Cooke Brown Holdings Limited 1997 Equity
                    Incentive Plan (1)*

          10.2      Employment Agreement dated September 1, 1997 between
                    Realm Investments Ltd. and Nicholas Mark Cooke (1)*

          10.4      Employment Agreement dated September 1, 1997 between
                    Stirling Cooke Brown Holdings Limited and George W.
                    Jones (l)*

          10.5      Agency Agreement dated as of June 1, 1995 between
                    Clarendon National Insurance Company and Stirling Cooke
                    Insurance Services, Inc. (1)

          10.6      Amendment Number One to Agency Agreement dated as of
                    June 1, 1995 between Clarendon National Insurance
                    Company and Stirling Cooke Insurance Services, Inc. (1)

          10.7      Amendment Number Two to Agency Agreement dated as of
                    June 1, 1995 between Clarendon National Insurance
                    Company and Stirling Cooke Insurance Services, Inc. (1)

          10.8      Addendum dated April 1, 1997 to Agency Agreement dated
                    as of June 1, 1995 between Clarendon National Insurance
                    Company and Stirling Cooke Insurance Services, Inc. (1)

          10.9      Agency Agreement dated as of October 1, 1995 between
                    Clarendon National Insurance Company and Stirling Cooke
                    Texas, Inc. (1)

          10.10     Management Agreement dated as of August 1, 1995 between
                    Legion Insurance Company and Stirling Cooke Insurance
                    Services, Inc. (1)

          11        Statement Re Computation of Per Share Earnings

          21        Subsidiaries of the Company

          99        Forward-Looking Information

(1)  Incorporated by reference from Registration Statement on Form S-1 (No.
     333-32995) of Stirling Cooke Brown Holdings Limited.
*Management Compensation
<PAGE>


(B)  REPORTS ON FORM 8-K.

     The Company filed a Form 8-K on October 11, 1999 reporting the
     resignation of Mr. Nicholas Brown as managing director and head of the
     London brokering operations.

     The Company filed a Form 8-K on November 3, 1999 reporting the
     election of Mr. Stephen A. Crane as President, Chief Executive Officer
     and director of the Company effective November 1, 1999.

(C)  FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

     1. Financial Statements

          Included in Part II--Item 8 of this report.

     2. Index to Financial Statement Schedules

          Included in Part IV of this report:

                                                           SCHEDULE
             -----------------------------                 --------
                                                           NUMBER     PAGE
                                                           ------   --------

     Reports of Independent Accountants on financial
       statement schedules included in Form 10-K.                        53

     Schedule of Investments excluding Investments in
       Related Parties as of December 31, 1999                  I        55

     Condensed Financial Information of Registrant as
       of and for the years ended December 31, 1997, 1998
       and 1999                                                II     56-58

     Supplementary Insurance Information as of and for
       the years ended December 31, 1997, 1998 and 1999       III        59

     Reinsurance for the years ended December 31, 1997,        IV        60
       1998 and 1999 Valuation and Qualifying Accounts
       for the years ended December 31, 1997, 1998 and
       1999                                                     V        61
     Supplmental Information concerning
       Property-Casualty Insurance Operations for the
       years ended December 31, 1997, 1998 and 1999            VI        62
<PAGE>

        REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors and Shareholders of
Stirling Cooke Brown Holdings Limited

Under date of March 13, 2000, we reported on the consolidated balance sheet
of Stirling Cooke Brown Holdings  Limited and  subsidiaries  as of December
31,  1999,   and  the  related   consolidated   statements  of  income  and
comprehensive  income,  changes in shareholders'  equity and cash flows for
the year then ended. These consolidated  financial  statements  referred to
above are  included  in Item 8 of this  Annual  Report on Form 10-K for the
year  ended  December  31,  1999.  In  connection  with  our  audit  of the
aforementioned  consolidated  financial  statements,  we also  audited  the
related  financial  statement  schedules listed in the accompanying  index.
These financial statement schedules are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statement schedules based on our audit.

