ENERGY INSURANCE MUTUIAL 22nd ANNUAL RISK MANAGERS INFORMATION MEETING

David L. Hadler President and Chief Executive Officer President and Chief Executive Officer

2007 THE YEAR IN REVIEW

CLAIMS NOTICE CATEGORIES CATEGORY ONE Highly improbable that it will impact EIM; requires only periodic review to insure that it is not adversely developing. CATEGORY TWO Requires continuous monitoring and specific actions. CATEGORY THREE Meets the accepted requirements for setting specific loss reserves

OPEN CLAIMS CATEGORY 1 CATEGORY 2CATEGORY 3 GENERAL LIABILITY DIRECTORS & OFFICERS LIABILITY FIDUCIARY LIABILITY PROPERTY

CATEGORY 2 AND 3 GENERAL LIABILITY LOSSES FIRE 12 GAS EXPLOSION 11 FLOODING 2 POLLUTION 2 LAND CLAIM 1 STEAM PIPE RUPTURE 1

CASE RESERVES ESTABLISHED

LOSSES PAID

2007 – CLAIM PAYMENTS, NEW RESERVES ESTABLISHED CLAIMS PAID NEW CASE RESERVES GENERAL LIABILITY $ 45,463,208$166,351,723 D&O/FIDUCIARY$ 89,433,740$ 70,867,734 PROPERTY$ 13,824,441$ 22,304,193 REINSURANCE$ 10,951,231$ 1,905,017 $159,672,620$261,428,667

TOTAL CLAIMS PAID CLAIMS PAID GENERAL LIABILITY$214,343,260 D&O/FIDUCIARY$550,301,105 PROPERTY$ 51,476,384 REINSURANCE$ 44,114,707 $860,235,456

SURPLUS

2007 – DESPITE SEEING: DISTRIBUTION OF $ 12,500,000 PAID LOSSES OF $159,672,620 CASE RESERVES OF $261,428,667 SURPLUS GREW BY $ 31,070,000

2008 A. M. BEST RATING ENERGY INSURANCE MUTUAL LIMITED BEST’S RATING: A (EXCELLENT) OUTLOOK: STABLE “The rating reflects the Company’s excellent capitalization, historically strong operating returns, and conservative leverage position.”

DISTRIBUTIONS 1988 – 1990 $ 52,133, – 2001 $ 95,000, – 2007 $ 32,500,000 TOTAL $179,633,827

REINSURANCE 2008

REINSURERS IMPACTED PURCHASED REINSURANCE SINCE DECEMBER 1, 1986 FIRST CLAIM ON REINSURERS 1996 NEXT CLAIMS ON REINSURERS 2000, 2001, 2002, 2003, 2004, 2005 AND 2007

REINSURANCE Our argument that we are a market of severity not frequency is obviously now open to question. We seem to have entered a phase where we are finding ourselves involved with frequent severe losses.

REINSURANCE RELATIONSHIPS ON CORE BUSINESS – GL AND D&O Various Lloyd’s Syndicates have reinsured EIM since December 1, NEIL first reinsured EIM on January 1, Basically the same group of reinsurers since January 1, Personal relationships are extremely important.

2008 REINSURANCE GENERAL LIABILITY RETENTIONS $5,000,000 EACH AND EVERY LOSS $50,000,000 EACH LOSS AND $75,000,000 IN THE AGGREGATE

2008 REINSURANCE GENERAL LIABILITY RECOVERABLES FIRST $100,000,000 LOSS $45,000,000 RECOVERABLE SECOND $100,000,000 LOSS $70,000,000 RECOVERABLE THIRD $100,000,000 LOSS $95,000,000 RECOVERABLE MAXIMUM RECOVERABLE $250,000,000

2008 REINSURANCE D&O LIABILITY MAXIMUM CAPACITY $50,000,000 NEIL REINSURES EIM FOR 80% OF $20,000,000 EXCESS OF $30,000,000 THEREFORE EIM’S MAXIMUM NET LINE IS $34,000,000

2008 REINSURANCE D&O LIABILITY RETENTIONS $5,000,000 EACH AND EVERY LOSS $29, EACH LOSS AND $58,000,000 IN THE AGGREGATE

2008 REINSURANCE D&O LIABILITY RECOVERABLES FIRST $50,000,000 LOSS $16,000,000 RECOVERABLE SECOND $50,000,000 LOSS $16,000,000 RECOVERABLE THIRD $50,000,000 LOSS $45,000,000 RECOVERABLE FOURTH $50,000,000 LOSS $45,000,000 RECOVERABLE MAXIMUM AMOUNT RECOVERABLE $102,000,000 FROM THE NON NEIL REINSURANCE

