The property and casualty insurance business has historically been subject to cyclical fluctuations in pricing and availability of property and casualty insurance. “Soft” markets are characterized by excess capital and underwriting capacity, as well as pricing and policy terms and conditions that are relatively less favorable to insurers, resulting in intense premium rate competition, an erosion of underwriting discipline and poor operating performance. A “soft” market is eventually followed by a period of diminished underwriting capacity and greater underwriting discipline, with insurance companies exiting unprofitable areas of business and/or increasing their premium rates in order to improve operating performance. This phase of the cycle is generally referred to as a “hard” market.

The markets for these lines of business generally have separate dynamics and rarely move in lock step with one another. For example, the public D&O market recently has been impacted by corporate scandals, while the insurance agents E&O market has been impacted by natural disasters, and the managed care E&O market has been impacted by certain class-action litigation. A survey sponsored by The Council of Insurance Agents & Brokers reports that, in the soft commercial property and casualty market that occurred during the second quarter of 2005, premiums for the average small account (defined as accounts with less than $25,000 in commission and fees) decreased by 5.6%, while premiums for the average mid-sized account (defined as accounts with commissions and fees ranging from $25,000 to $100,000) decreased by 11.4% and premiums for the average large account (defined as accounts with more than $100,000 in commissions and fees) by 12.0%.

In its D&O line of business, the Company underwrites public, private and non-profit accounts. Under various state laws, a corporation is authorized to indemnify its directors and officers against legal claims arising in connection with their work on behalf of the corporation. In order to attract and retain qualified directors and officers, corporations purchase D&O insurance. D&O insurance for public corporations covers directors and officers when the corporation is not legally permitted, or is financially unable, to indemnify them. It also covers the corporation to the extent that the corporation has indemnified directors and officers, and also frequently covers the corporation directly for claims relating to violations of the securities laws. D&O insurance for private or non-profit accounts generally provides broader coverage for the entity, but has little or no exposure to securities claims.

In its E&O line of business, the Company currently underwrites in six broad classes: Managed Care E&O; Lawyers Professional E&O; Insurance Agents E&O; Municipal Entity and Public Officials E&O; Technology E&O; and Miscellaneous Professional E&O. E&O coverage protects insureds, generally business owners and professional service providers against claims by clients, customers and other parties that services provided by the insured were executed incorrectly. The Company provides insurance against underlying liability claims as well as the legal costs of defending such claims. Managed Care E&O provides protection for some of the business activities of managed care organizations such as evaluating the appropriateness of medical services provided for purposes of coverage under a health care plan (utilization review), and selecting, evaluating or contracting with providers of medical services (provider selection). The E&O policies that the Company issues specifically exclude coverage for medical professional services (except for vicarious liability claims). Some types of organizations or professionals receive a specialized form of policy that is highly customized for their needs and risks (e.g., insurance agents, law firms). Miscellaneous E&O refers to those coverages that can be written on a more generic, less customized form of policy.

The Company currently has four distinct classes within its Medical Malpractice Liability line of business: Hospital Professional Liability; Miscellaneous Medical Facilities; Physicians and Physician Groups; and Psychiatrists. In this line of business, the Company provides coverage to physicians and other healthcare providers as individual practitioners or as members of practice groups. The Company’s insurance protects policyholders against losses arising from professional liability claims and the related defense costs for injuries in which the patient alleges that medical error or malpractice has occurred. Optional coverage is available for the professional corporations in which some physicians practice.

Gross premiums written were $165.8 million for the year ended December 31, 2005, compared to $100.5 million for the year ended December 31, 2004, an increase of $65.3 million, or 65.1%.

Net premiums earned were $84.7 million for the year ended December 31, 2005 compared to $46.1 million for the year ended December 31, 2004, an increase of $38.6 million or 83.8%.

Net investment income increased to $4.9 million for the year ended December 31, 2005 compared to $0.9 million for the year ended December 31, 2004, an increase of $4.0 million, or 418.4%.

Other income (expenses), net incurred were a net expense of $1.1 million for the year ended December 31, 2005 compared to an expense $0.9 million for the year ended December 31, 2004, an increase of $0.2 million or 20.4%.