The  consolidated  financial  statements of Stirling  Cooke Brown  Holdings
Limited and subsidiaries as of December 31, 1998 and 1997, were reported on
by other auditors whose report is dated March 5, 1999.  Those  consolidated
financial  statements referred to above are also included in Item 8 of this
Annual  Report  on Form  10-K for the year  ended  December  31,  1999.  In
connection with their audits of the aforementioned  consolidated  financial
statements,  they also audited the related  financial  statement  schedules
listed in the accompanying index.

In our  opinion,  the 1999  amounts  included  in the  financial  statement
schedules fairly state in all material respects the financial data required
to be set forth therein in relation to the basic financial statements taken
as a whole.


/s/ Arthur Andersen LLP
-----------------------

Arthur Andersen LLP


New York, New York
March 13, 2000
<PAGE>


                        INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders of
Stirling Cooke Brown Holdings Limited

     Under date of March 5, 1999, we reported on the  consolidated  balance
sheet of Stirling  Cooke Brown  Holdings  Limited  and  subsidiaries  as of
December 31, 1998,  and the related  consolidated  statements of income and
comprehensive  income,  changes in shareholders' equity, and cash flows for
each of the years in the two year period ended December 31, 1998, which are
included in item 8 of this Form 10-K for the year ended  December 31, 1999.
In connection with our audits of the aforementioned  consolidated financial
statements, we also audited the related financial statement schedules as of
December  31, 1998 and for each of the years in the two year  period  ended
December  31,  1998.   These   financial   statement   schedules   are  the
responsibility  of  the  Company's  management.  Our  responsibility  is to
express an  opinion on these  financial  statement  schedules  based on our
audits.

     In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated  financial  statements taken as a whole,
present  fairly,  in all  material  respects,  the  information  set  forth
therein.


/s/ KPMG
-----------------

KPMG
Hamilton, Bermuda
March 5, 1999
<PAGE>
<TABLE>
<CAPTION>

                      STIRLING COOKE BROWN HOLDINGS LIMITED
        SCHEDULE OF INVESTMENTS EXCLUDING INVESTMENTS IN RELATED PARTIES
                                   SCHEDULE I

                                                                                           AMOUNT AT WHICH
                                                                                            SHOWN IN THE
                                                                                FAIR        BALANCE SHEET
                                                                       COST     VALUE      DECEMBER 31, 1999
                                                                      ------    -----      -----------------
<S>                                                                 <C>      <C>           <C>

Fixed maturities
   Bonds:
     United States Government and government agencies and
        authorities..............................................   $  8,988   $ 8,872         $   8,872
     States, municipalities and political subdivisions...........         30        30                30
     Foreign governments.........................................      7,680     7,496             7,496
     All other corporate bonds...................................     12,842    12,404            12,404
                                                                    --------   -------         ---------

          Total fixed maturities.................................     29,540    28,802            28,802
Equity securities
   Common stocks:
     Industrial, miscellaneous and all other.....................      2,626     3,354             3,354
   Nonredeemable preferred stocks................................        697       697               697
                                                                    --------   -------         ---------

          Total equity securities................................      3,323     4,051             4,051
Short-term investments...........................................      1,256     1,256             1,256
                                                                    --------   -------         ---------

          Total investments......................................    $34,119   $34,109        $   34,109
                                                                     =======   =======         =========
</TABLE>

<PAGE>


<TABLE>
<CAPTION>

                   STIRLING COOKE BROWN HOLDINGS LIMITED

               CONDENSED FINANCIAL INFORMATION OF REGISTRANT

              PARENT COMPANY ONLY BALANCE SHEETS--SCHEDULE II

                         DECEMBER 31, 1998 AND 1999
 (Expressed in thousands of United States Dollars, except share and per share data)

                                                                                                 1998       1999
                                                                                               --------   --------
<S>                                                                                            <C>         <C>

