The property and casualty industry historically has been cyclical, as evidenced by the fact that the combined ratios for the industry have tended to be either good (that is, below 100% for several years in a row reflecting underwriting profitability) or poor (that is, above 100% for several years in a row reflecting underwriting unprofitability).

When excess underwriting capacity exists, increased competition generally results in lower pricing and less favorable policy terms and conditions for insurers and reinsurers. As underwriting capacity contracts, pricing and policy terms and conditions generally become more favorable for insurers and reinsurers. In the past, underwriting capacity has been impacted by several factors, including catastrophes, industry losses, recognition of reserve deficiencies, changes in the law and regulatory requirements, investment returns and the ratings and financial strength of competitors.

The pricing and policy coverage terms and conditions for the industry began to become more favorable to insurers near the beginning of 2001. The terrorist attacks of September 11, 2001, with insured losses estimated to be between $30 to $40 billion, as reported by the Insurance Information Institute, exacerbated the upward pressure on insurance prices. This relatively more favorable underwriting environment for insurers continued through 2004.

In 2004, the industry\\\'s results improved significantly with its overall combined ratio declining to 98.3% and property/casualty insurer financial assets increasing by 10% to $1.2 trillion, as reported by the Insurance Information Institute. Although the combined ratio rose 2.6% to 100.9% in 2005, it was the third best combined ratio since 1980, surpassed only by the 98.3% combined ratio for 2004 and the 100.1% combined ratio for 2003, according to a press release, dated April 18, 2006, of Insurance Services Offices, Inc., a risk consulting firm. The Insurance Information Institute reported that in 2005, property/casualty insurer financial assets increased by 8.5% to $1.3 trillion.

- Coverage to be offered under the Company’s commercial package and business owners\\\' policies will combine property, liability, business interruption, equipment breakdown, fidelity and inland marine coverages tailored for commercial businesses and enterprises. The liability coverage includes general liability and products and completed operations;

- The Company’s fire and allied lines policies will consist of dwelling policies and monoline commercial property policies. The dwelling policies will provide optional coverages for personal property and can be combined with an optional endorsement for liability insurance;

- The Company will offer other liability products in personal and commercial lines. The Company’s commercial products will be comprised of monoline commercial general liability and commercial umbrella policies. The Company writes commercial general liability policies for risks that do not have property exposure or whose property exposure is insured elsewhere;

- The Company will write workers\\\' compensation, which is a statutory coverage requirement for commercial businesses. Workers\\\' compensation is required in businesses in almost every state to protect employees in case of injury on the job, and the employer from liability for an accident involving an employee;

- The Company’s homeowner\\\'s policy will be a multiple-peril policy, providing property and liability coverages for one and two-family owner-occupied residences. Homeowners\\\' policies can also provide additional coverage to the homeowner for personal umbrella and personal inland marine;

- The Company will offer professional liability and errors and omissions insurance for commercial enterprises that may face liability as a result of their performance or failure to perform professional services. Coverage can be designed to respond to customer needs including employment practices, fidelity or crime-related loss and fiduciary liabilities.

Net premiums earned were $27.0 million for the three months ended September 30, 2006. Net premiums earned were $47.4 million for the period from inception to September 30, 2006.

Commission income was $0.9 million for the three months ended September 30, 2006. Commission income was $1.4 million from inception to September 30, 2006.

Operating expenses were $12.4 million for the three months ended September 30, 2006. Operating expenses were $21.8 million for the period from inception to September 30, 2006.

Net income and average return on equity was $5.4 million and 8.0%, respectively, for the three months ended September 30, 2006.

Net income and average return on equity was $3.7 million and 2.7%, respectively, for the period from inception to September 30, 2006.