Workers’ compensation is a statutory system under which an employer is required to pay for its employees’ medical, disability, vocational rehabilitation and death benefit costs for work-related injuries or illnesses. While some employers elect to self-insure workers’ compensation risks, most employers purchase workers’ compensation insurance. The principal concept underlying workers’ compensation laws is that employees injured in the course and scope of their employment have only the legal remedies available under workers’ compensation laws and do not have any other recourse against their employer. An employer’s obligation to pay workers’ compensation does not depend on any negligence or wrongdoing on the part of the employer and exists even for injuries that result from the negligence or fault of another person, a co-employee or, in most instances, the injured employee.

Workers’ compensation insurance policies generally provide that the insurance carrier will pay all benefits that the insured employer may become obligated to pay under applicable workers’ compensation laws. Each state has a regulatory and adjudicatory system that quantifies the level of wage replacement to be paid, determines the level of medical care required to be provided and the cost of permanent impairment and specifies the options in selecting medical providers available to the injured employee or the employer. These state laws generally require two types of benefits for injured employees: medical benefits, which include expenses related to diagnosis and treatment of the injury, as well as any required rehabilitation, and indemnity payments, which consist of temporary wage replacement, permanent disability payments and death benefits to surviving family members.

The year 2002 marked the first year in five years that private carriers in the property and casualty insurance industry experienced an increase in annual after-tax returns on surplus, including realized capital gains, according to the National Council on Compensation Insurance, Inc. (“NCCI”). Workers’ compensation insurance industry calendar year combined ratios declined for the first time in seven years, falling from 122% in 2001 (with 1.9% attributable to the September 11, 2001 terrorist attacks) to 102% in 2005 as premium rates have increased and claims severity has declined. In addition, claims frequency has declined. From 1990 through 2005, the cumulative decline in lost-time claims frequency was approximately 50%.

The Company exclusively offers and provides guaranteed cost insurance contracts. Under guaranteed cost contracts, policyholders pay premiums based on a percentage of their payroll determined by job classification. The Company’s premium rates for these policies vary depending upon certain factors, including the type of work to be performed by employees and the general business of the policyholder.

The Company’s specialty risk and extended warranty coverage segment primarily serves manufacturers, service providers, retailers and third party warranty administrators that provide coverage for accidental damage, mechanical breakdown and related risks for consumer and commercial goods. The Company underwrites this coverage in Europe through AIU and in the United States through TIC, RIC and, prospectively, WIC.

The Company’s specialty risk and extended warranty coverages typically have a term of twelve months, but typically are subject to rate adjustment (and earlier cancellation in the Company’s European Business). Terms, however, range from one month to 60 months, and the weighted average term of the Company’s specialty risk and extended warranty coverages is approximately 25 months.

The Company’s specialty risk and extended warranty policyholders primarily include warranty and service contract providers and consumers. As of March 31, 2006, the Company provided specialty risk coverage for approximately 72 extended warranty and accidental damage coverage plans in the European Union and the United States.

The specialty middle-market property and casualty business consists of workers’ compensation, general liability, commercial auto liability and commercial property coverage for small and middle-market businesses. In December, 2005, the Company expanded into this business segment through its acquisition of the renewal rights to substantially all of Alea’s specialty middle-market property and casualty business

Net premiums written increased from $81.9 million to $110.8 million for the three months ended March 31, 2005 and 2006, respectively.

Net premiums earned increased from $47.4 million for the three months ended March 31, 2005 to $69.8 million for the three months ended March 31, 2006.

Net realized gains on investments for the three months ended March 31, 2006 were $1.6 million, compared to $0.03 million for the same period in 2005.

Operating income from continuing operations increased to $13.6 million for the three months ended March 31, 2006, from $0.9 million for the three months ended March 31, 2005, an increase of $12.7 million or 1,411.1%.

Interest expense for the three months ended March 31, 2006 was $1.2 million, compared to $0.1 million for the same period in 2005.