Assets
     Cash and cash equivalents............................................................     $28,007    $14,495
     Due from subsidiaries................................................................      15,569     23,812
     Investments in subsidiaries..........................................................      49,786     34,143
     Other assets.........................................................................         427        497
     Marketable securities................................................................       4,092     12,606
                                                                                               -------    -------
          Total Assets....................................................................     $97,881    $85,553
                                                                                               =======    =======
Liabilities
     Accounts payable and accrued liabilities.............................................        $249       $721
                                                                                               -------    -------
          Total Liabilities...............................................................         249        721
                                                                                               -------    -------

Shareholders' equity
     Share capital
        Authorized 20,000,000 ordinary shares of par value $0.25 each issued and fully
          paid 9,863,372 ordinary shares..................................................       2,466      2,466
     Additional paid in capital...........................................................      54,167     54,167
     Accumulated other comprehensive income (loss)........................................         319      (211)
     Retained earnings....................................................................      41,914     34,067
                                                                                               -------    -------
                                                                                                98,866     90,489
     Less: ordinary shares in treasury (1998--87,000, 1999--443,400) at cost................    (1,234)    (5,657)
                                                                                               -------    -------
          Total shareholders' equity......................................................      97,632     84,832
                                                                                               -------    -------
Total Liabilities and Shareholders' equity................................................     $97,881    $85,553
                                                                                               =======    =======
</TABLE>
<PAGE>


<TABLE>
<CAPTION>

                   STIRLING COOKE BROWN HOLDINGS LIMITED

               CONDENSED FINANCIAL INFORMATION OF REGISTRANT

 PARENT COMPANY ONLY STATEMENTS OF INCOME AND COMPREHENSIVE INCOME--SCHEDULE II

                YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
 (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

                                                                                1997      1998        1999
                                                                                -----     -----       -----
<S>                                                                           <C>        <C>         <C>

REVENUES
     Net investment income............................................       $   139    $  1,920       $ 1,717
                                                                               ------     -------      -------
Total Revenues........................................................           139       1,920         1,920
EXPENSES
     Salaries and benefits............................................           395         184           536
     Other operating expenses.........................................           683       1,015         3,178
                                                                             --------    --------     --------

Total Expenses........................................................         1,078       1,199         3,714
NET INCOME (LOSS) BEFORE EQUITY IN INCOME OF SUBSIDIARIES ............          (939)        721        (1,997)
Equity in income of subsidiaries......................................        13,932      15,297        (4,720)
                                                                             --------    --------     --------

NET INCOME (LOSS).....................................................       $12,993     $16,018      ($ 6,717)
                                                                             --------    --------     --------

Other comprehensive income (loss), net of tax:
   Unrealized holding gains (losses) arising during
        the year (net of tax of $130, $130 and $72)...................           188         314          (696)
   Less: reclassification adjustments for realized gains (losses).....
        included in net income (net of tax of $166, $1 and ($189))....          (272)        (58)           16
                                                                             --------    --------     --------
   Other comprehensive income (loss), net of tax......................           (84)        256          (530)
   Comprehensive income (loss)........................................       $12,909     $16,274      ($ 7,247)
                                                                             ========    ========     ========
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                   STIRLING COOKE BROWN HOLDINGS LIMITED

               CONDENSED FINANCIAL INFORMATION OF REGISTRANT

         PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS--SCHEDULE II

                YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                  (Expressed in thousands of United States
                 Dollars, except share and per share data)

                                                                                1997      1998        1999
                                                                                -----     -----       -----
<S>                                                                          <C>         <C>           <C>

OPERATING ACTIVITIES
     Net income (loss).....................................................  $12,993     $16,018       ($6,717)
Items not effecting cash
     Amortization of goodwill..............................................      373         373           373
     Amortization of marketable securities.................................        0          (8)           10
     Depreciation and amortization of capital assets.......................        0           2            10
     Equity in income of subsidiaries......................................  (13,932)    (15,297)        4,720
     Gain on sale of marketable securities.................................        0         (55)         (143)
     Changes in non cash operating assets and liabilities
        Other assets.......................................................     (258)       (134)          (80)
        Accounts payable and accrued liabilities...........................    1,125        (892)          472
        Due to subsidiaries................................................     (193)          0             0
                                                                             --------    --------     --------
          Net cash provided (used) by operating activities.................      108           7        (1,355)
                                                                             --------    --------     --------

