GEM A Progress Report June 29, 2012

A Brief History Governmental Entities Mutual, Inc. (GEM) is a captive domiciled in Washington, DC Incorporated 12/24/2002 and licensed to write liability, workers compensation and property insurance and reinsurance GEM launched its liability reinsurance program on 1/1/2003, property and workers’ compensation programs followed in 2005 Converted to a Protected Cell Corporation as of 1/1/2010 GEM completed its ninth year of operations on 12/31/ Member Board comprised of Designated Member Representatives from our member pools.

 Alaska Municipal League JIA  California Insurance Transit Pool  Delaware Valley Insurance Trust  Enduris  Miami Valley Risk Management Association  Michigan Risk Management Agency  MPR  Montana Municipal Interlocal Authority  Nevada Public Agency Insurance Pool  NH Public Risk Management Exchange  Park District Risk Management Agency  Texas Council Risk Management Fund  Texas School Boards Risk Management Fund  Texas Water Conservation Association Risk Management Fund  Virginia Liability Transit Pool  Washington Cities Insurance Authority  Washington State Transit Insurance Pool  Wisconsin Municipal Mutual Insurance Co. Membership

GEM Board Members  Al Hatten, Washington State Transit Insurance Pool (WSTIP)  Michael Hammond, Miami Valley Risk Management Association (MVMRA)  Parker Chambers, Texas Water Conservation Assoc. Risk Mgmt Fund (TWCARMF)  Richard Lee, Delaware Valley Insurance Trust (DVIT)  Micheon Balmer, California Insurance Transit Pool (CalTIP)  Greg Womack – Chair, Texas Council Risk Management Fund (TCRMF)  Brett Davis – Vice Chair, Park District Risk Management Agency (PDRMA)  Dean Boes – Secretary, Wisconsin Municipal Mutual Insurance Company (WMMIC)  Mike Rhyner, Michigan Municipal Risk Management Authority (MMRMA)  Alan Hulse, Montana Municipal Interlocal Authority (MMIA)

Financial Stability GEM is a regulated captive insurance company GEM is required to maintain adequate Risk-Based Capital (RBC) ratios GEM is member-owned and governed Members have access to GEM’s financial information on a monthly basis Annually GEM has an independent audit and actuarial loss reserve opinion Members make a long-term capital commitment to GEM Management provides an annual risk profile report to the Board of Directors All profits inure to the benefit of the Members

GEM Risk Model

GEM Financial Performance

Members’ Equity

Return on Members’ Equity A comparison of investing in GEM versus investing in 5-year Treasuries

The GEM/WSTIP Relationship  All Founding and Premier members are required to contribute a minimum of $500,000 or 70% of gross written premium as surplus to GEM. WSTIP has contributed capital of $750,000.  2012 Liability Reinsurance – WSTIP Retention: $ 1,000,000 per occurrence – Limit Retained by GEM: $ 2,000,000 – GEM Net Written Premium: $ 796,000  2011 Member Accounting – Member Surplus Accounts $ 1,091,800 – Member Policy Accounts $ 171,475

Expected Outcomes of WSTIP’s Investment  Maintenance of an economically sound company while providing long term cost-effective reinsurance and service  Member control of the Company through member elected Board  Follow form coverage eliminating differences in conditions, retention of claims handing authority at the pool level  High quality claims, underwriting and pool support services provided by staff and service providers with extensive pool & public entity experience  Stabilization or reduction of the overall cost of reinsurance in GEM’s retained layer through the law of large numbers and risk distribution  Building mutual strength of pools to retain higher limits before accessing the commercial reinsurance market

GEM Value Added Services Claims Audits Underwriting Reviews HR Sentry & John Salisbury Grants through NAGEP Building Mutual Strength Among Pools Governance – Summer 2007 Finance – Fall 2007 Member Services – Summer 2008 Coverage Documents – Summer 2009 Economic Outlook and Fixed Income Markets – Winter 2010 & 2011 Risk Management – Summer 2011

Future Directions for GEM Selectively launch new cells under the Protected Cell Company potentially beginning with Transit Re in 2012 Increase capacity to assume risk - $25 million member equity goal by 2013, net of unrealized capital gains. Actively market GEM to attract new members Continue development of the GEM risk profile model Actively seek ability to collaborate with NCL Mutual and CRL Integrate technology into how GEM delivers services to the membership Remember our roots

In Conclusion GEM – A Member Driven Reinsurer Building Mutual Strength