Filed pursuant to Rule 424(a)
                                                Registration No.:  333-52726

                   Subject to Completion. Dated April 5, 2001

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                              PROSPECTUS SUPPLEMENT

                (To Preliminary Prospectus dated March 30, 2001)

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                               CII FINANCIAL, INC.

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      The following  supplements  the  information  contained in the preliminary
          prospectus dated March 30, 2001, of CII Financial,  Inc. to which this
          supplement is affixed, and should be read together with the
                            preliminary prospectus.


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We will receive a dividend of $5.0 million from California  Indemnity  Insurance
Company, one of our insurance subsidiaries,  and a commitment from Sierra Health
Services, Inc., our corporate parent, to lend us $15.0 million. As a result, the
condition to the exchange offer that we obtain  sufficient  cash to pay any cash
required  to be paid as exchange  consideration  has been  satisfied.  All other
terms of the exchange offer remain unchanged.

Upon  completion  of the exchange  offer,  we will have  purchased  and canceled
$28,572,000 aggregate principal amount of old junior subordinated debentures for
cash and an aggregate principal amount of $18,487,000 of old junior subordinated
debentures and new senior  debentures will be outstanding.  The relative amounts
of old junior subordinated debentures and new senior debentures outstanding will
depend upon the aggregate principal amount of old junior subordinated debentures
tendered in the exchange offer.

If the  conditions of the exchange  offer are satisfied or waived by us, we will
accept for  exchange  any and all old junior  subordinated  debentures  that are
validly  tendered and not  withdrawn  before 11:59 p.m.,  New York City time, on
April 12, 2001, the expiration date of the exchange offer,  unless extended.  If
the  conditions  are not  satisfied or waived or if we otherwise  terminate  the
exchange offer,  tendered old junior  subordinated  debentures will be returned,
without expense to you.

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             The exclusive dealer manager for the exchange offer is:

                         Banc of America Securities LLC

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