INVESTING ACTIVITIES
     Purchase of capital assets............................................      (37)          0             0
     Investments in subsidiaries...........................................     (274)        960            15
     Due from subsidiaries.................................................   (5,600)     (4,331)       (3,606)
     Dividends received from subsidiaries..................................    6,850       9,250         6,000
     Purchase of debt securities...........................................        0      (3,992)      (11,156)
     Purchase of equity securities.........................................        0        (503)       (1,000)
     Proceeds on sale of debt securities...................................        0           0         2,190
     Proceeds on sale of equity securities.................................        0         558           953
                                                                             --------    --------     --------
          Cash provided (used) by investing activities.....................      939       1,942        (6,604)
                                                                             --------    --------     --------

FINANCING ACTIVITIES
     Dividends.............................................................        0      (1,178)       (1,130)
     Net proceeds from subscription to share capital.......................   26,832           0             0
     Proceeds from exercise of options.....................................    1,625           0             0
     Purchase of ordinary shares in treasury...............................   (1,807)       (567)       (4,423)
     Sales of ordinary shares in treasury..................................       86           0             0
                                                                             --------    --------     --------
          Cash provided (used) by financing activities.....................   26,736      (1,745)       (5,553)
                                                                             --------    --------     --------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS...........................   27,783         204       (13,512)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............................       20      27,803        28,007
                                                                             --------    --------     --------
CASH AND CASH EQUIVALENTS FROM END OF YEAR.................................  $27,803     $28,007       $14,495
                                                                             ========    ========     ========

All dividends received were from consolidated subsidiaries.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>


                   STIRLING COOKE BROWN HOLDINGS LIMITED

             SUPPLEMENTARY INSURANCE INFORMATION--SCHEDULE III

                YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                  (Expressed in thousands of United States
                 Dollars, except share and per share data)

                                           FUTURE
                                           POLICY
                                          BENEFITS,           OTHER                      BENEFITS, AMORTIZATION
                               DEFERRED    LOSSES,            POLICY                      CLAIMS,   OF DEFERRED
                                POLICY     CLAIMS             CLAIMS             NET     LOSSES AND   POLICY     OTHER
                              ACQUISITION AND LOSS  UNEARNED   AND    PREMIUM INVESTMENT SETTLEMENT ACQUISITION OPERATING PREMIUMS
                                COSTS     EXPENSES  PREMIUMS BENEFITS REVENUE   INCOME   EXPENSES     COSTS     EXPENSES  WRITTEN
                                -----     --------  -------- -------- -------   ------   --------     -----     --------  -------
<S>                              <C>    <C>        <C>         <C>    <C>      <C>       <C>           <C>      <C>       <C>

