2003 FINANCIAL REVIEW Samuel M. Garvin, Jr. Vice President and Chief Financial Officer

SIMPLIFIED BALANCE SHEET (MILLIONS OF DOLLARS) 12/31/03 12/31/02CHANGE ASSETS Invested assets (192.7) Reinsurance recoverable Deferred taxes (24.1) Other TOTAL1, , LIABILITIES AND SURPLUS Loss reserves Unearned premiums Payable for investments Deferred Taxes Other (1.1) Policyholders’ surplus TOTAL1, ,

SIMPLIFIED BALANCE SHEET (MILLIONS OF DOLLARS) 12/31/03 12/31/02CHANGE ASSETS Invested assets (192.7) Reinsurance recoverable Deferred taxes (24.1) Other TOTAL1, , LIABILITIES AND SURPLUS Loss reserves Unearned premiums Payable for investments Deferred taxes Other (1.1) Policyholders’ surplus TOTAL1, ,

INVESTMENT MANAGEMENT FIXED INCOME MANAGERS §Fidelity Management Trust §Morgan Stanley EQUITY MANAGERS §SSgA State Street Global Advisors INVESTMENT ADVISORS §Frank Russell Company

INVESTMENT MANAGERS ALLOCATION (MILLIONS OF DOLLARS) 12/31/03 12/31/02 Fidelity$ % $ % Morgan Stanley$ % $ % SSgA – US$ % $ % SSgA -Non-US$ % $ % Total With Managers$ % $ % Cash $10.0 $7.8 Total$869.2 $680.2

ASSET ALLOCATION Asset ClassTargetDrift Range US Equity 40%35% - 50 % Non-US Equity10% 5% - 15% Fixed Income 50%40% - 55%

SIMPLIFIED BALANCE SHEET (MILLIONS OF DOLLARS) 12/31/03 12/31/02CHANGE ASSETS Invested assets (192.7) Reinsurance recoverable Deferred taxes (24.1) Other TOTAL1, , LIABILITIES AND SURPLUS Loss reserves Unearned premiums Payable for investments Deferred taxes Other (1.1) Policyholders’ surplus TOTAL1, ,

NET CLAIM RESERVES (MILLIONS OF DOLLARS) 12/31/03 12/31/02Change Loss Reserves (9.1) IBNR LAE Reserves Total

SIMPLIFIED BALANCE SHEET (MILLIONS OF DOLLARS) 12/31/03 12/31/02CHANGE ASSETS Invested assets (192.7) Reinsurance recoverable Deferred taxes (24.1) Other TOTAL1, , LIABILITIES AND SURPLUS Loss reserves Unearned premiums Payable for investments Deferred taxes Other (1.1) Policyholders’ surplus TOTAL1, ,

UNEARNED PREMIUM RESERVES (MILLIONS OF DOLLARS) 12/31/03 12/31/02Change General Liability Directors and Officers Property (9.5) Total

CHANGE PREMIUMS EARNED: Gross premiums written Unearned premiums – change(31.4) (21.1)(10.3) Gross premiums earned (58.3) Reinsurance premiums ceded 60.4 (53.6)(6.8) NET PREMIUMS EARNED EXPENSES Gross losses and LAEs Reinsurance recoverable(59.8) (139.9) (80.1) Net losses and LAEs (71.1) Administrative expenses (1.3) TOTAL EXPENSES (72.4) (LOSS) INCOME FROM UNDERWRITING(5.9) 15.0(20.9) STATEMENT OF OPERATIONS (MILLIONS OF DOLLARS)

CHANGE PREMIUMS EARNED: Gross premiums written Unearned premiums – change(31.4) (21.1)(10.3) Gross premiums earned (58.3) Reinsurance premiums ceded 60.4 (53.6)(6.8) NET PREMIUMS EARNED EXPENSES Gross losses and LAEs Reinsurance recoverable(59.8) (139.9) (80.1) Net losses and LAEs (71.1) Administrative expenses (1.3) TOTAL EXPENSES (72.4) (LOSS) INCOME FROM UNDERWRITING(5.9) 15.0(20.9) STATEMENT OF OPERATIONS (MILLIONS OF DOLLARS)

NET PREMIUMS EARNED (MILLIONS OF DOLLARS) 12/31/03 12/31/02Change General Liability Directors and Officers Property (1.9)

CHANGE PREMIUMS EARNED: Gross premiums written Unearned premiums – change(31.4) (21.1)(10.3) Gross premiums earned (58.3) Reinsurance premiums ceded 60.4 (53.6)(6.8) NET PREMIUMS EARNED EXPENSES Gross losses and LAEs Reinsurance recoverable(59.8) (139.9) (80.1) Net losses and LAEs (71.1) Administrative expenses (1.3) TOTAL EXPENSES (72.4) (LOSS) INCOME FROM UNDERWRITING(5.9) 15.0(20.9) STATEMENT OF OPERATIONS (MILLIONS OF DOLLARS)

NET LOSSES AND LAEs (MILLIONS OF DOLLARS) 12/31/03 12/31/02Change (42.5) Prior(3.8) (53.6)49.8 Tail 2.1 (2.1)

STATEMENT OF OPERATIONS (MILLIONS OF DOLLARS) CHANGE (Loss) Income from underwriting(5.9) 15.0(20.9) Miscellaneous income Net investment income (1.0) Income before income taxes (19.9) Income taxes (0.8) (7.6) 6.8 NET INCOME (13.1)

NET INVESTMENT INCOME (MILLIONS OF DOLLARS) 12/31/03 12/31/02Change Interest and Dividends Realized (Losses) - Equities(6.6) (3.1)(3.5) Realized Gains (Losses) - Fixed Income3.0 (0.7)

INVESTMENT PERFORMANCE EIM ANNUAL RETURN % (6.1%) (1.1%) % % % % % % (0.6%)

TAX ADJUSTED PERFORMANCE VS. BENCHMARKS BY MANAGER ONE YEAR RETURNS PerformanceBenchmark Combined Fund Fixed Income Fidelity Morgan Stanley Equity SSgA S&P SSgA Non-US

LONG TERM INVESTMENT PERFORMANCE AS OF DECEMBER 31, Years6.1% 5 Years3.1% 3 Years2.2%

CHANGE IN POLICYHOLDERS’ SURPLUS (MILLIONS OF DOLLARS) BEGINNING SURPLUS Plus: Net income 12.4 Unrealized gain of investments 62.7 Change 75.1 ENDING SURPLUS 461.2

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