2007 IN REVIEW

We continue to be mired in the soft market that came upon us in 2006 with no end in sight. Prognosticators are predicting continued overall combined ratios of under 100% for at least the short term, which can only mean continued softness of premiums in the short term.

Given this, our goals for 2007 were modest once again.a growth rate of only 2.8%, and even a decline in some territories because of the softness of the market. As mentioned in past years, we continue to believe sound and conservative underwriting practices are the approach to take. Even with this in mind,   market conditions dictated that we look at lowering prices where it made sense to do so. We do this carefully since we do not want to sacrifice the loss ratio for the sake of writing more business.

In the end our production increased by 1.1%.not our goal but far better than the previous 2 - 3 years when we showed declines. Our average premium per policy decreased - 4.4% - for the first time since 2001, which shows the effects of pricing strategies. Even with this, I am pleased to report our pure, direct loss ratio improved by 2.3% to 57.2%. So we were able to successfully walk the tightrope between lowering prices without sacrificing our loss ratio.

I am also pleased to report that once again we were able to increase Policyholders Surplus.it now stands at just under $12 million. Since 1992 we have seen an increase of just under 45%.

As always, my thanks to our owner companies, all members of our staff and to each of our agents for their continued support of the company and to the goals and principals we have established.

Sincerely,

William Swetland,CPCU
President/CEO