Workers\\\' compensation is a statutory system under which an employer is required to provide coverage for its employees\\\' medical, disability, vocational rehabilitation and death benefits costs for work-related injuries or illnesses. Most employers comply with this requirement by purchasing workers\\\' compensation insurance.

Workers\\\' compensation was the fourth largest property and casualty insurance line in the U.S. in 2005, on a net written premium basis, according to NCCI. According to NCCI, net premiums written in 2005 for the workers\\\' compensation industry were approximately $37.8 billion, or 8.9% of the estimated $425.7 billion in net premiums written for the property and casualty industry as a whole.

Premium volume in the workers\\\' compensation industry was up 8.8% in 2005 compared to 2004, while the entire property and casualty industry experienced a 0.4% increase in net premium written in 2005 from 2004, according to NCCI.

Workers\\\' compensation medical claims costs have risen approximately 125% over the ten years ended 2005, according to NCCI, driven in part by increased utilization and prescription drug costs.

The Nevada workers\\\' compensation market has changed dramatically over the past decade. From 1913 until July of 1999 the workers\\\' compensation market was served by a monopolistic state fund. In the 1980\\\'s, employers were also allowed to opt for self insurance. In July of 1999, the Nevada workers\\\' compensation insurance market was opened to competition by private carriers, and the Fund was privatized in January of 2000.

The Company provides workers\\\' compensation coverage to several homogeneous groups of business such as physicians, dentists, restaurants and retail stores. Annually the Company reviews the premium, payroll, and loss history trends of each group and develop a schedule rating modification that is applied to all policyholders that meet the qualification standards for a given group.

The Company executes its underwriting processes through highly automated systems and through seasoned underwriters with specific knowledge of local markets. Within these systems, the Company has developed underwriting templates for specific, targeted classes of business that produce faster quotations when all underwriting criteria are met by a specific risk.

The Company’s workers\\\' compensation insurance product is written primarily on a guaranteed cost basis, meaning the premium for a policyholder is set in advance and varies based only upon changes in the policyholder\\\'s class and payroll.

The premiums the Company charges are established when coverage is bound. Premiums are based on the particular class of business and the Company’s estimates of expected losses, loss adjustment expenses and other expenses related to the policies the Company underwrites.

In all of the states in which the Company currently operates, it uses both variables to calculate a policy premium that will cover the claim payments, losses and LAE, and company overhead and result in a reasonable profit.

Net premiums written decreased $36.8 million, or 11.0%, to $299.5 million for the nine months ended September 30, 2006 from $336.3 million for the nine months ended September 30, 2005.

Net premiums earned decreased $31.0 million, or 9.3%, to $300.1 million for the nine months ended September 30, 2006 from $331.1 million for the nine months ended September 30, 2005.

Net investment income increased $10.2 million, or 25.8%, to $49.7 million for the nine months ended September 30, 2006 from $39.5 million for the nine months ended September 30, 2005.

Net income increased $53.4 million, or 84.6%, to $116.5 million for the nine months ended September 30, 2006 from $63.1 million for the nine months ended September 30, 2005.