2008 CASUALTY REINSURERS ASPEN INSURANCE UK LIMITED ENDURANCE SPECIALTY LIBERTY MUTUAL LLOYDS NUCLEAR ELECTRIC INSURANCE LIMITED ODYSSEY RE PLATINUM RE TRANSATLANTIC RE

2008 REINSURANCE PROPERTY UP TO FEBRUARY 1, /50 QUOTA SHARE ARRANGEMENT WITH ENDURANCE, BERMUDA. FROM FEBRUARY 1, 2007 EXCESS OF LOSS ARRANGEMENT WITH LLOYD’S, ODYSSEY RE HANNOVER RE AND NEIL. FROM FEBRUARY 1, 2008 EXCESS OF LOSS PROGRAM WITH NEIL.

THE ENERGY SCHOOL

Samuel M. Garvin, Jr. Vice President and Chief Financial Officer Vice President and Chief Financial Officer

2007 FINANCIAL REVIEW

12/31/07 12/31/06CHANGE ASSETS Invested assets$1,245.5 $1,250.4$ (4.9) Reinsurance recoverable Other TOTAL$1,717.0 $1,601.8$ LIABILITIES AND SURPLUS Loss reserves$844.4 $750.1$ 94.3 Unearned premiums (8.0) Policyholder distribution payable Payable for investments (16.3) Deferred taxes Other (1.1) Policyholders’ surplus TOTAL$1,717.0 $1,601.8$ (In Millions) SIMPLIFIED BALANCE SHEET

FIXED INCOME MANAGERS  Pyramis Global Advisors  Morgan Stanley EQUITY MANAGERS  SSgA State Street Global Advisors INVESTMENT ADVISORS  Frank Russell Company INVESTMENT MANAGEMENT

12/31/07 12/31/06CHANGE ASSETS Invested assets$1,245.5 $1,250.4$ (4.9) Reinsurance recoverable Other TOTAL$1,717.0 $1,601.8$ LIABILITIES AND SURPLUS Loss reserves$844.4 $750.1$ 94.3 Unearned premiums (8.0) Policyholder distribution payable Payable for investments (16.3) Deferred taxes Other (1.1) Policyholders’ surplus TOTAL$1,717.0 $1,601.8$ (In Millions) SIMPLIFIED BALANCE SHEET 12/31/0712/31/06 CHANGE Invested assets$1,245.5$1,250.4$ (4.9) Payable for investments (16.3) TOTAL$1,242.3$1,230.9$ 11.4

12/31/07 12/31/06 PYRAMIS$ % $ % MORGAN STANLEY$ % $ % SSgA – US$ % $ % SSgA – NON US$ % $ % TOTAL WITH MANAGERS$1, % $1, % CASH$ 43.5 $ 42.5 TOTAL$1,242.3 $1,230.9 (In Millions) INVESTMENT MANAGERS ALLOCATION

ASSET ALLOCATION - DECEMBER 31, 2007 ASSET CLASSTARGETDRIFT RANGE U. S. EQUITY35% 30% - 45% NON-U. S. EQUITY15% 10% - 20% FIXED INCOME50% 40% - 55%

12/31/07 12/31/06CHANGE ASSETS Invested assets$1,245.5 $1,250.4$ (4.9) Reinsurance recoverable Other TOTAL$1,717.0 $1,601.8$ LIABILITIES AND SURPLUS Loss reserves$844.4 $750.1$ 94.3 Unearned premiums (8.0) Policyholder distribution payable Payable for investments (16.3) Deferred taxes Other (1.1) Policyholders’ surplus TOTAL$1,717.0 $1,601.8$ (In Millions) SIMPLIFIED BALANCE SHEET 12/31/0712/31/06 CHANGE Loss reserves$844.4$750.1$ 94.3 Reinsurance recoverable TOTAL$ 440.3$ 457.7$ (17.4)

12/31/07 12/31/06Change LOSS RESERVES $147.3 $195.1$(47.8) IBNR $290.0 $ LAE RESERVES $ 3.0 $ 1.8$ 1.2 TOTAL $440.3 $457.7$ (17.4) NET CLAIM RESERVES

