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ENERGY INSURANCE MUTUIAL

ENERGY INSURANCE MUTUIAL. 22nd ANNUAL RISK MANAGERS INFORMATION MEETING. David L. Hadler. President and Chief Executive Officer. 2007. THE YEAR IN REVIEW. CLAIMS NOTICE CATEGORIES. CATEGORY ONE

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ENERGY INSURANCE MUTUIAL

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  1. ENERGY INSURANCE MUTUIAL 22nd ANNUALRISK MANAGERSINFORMATION MEETING

  2. David L. Hadler President and Chief Executive Officer

  3. 2007 THE YEAR IN REVIEW

  4. CLAIMS NOTICE CATEGORIES CATEGORY ONE Highly improbable that it will impact EIM; requires only periodic review to insure that it is not adversely developing. CATEGORY TWO Requires continuous monitoring and specific actions. CATEGORY THREE Meets the accepted requirements for setting specific loss reserves

  5. OPEN CLAIMS - 2007

  6. CATEGORY 2 AND 3GENERAL LIABILITY LOSSES FIRE 12 GAS EXPLOSION 11 FLOODING 2 POLLUTION 2 LAND CLAIM 1 STEAM PIPE RUPTURE 1

  7. CASE RESERVES ESTABLISHED

  8. LOSSES PAID

  9. 2007 – CLAIM PAYMENTS,NEW RESERVES ESTABLISHED

  10. TOTAL CLAIMS PAID1986 -2007

  11. SURPLUS

  12. 2007 – DESPITE SEEING: • DISTRIBUTION OF $ 12,500,000 • PAID LOSSES OF $159,672,620 • CASE RESERVES OF $261,428,667 • SURPLUS GREW BY $ 31,070,000

  13. 2008 A. M. BEST RATINGENERGY INSURANCE MUTUAL LIMITED BEST’S RATING: A (EXCELLENT) OUTLOOK: STABLE “The rating reflects the Company’s excellent capitalization, historically strong operating returns, and conservative leverage position.”

  14. DISTRIBUTIONS 1988 – 1990 $ 52,133,827 1996 – 2001 $ 95,000,000 2005 – 2007 $ 32,500,000 TOTAL $179,633,827

  15. REINSURANCE 2008

  16. REINSURERS IMPACTED • PURCHASED REINSURANCE SINCE DECEMBER 1, 1986 • FIRST CLAIM ON REINSURERS 1996 • NEXT CLAIMS ON REINSURERS 2000, 2001, 2002, 2003, 2004, 2005 AND 2007

  17. REINSURANCE • Our argument that we are a market of severity not frequency is obviously now open to question. • We seem to have entered a phase where we are finding ourselves involved with frequent severe losses.

  18. REINSURANCE RELATIONSHIPSON CORE BUSINESS – GL AND D&O • Various Lloyd’s Syndicates have reinsured EIM since December 1, 1986. • NEIL first reinsured EIM on January 1, 1994. • Basically the same group of reinsurers since January 1, 2004. • Personal relationships are extremely important.

  19. 2008 REINSURANCEGENERAL LIABILITY RETENTIONS • $5,000,000 EACH AND EVERY LOSS • $50,000,000 EACH LOSS AND • $75,000,000 IN THE AGGREGATE

  20. 2008 REINSURANCEGENERAL LIABILITY RECOVERABLES • FIRST $100,000,000 LOSS $45,000,000 RECOVERABLE • SECOND $100,000,000 LOSS $70,000,000 RECOVERABLE • THIRD $100,000,000 LOSS $95,000,000 RECOVERABLE MAXIMUM RECOVERABLE $250,000,000

  21. 2008 REINSURANCED&O LIABILITY • MAXIMUM CAPACITY $50,000,000 • NEIL REINSURES EIM FOR 80% OF $20,000,000 EXCESS OF $30,000,000 • THEREFORE EIM’S MAXIMUM NET LINE IS $34,000,000

  22. 2008 REINSURANCED&O LIABILITY RETENTIONS • $5,000,000 EACH AND EVERY LOSS • $29,000.000 EACH LOSS AND • $58,000,000 IN THE AGGREGATE

  23. 2008 REINSURANCED&O LIABILITY RECOVERABLES • FIRST $50,000,000 LOSS $16,000,000 RECOVERABLE • SECOND $50,000,000 LOSS $16,000,000 RECOVERABLE • THIRD $50,000,000 LOSS $45,000,000 RECOVERABLE • FOURTH $50,000,000 LOSS $45,000,000 RECOVERABLE MAXIMUM AMOUNT RECOVERABLE $102,000,000 FROM THE NON NEIL REINSURANCE

  24. 2008 CASUALTY REINSURERS • ASPEN INSURANCE UK LIMITED • ENDURANCE SPECIALTY • LIBERTY MUTUAL • LLOYDS • NUCLEAR ELECTRIC INSURANCE LIMITED • ODYSSEY RE • PLATINUM RE • TRANSATLANTIC RE

  25. 2008 REINSURANCEPROPERTY • UP TO FEBRUARY 1, 2007 50/50 QUOTA SHARE ARRANGEMENT WITH ENDURANCE, BERMUDA. • FROM FEBRUARY 1, 2007 EXCESS OF LOSS ARRANGEMENT WITH LLOYD’S, ODYSSEY RE HANNOVER RE AND NEIL. • FROM FEBRUARY 1, 2008 EXCESS OF LOSS PROGRAM WITH NEIL.

  26. THE ENERGY SCHOOL

  27. Samuel M. Garvin, Jr. Vice President and Chief Financial Officer

  28. 2007FINANCIALREVIEW

  29. SIMPLIFIED BALANCE SHEET (In Millions)

  30. FIXED INCOME MANAGERS Pyramis Global Advisors Morgan Stanley EQUITY MANAGERS SSgA State Street Global Advisors INVESTMENT ADVISORS Frank Russell Company INVESTMENT MANAGEMENT

  31. SIMPLIFIED BALANCE SHEET (In Millions)

  32. INVESTMENT MANAGERS ALLOCATION (In Millions)

  33. ASSET ALLOCATION - DECEMBER 31, 2007

  34. SIMPLIFIED BALANCE SHEET (In Millions)

  35. NET CLAIM RESERVES

  36. SIMPLIFIED BALANCE SHEET (In Millions)

  37. UNEARNED PREMIUM RESERVES

  38. STATEMENT OF OPERATIONS

  39. STATEMENT OF OPERATIONS

  40. NET PREMIUMS EARNED (In Millions)

  41. STATEMENT OF OPERATIONS

  42. NET INVESTMENT INCOME

  43. INVESTMENT PERFORMANCE

  44. TAX ADJUSTED PERFORMANCE VS. BENCHMARKS BY MANAGER ONE YEAR RETURNS PERFORMANCEBENCHMARK COMBINED FUND 6.5 6.7 FIXED INCOME PYRAMIS 6.4 5.4 MORGAN STANLEY 3.3 7.0 EQUITY SSgA S&P 900 5.9 5.7 SSgA NON-US 12.1 11.2

  45. LONG TERM INVESTMENT PERFORMANCE AS OF DECEMBER 31, 2007 7 Years 6.1% 5 Years 10.4% 3 Years 8.3%

  46. STATEMENT OF OPERATIONS

  47. NET LOSSES AND LAE (In Millions)

  48. INCURRED LOSSES BY ACCIDENT YEAR All Coverages

  49. Gross IBNR $471.1 Million

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