1. SB304 Montana State Fund Financial Presentation September 23, 2003

2. Definitions GAAP – Generally Accepted Accounting Principles GASB – Governmental Accounting Standards Board (Governmental GAAP) SAP – Statutory Accounting Principles (an Other Comprehensive Basis of Accounting) NAIC – National Association of Insurance Commissioners RBC – Risk Based Capital

3. Accounting Differences between GASB and NAIC-SAP Financial Statements

4. Investments GASB: All Bonds and Stocks carried at Fair Market Value. Unrealized gain/loss on Investments is included in Investment Income (Net Income impact). NAIC: Bonds carried at Book Value. Stocks carried at Fair Market Value. Unrealized gain/loss on Stocks is a direct adjustment to Surplus (no Net Income impact). Accounting Differences

5. Accounting Differences Non-Admitted Assets GASB: All assets carried on Balance Sheet at net realizable value. NAIC: Non-liquid assets are written off the Balance Sheet as a direct adjustment to Surplus. Examples of non-liquid assets are: Intangibles, majority of Fixed Assets, Notes Receivable, and A/R > 90 Days.

6. Accounting Differences Deferred Acquisition Costs (DAC) GASB: Matching of expenses with revenues by recognizing acquisition expense over the period premiums are earned. NAIC: Recognizing the acquisition expense as it is incurred.

7. Reconciliation of Audited GASB Surplus to Audited Statutory Surplus at June 30, 2002 Audited GASB Surplus$ 180,715 Reconciling Items: Unrealized Gain on Bonds 2,107 Unrealized Loss on Equities (9,819) Net Effect of Cumulative Change in Non-Admitted Assets (5,047) Net Income Difference between Methods (9,457) Statutory Accounting Ending Surplus$ 158,499

8. Fiscal Year 2002 New Fund Audited NAIC Financial Results

9. FY 2002 New Fund Balance Sheet – NAIC NAIC (000’s) Total Invested Assets$559,101 Other Assets$15,823 Total Assets$574,924 Losses and Loss Adjustment Expense$346,400 Other Liabilities$70,025 Total Liabilities$416,425 Surplus$158,499

10. FY 02 Income Statement Information FY 2002 Income Statement Information New Fund NAIC (000’s)FY01FY02 Net Earned Premium$74,510$92,972 Investment Inc/Realized Gains$33,643$33,464 Loss & LAE$83,196$99,583 Underwriting Expense$12,957$15,024 Net Income before Dividends$11,582$11,795 Dividends$4,995$4,001 Net Income $6,587$7,793 Surplus$150,880$158,499

11. Financials As of 3 rd Quarter FY 2003

12. Financials As of 3 rd Quarter FY 2003

13. MSF by the Numbers

14. Fiscal Year 2002 Old Fund Audited GASB Financial Results

15. FY 2002 Old Fund Balance Sheet GASB (000’s) Total Invested Assets$114,756 Securities Lending Collateral$16,600 Other Assets$2,434 Total Assets$133,790 Losses and Loss Adjustment Expense$90,900 Securities Lending Liability$16,600 Other Liabilities$1,424 Total Liabilities$108,924 Net Assets$24,866

16. Old Fund FASB FY 2002 Old Fund Old Fund (000’s)FY01FY02 OFLT Revenue$113$28 Investment / Other Income$13,047$10,090 Paid Benefits and Expenses$2,173$626 Net Income before Transfer to NF$10,987$9,492 Net Assets before Transfer to NF$29,547$32,274 less: Transfer to NF($6,765)($7,408) Net Assets after Transfer to NF$22,782$24,866

17. FY 2003 Old Fund Balance Sheet As of March 31, 2003 GASB (000’s) Total Invested Assets$102,993 Securities Lending Collateral$6,172 Other Assets$1,796 Total Assets$110,961 Losses and Loss Adjustment Expense$80,140 Securities Lending Liability$6,172 Other Liabilities$19,291 Total Liabilities$105,603 Net Assets$5,358

18. Old Fund FASB FY 2003 Old Fund Projected Operating Results Old Fund (000’s)FY 2003 Projected OFLT Revenue$- Investment / Other Income$6,130 Paid Benefits and Expenses($4,447) Net Income before Transfer to NF$1,683 Net Assets before Transfer to NF$24,866 less: Transfer to NF($22,268) Net Assets after Transfer to NF$4,281

19. FY03 Old Fund Transfer FY 2003 Old Fund Transfers