12/31/07 12/31/06CHANGE ASSETS Invested assets$1,245.5 $1,250.4$ (4.9) Reinsurance recoverable Other TOTAL$1,717.0 $1,601.8$ LIABILITIES AND SURPLUS Loss reserves$844.4 $750.1$ 94.3 Unearned premiums (8.0) Policyholder distribution payable Payable for investments (16.3) Deferred taxes Other (1.1) Policyholders’ surplus TOTAL$1,717.0 $1,601.8$ (In Millions) SIMPLIFIED BALANCE SHEET 12/31/0712/31/06 CHANGE Unearned premiums$ $ 110.4$ (8.0)

UNEARNED PREMIUM RESERVES 12/31/07 12/31/06Change GENERAL LIABILITY $ 49.7 $ 49.4$ 0.3 D&O / FIDUCIARY $ 36.1 $ 41.7$ (5.6) PROPERTY $ 16.6 $ 19.3$ (2.7) TOTAL $102.4 $110.4$ (8.0)

STATEMENT OF OPERATIONS Revenues (In Millions) Change Premiums Gross premiums written $194.1 $202.0$ (7.9) Reinsurance premium assumed (0.2) Decrease in unearned premiums Reinsurance premiums ceded (92.1) (92.6) 0.5 Net premiums earned $115.5 $119.8$ (4.3) Other underwriting income (1.0) Investment income - net Net (loss)/gain on disposal of investments (2.0) 1.5 (3.5) TOTAL REVENUE $160.6 $163.2$ (2.6)

STATEMENT OF OPERATIONS Revenues (In Millions) Change Premiums Gross premiums written $194.1 $202.0$ (7.9) Reinsurance premium assumed (0.2) Decrease in unearned premiums Reinsurance premiums ceded (92.1) (92.6) 0.5 Net premiums earned $115.5 $119.8$ (4.3) Other underwriting income (1.0) Investment income - net Net (loss)/gain on disposal of investments (2.0) 1.5 (3.5) TOTAL REVENUE $160.6 $163.2$ (2.6) CHANGE Net premiums earned$ $ 119.8$ (4.3)

NET PREMIUMS EARNED 12/31/07 12/31/06Change GENERAL LIABILITY $ 60.1 $ 61.7$ (1.6) D&O/FIDUCIARY $ 44.7 $ 47.3$ (2.6) PROPERTY $ 5.3 $ 5.2$ 0.1 ASSUMED $ 5.4 $ 5.6 $ (0.2) TOTAL $115.5 $119.8$ (4.3) (In Millions)

STATEMENT OF OPERATIONS Revenues (In Millions) Change Premiums Gross premiums written $194.1 $202.0$ (7.9) Reinsurance premium assumed (0.2) Decrease in unearned premiums Reinsurance premiums ceded (92.1) (92.6) 0.5 Net premiums earned $115.5 $119.8$ (4.3) Other underwriting income (1.0) Investment income - net Net (loss)/gain on disposal of investments (2.0) 1.5 (3.5) TOTAL REVENUE $160.6 $163.2$ (2.6) CHANGE Investment income – net Net (loss)/gain on disposal of investment TOTAL $ 44.4 (2.0) $ 42.4 $ $ 39.7 $ 6.2 (3.5) $ 2.7

NET INVESTMENT INCOME (In Millions) 12/31/07 12/31/06Change INTEREST AND DIVIDENDS $44.4 $38.2$ 6.2 REALIZED (GAINS) LOSSES -EQUITIES -FIXED INCOME 0.7 (2.7) $ (0.1) $39.7 (0.9) (2.6) $ 2.7

INVESTMENT PERFORMANCE EIM ANNUAL RETURN %2002(6.1)% %2001(1.1)% % % % % % %

TAX ADJUSTED PERFORMANCE VS. BENCHMARKS BY MANAGER ONE YEAR RETURNS PERFORMANCEBENCHMARK COMBINED FUND FIXED INCOME PYRAMIS MORGAN STANLEY EQUITY SSgA S&P SSgA NON-US

LONG TERM INVESTMENT PERFORMANCE AS OF DECEMBER 31, Years6.1% 5 Years10.4% 3 Years8.3%

Expenses (In Millions) Losses and loss adjustment expenses Change Gross losses and LAE incurred$258.0 $195.3$(62.7) Assumed losses and LAE0.0 (1.8) Reinsurance recoveries (133.9) (94.2) 39.7 Net losses and LAE incurred$124.1 $ 99.3$(24.8) Other underwriting expenses Administrative expenses (1.3) Total expenses$135.9 $110.5$(25.4) Policyholders’ distribution (2.5) Income before income taxes$ 12.2 $ 42.7$(30.5) Income tax (0.9) NET INCOME$ 13.1 $ 33.1$(20.0) STATEMENT OF OPERATIONS CHANGE Net losses and LAE incurred$ $ 99.3$ (24.8)