Year ended December 31, 1997
  Insurance.................    $     34 $ 14,969  $ 13,338    $  0  $ 2,921   $ 1,696   $ 2,426     $    840  $ 1,662  $  3,988
  Reinsurance...............          23   21,307     5,849       0    8,869       517     8,525          504      296     9,193
  Brokerage.................                    0         0       0        0     2,531         0            0   14,794         0
  Program Business..........                    0         0       0        0        74         0            0   15,832         0
  Underwriting Management...                    0         0       0        0        15         0            0    1,684         0
  Other.....................                    0         0       0        0        14         0            0    2,829         0
                                -------- --------  --------    ---- --------   -------  --------     --------  -------  --------
                                $    579 $ 36,276  $ 19,187    $  0  $11,790   $ 5,782   $10,951     $  1,344  $37,097  $ 13,181
Year ended December 31, 1998
  Insurance.................       1,848 $ 30,788  $ 22,477    $  0  $ 7,716   $ 1,261   $ 4,790     $  2,052  $ 3,062  $  9,676
  Reinsurance...............         438   35,329     2,560       0   10,058       847    12,481        1,566      215     7,740
  Brokerage.................           0        0         0       0        0     3,336         0            0   15,643         0
  Program Business..........           0        0         0       0        0       777         0            0   21,932         0
  Underwriting Management...           0        0         0       0        0       197         0            0    1,865         0
  Other.....................                                               0                                                   0
                                       0        0         0       0        0     2,353         0            0    1,679         0
                               --------- --------  --------    ---- --------   -------  --------     --------  -------  --------
                                $  2,286 $ 66,117  $ 25,037    $  0  $17,774   $ 8,771   $17,271     $  3,618  $44,396  $ 17,416
Year ended December 31, 1999
  Insurance.................    $  1,723 $ 59,422  $ 20,108    $  0  $ 9,451     $ 558   $ 6,965     $  3,141  $ 4,590  $  8,907
  Reinsurance...............          22   33,713       851       0    2,399       739     5,405          719      416     1,121
  Brokerage.................           0        0         0       0        0     2,573         0            0   22,173         0
  Program Business..........           0        0         0       0        0       424         0            0   25,160         0
  Underwriting Management...           0        0         0       0        0       223         0            0    2,677         0
  Other.....................                                               0                                                   0
                                       0        0         0       0        0     2,197         0            0    6,063         0
                               --------- --------  --------    ---- --------   -------  --------     --------  -------  --------
                                $  1,745 $ 93,135  $ 20,959    $  0  $11,850   $ 6,714   $12,370     $  3,860  $61,079  $ 10,028

</TABLE>
<PAGE>


<TABLE>
<CAPTION>

                   STIRLING COOKE BROWN HOLDINGS LIMITED

                          REINSURANCE--SCHEDULE IV

                    YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                  (Expressed in thousands of United States
                 Dollars, except share and per share data)


                                                                                                PERCENTAGE
                                                                                                 OF GROSS
                                                                                                 PREMIUMS
                                          GROSS        GROSS           GROSS         NET         ASSUMED
                                         PREMIUMS      PREMIUMS      PREMIUMS      PREMIUMS       TO NET
                                          WRITTEN      CEDED          ASSUMED       EARNED    PREMIUMS EARNED
                                          -------      --------      --------      --------   ---------------
<S>                                     <C>            <C>            <C>           <C>             <C>

Year ended December 31, 1997.......      $15,408        $ 17,396     $ 13,778       $11,790          117%
Year ended December 31, 1998.......      $39,526        $ 36,807     $ 15,055       $17,774           85%
Year ended December 31, 1999.......      $49,856        $ 42,707     $  4,701       $11,850           40%


</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                   STIRLING COOKE BROWN HOLDINGS LIMITED

               VALUATION AND QUALIFYING ACCOUNTS--SCHEDULE V
             (EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)

                                                             CHARGED TO
                                     BALANCE AT   CHARGED TO   OTHER
                                     BEGINNING    COSTS AND    ACCOUNTS-  DEDUCTIONS  BALANCE AT
             DESCRIPION              OF PERIOD    EXPENSES     DESCRIBE   -DESCRIBE   END OF PERIOD
             ----------              ----------   ---------- -----------  ----------  -------------
<S>                                     <C>        <C>        <C>         <C>         <C>

Year ended December 31, 1997
   Allowance for Doubtful Accounts      $    --   $     --    $     --    $     --    $       --
Year ended December 31, 1998
   Allowance for Doubtful Accounts      $    --   $  2,500    $     --    $     --    $    2,500
Year ended December 31, 1999
   Allowance for Doubtful Accounts      $ 2,500   $  4,242    $     --    $     --    $    6,742
</TABLE>
<PAGE>

<TABLE>
<CAPTION>

                   STIRLING COOKE BROWN HOLDINGS LIMITED

                    SUPPLEMENTARY INSURANCE INFORMATION
       CONCERNING PROPERTY/CASUALTY INSURANCE OPERATIONS--SCHEDULE VI

                YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                  (Expressed in thousands of United States
                 Dollars, except share and per share data)