NET LOSSES AND LAE 12/31/0712/31/06Change 2007$ 119.8$ 0.0$(119.8) 2006(3.4) (5.8)(15.9)(10.1) (6.7)(26.1) PRIOR(12.4)(9.8)2.6 TAIL 2.6 (2.0) (4.6) $ 124.1$ 99.3$ (24.8) (In Millions)

GrossNet Initial12/31/07ChangeInitial12/31/07Change 2007 $ $ 0.0$ $ (132.7) (30.8) (19.8) (36.6) (164.9) (170.6) (8.8) All Coverages INCURRED LOSSES BY ACCIDENT YEAR

Gross IBNR $471.1 Million

CHANGE IN POLICYHOLDERS’ SURPLUS BEGINNING SURPLUS$636.0 Plus: Net income$13.1 Unrealized gain of investments$18.0 Change$31.1 ENDING SURPLUS $667.1 (In Millions)

2007 UNDERWRITING REVIEW JILL DOMINGUEZ Vice President-Underwriting

NEW MEMBERS IN 2007 Cascade Natural Gas Corporation Spectra Energy Corporation RC Cape May Holdings, LLC Bicent Power, LLC

MEMBER RETENTION RATE “The EIM staff does a great job of providing focused customer service and treats their Members with the highest regard. EIM is an indispensable element to the industry’s financial security and strength. EIM is a pleasure to do business with.”

MEMBER RETENTION RATE % % % % %

2007 MEMBERSHIP One Acquisition by Non-EIM Member Three Non-Renewals 2 no longer needed limits 1 lost because of price Three Member/Member Mergers ENDED 2007 WITH 172 MEMBERS

MEMBERSHIP MIX “I think EIM has done a good job of providing a stable product for the utility industry”

MEMBERSHIP MIX

GROSS WRITTEN PREMIUM 2006 VS $207,667, $199,896,285

GENERAL LIABILITY $91,982,504 Gross Written Premium 169 EGL Policyholders $74.6M Average Limit $39M Average Attachment Point 48.5% of excess GL Policies Written for Maximum $100M Limit

GENERAL LIABILITY ENHANCEMENTS EPLI 48% Worker’s Compensation 18% Drop Down Joint Venture 43% Drop Down Over Specific Aggregates Professional Liability ($65M Sublimit) 67% 7.2%

Breakdown of other key operations insured by Excess Liability Policies Propane - 22 members Dams – 16 members E & P – 23 members Mining – 9 members Water Operations – 18 members

DIRECTORS AND OFFICERS LIABILITY $57.4M Gross Premium Written 94 EDO Policyholders $36.4M Average Limit $44.1M Average Attachment Point 44% of D&O policies written for maximum $50M Limit

FIDUCIARY LIABILITY $6.46M Gross Written Premium $22.8M Average Limit $38.3M Average Attachment Point 45 Policy Holders

PROPERTY Premium $7.5M EIM Only $21.5M NEIL Only Total policies written Primary layer – 50 Excess layer - 23

PROPERTY Capacity = $35,000,000 8% of members buy maximum limits

What is EIM thinking on Property Long term view of market – Strive to keep capacity over long term

BUILDERS RISK Term = 18 Months up to a Maximum of 60 Months

TRIA AND TRIPRA Program extended until 2014 Eliminates distinction between foreign and domestic acts of terrorism – both now considered “certified” $100 billion cap – insurer aggregate liability EIM will offer terrorism coverage in accordance with the Terrorism Risk Insurance Program Reauthorization Act of 2007 (TRIPRA) EIM removed the cap on Non-certified

Climate Change/Carbon Sequestration Currently working with a few members on Carbon Sequestration projects, solely in information gathering phase- What liabilities are to be assumed by utility? How will sites be managed over long periods of time? Will state or federal government provide any relief? Please keep us informed of your company’s needs and questions regarding climate change issues and carbon sequestration projects.

What should a mutual actually do? Long term provider of stable capacity? or Lowest cost provider, which could mean Reduced capacity Loss of policyholder’s distribution More restrictive coverage Give us your input on comment sheets or at Member’s Only Session

Customer Service – In Focus! It would be difficult to improve on the overall operation of EIM. EIM is a very important player in my insurance program and the ease of doing business with EIM makes my job easier. I appreciate the Company and everyone I come in contact with.