                                                                             LOSSES AND LOSS
                                                                           ADJUSTMENT EXPENSES
                                                                           INCURRED RELATED TO

                                         RESERVE                                                                    AMORTIZATION
                                        FOR LOSSES                                                                    OF DEFERRED
                            DEFERRED     AND LOSS     DISCOUNT,                         NET        (1)                 POLICY
                           ACQUISITION   ADJUSTMENT    IF ANY,   UNEARNED   EARNED    INVESTMENT CURRENT     (2)      ACQUISITION
                             COSTS       EXPENSES     DEDUCTED   PREMIUMS   PREMIUMS   INCOME     YEAR    PRIOR YEAR     COSTS
                             -----       --------     --------   --------   --------   ------     ----    ----------     -----
<S>                            <C>      <C>           <C>       <C>         <C>        <C>       <C>        <C>       <C>

Year ended December 31, 1997
  Property/Casualty
  entities................... $   579   $  36,276     $    --    $ 19,187   $  11,790   $ 2,213  $ 10,174    $  777    $  1,344

Year ended December 31, 1998
  Property/Casualty
  entities................... $ 2,286   $  66,117     $    --    $ 25,037   $  17,774   $ 2,108  $ 12,578   $ 4,693    $  3,618

Year ended December 31, 1999
  Property/Casualty
  entities................... $ 1,745   $  93,135     $   --     $ 20,959   $  11,850   $ 1,297  $  7,721   $ 4,649    $  3,860

</TABLE>
<PAGE>


<TABLE>
<CAPTION>

                   STIRLING COOKE BROWN HOLDINGS LIMITED

                    SUPPLEMENTARY INSURANCE INFORMATION
       CONCERNING PROPERTY/CASUALTY INSURANCE OPERATIONS--SCHEDULE VI

                YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
                  (Expressed in thousands of United States
                 Dollars, except share and per share data)



                                                                             LOSSES AND LOSS
                                                                           ADJUSTMENT EXPENSES
                                                                           INCURRED RELATED TO


                            PAID LOSSES
                            AND LOSS
                            ADJUSTMENT      PREMIUMS
                             EXPENSES       WRITTEN
                             --------       --------

<S>                            <C>          <C>

Year ended December 31, 1997
  Property/Casualty
  entities...................  $  5,460     $  13,181

Year ended December 31, 1998
  Property/Casualty
  entities...................  $ 12,504     $  17,416

Year ended December 31, 1999
  Property/Casualty
  entities...................  $ 10,473     $  10,028

</TABLE>
<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  IN
HAMILTON, BERMUDA, ON THE 30TH DAY OF MARCH, 2000.


                                      STIRLING COOKE BROWN HOLDINGS LIMITED

                                                   /S/ GEORGE W. JONES
                                By
                                                    George W. Jones
                                       Chief Financial Officer and Director

     PURSUANT TO THE  REQUIREMENTS OF THE SECURITIES  EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED  BELOW AS OF THIS 30TH DAY OF MARCH,  2000,  BY
THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED:



           SIGNATURE                                   TITLE
     -------------------------             -----------------------------------


       /S/ STEPHEN A. CRANE      President, Chief Executive Officer and
                                 Director (Principal Executive Officer)
         Stephen A. Crane


       /S/ GEORGE W. JONES       Chief Financial Officer and Director (Principal
                                 Financial and Accounting Officer)
          George W. Jones


          /S/ LEN QUICK          Chief Operating Officer and Director

             Len Quick


      /S/ REUBEN JEFFERY III     Director

        Reuben Jeffery III


      /S/ NICHOLAS MARK COOKE     Director

          Nicholas Mark Cooke


      /S/ JEAN DE POURTALES     Director

          Jean de Pourtales


      /S/ PATRICK J. MCDONOUGH     Director

        Patrick J. McDonough