2007 RISK MANAGER SURVEY RESULTS EIM follows reasonable, prudent, and sound underwriting practices: 100% Agree/Strongly Agree

EIM provides added value in form of broad coverage, price stability, consistent limits, and financial strength: 2007 RISK MANAGER SURVEY RESULTS 99.25% Agree/Strongly Agree

Overall, EIM meets my expectations in level of service: 2007 RISK MANAGER SURVEY RESULTS 99% Agree/Strongly Agree

Robert P. Schmid Vice President and Chief Operating Officer Vice President and Chief Operating Officer

ENERGY INSURANCE SERVICES

▪EIS OVERVIEW ▪OUR DOMICILE ▪SERVICE IMPROVEMENTS ▪COVERAGE ▪REGULATORY & COMPLIANCE ACTIVITY ▪THE FUTURE 2007 THE YEAR IN REVIEW

EIS BY THE NUMBERS ▪$1.8 Billion in Assets ▪$1.6 Billion in Gross Reserves ▪$500 Million Net Reserves ▪$450 Million Invested Assets ▪$150 Million Cash / Equivalents ▪$70 Million in MBP Equity ▪$80 Million Written Premium ▪$35 Million Ceded Premium ▪$60 Million Paid Claims

SOUTH CAROLINA ▪State Legislature Passes S589 Allows Director to Approve Reinsurers ▪New Director of Insurance Appointed Scott H. Richardson CPCU ▪Continued Focus on Service Providers Issues Managers are the SCDOI’s First Responders ▪Captive CPA Appointed State Treasurer Converse Chellis

SERVICE IMPROVEMENTS ▪Information and Reporting Expanded Financial Information Improved Accuracy and Timeliness Provided Internet Banking Developed Foundations of Secure Web Portal ▪Insurance Support & Policy Development Improved Information Stream between Major Carriers, Participants and their Advisors

COVERAGE ▪All Risk Property ▪All Risk Power Producer Operational ▪All Risk Railroad Rolling Stock ▪Aggregate Excess of Loss Reinsurance ▪Automobile ▪Builder's Risk ▪Contractor Equipment Floater ▪Deductible Buy-Back ▪Environmental ▪Excess Liability ▪Excess Workers’ Compensation ▪First Excess Nuclear Property ▪First Excess Casualty ▪Following Form EGL Indemnity ▪Hull and Machinery ▪Loss Portfolio Transfer of Workers’ Compensation Claims ▪Marine Liability ▪Professional Liability ▪Public Liability Deductible Reimbursement ▪Retiree Medical Group Stop Loss Policies ▪Specific Risk Liability ▪Transmission and Distribution ▪TRIA ▪Ultimate Net Loss

BUILDER’S RISK ▪Program Flexibility ▪Savings of 4% to 6% if Reinsured versus Commercial Options ▪Project Orientations, Wrap Ups or OCIP Platforms ▪Uninsurable or Prohibitively Expensive Perils can be Covered

WORKER’S COMPENSATION ▪Platform for Fronted Program in Jurisdictions where Regulators Require Admitted Insurer ▪Deductible Reimbursement Programs May Enhance the Treatment of Current SI Reserves ▪Access to Reinsurers with Nuclear Capacity ▪Daily Funding of TPA Claims Management

PARAMETRIC T&D ▪Developed by a Consortium of Utilities with Hurricane Wind Exposure ▪Creates a System Wide Detailed Inventory of Exposures ▪Models Potential Future Events Based on Robust Historical Storm Data ▪Estimates the Likelihood of a Future Event of a Given Intensity Occurring at any Location During the Policy Period ▪Claim is Triggered not by Loss Amount, but by Physical Parameter of Covered Event.

TERRORISM ▪Individual Cell MBP’s can access TRIA program ▪Lower Earned Premiums mean lower Deductibles and Higher Recoupment ▪MBP’s can cover Nuclear, Biological and Chemical Risks Excluded by Insurers and access TRIA for those Perils ▪MBP’s can fund Retentions and Access Reinsurance for Assumed Risks

REGULATORY & COMPLIANCE ▪First U.S. Audit Completed and Filed with the SCDOI ▪2007 Audit Began in September ▪EIB Tax Years 2003 & 2004 are under Examination by the IRS ▪IRS Issued Revenue ruling Provides guidance for Protected Cell Companies regarding Insurance Treatment for Federal Tax Purposes

2008 ▪Continue Service Improvements for Existing Members ▪Responsive Consultations with Prospective Participants ▪Support the Resolution of the Current IRS Examination ▪Meet all Regulatory and Compliance Responsibilities in our Domicile ▪Host an Effective and Informative Annual Meeting in Greenville October 13 th – 16 th