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ENERGY INSURANCE MUTUAL

ENERGY INSURANCE MUTUAL. 19th ANNUAL RISK MANAGERS INFORMATION MEETING. The Westin Innisbrook Golf Resort Tarpon Springs, Florida February 27 - March 1, 2005. Jill Dominguez. Vice President - Underwriting. 2004 UNDERWRITING OVERVIEW. 2004 IN REVIEW. NEW MEMBERS 8

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ENERGY INSURANCE MUTUAL

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  1. ENERGY INSURANCE MUTUAL 19th ANNUALRISK MANAGERSINFORMATION MEETING The Westin Innisbrook Golf Resort Tarpon Springs, Florida February 27 - March 1, 2005

  2. Jill Dominguez Vice President - Underwriting

  3. 2004 UNDERWRITING OVERVIEW

  4. 2004IN REVIEW NEW MEMBERS 8 MEMBERS AS OF 12/31/2004 172 GROSS PREMIUM EARNED $213,843,000

  5. 2004 COMPAREDTO 2003

  6. WRITTEN/EARNED PREMIUM

  7. WRITTEN/EARNED PREMIUM

  8. NEW MEMBERS IN 2004 Toronto Hydro Corporation 01/01/2004 Alabama Electric Cooperative, Inc. 04/01/2004 Massachusetts Water Resources Authority 06/28/2004 National Energy & Gas Transmission, Inc. 08/01/2004 Complete Energy Holdings, LLC 08/23/2004 Anadarko Petroleum Corporation 09/12/2004 Wolf Creek Nuclear Operating Corp. 12/10/2004 Texas Genco LLC 12/15/2004

  9. TOTAL MEMBERSHIP

  10. RETENTION 2004 98.82% 2003 96.05% 2002 99.42% 2001 99.40%

  11. EIM’S PRODUCTS - SUCCESSFUL IN MAINTAINING LARGE AMOUNT OF CAPACITY GENERAL LIABILITY • Capacity $100M as of 01/01/04 • Availability Depends on Risk D&O/GENERAL PARTNER • Capacity $50M as of 01/01/04 • $10M to $50M Available Depending on Risk EXCESS FIDUCIARY LIABILITY • $25M Available Depending on Risk Property • Primary and Excess Quota Share • Capacity $15M

  12. EIM MEMBERSHIP MIX

  13. 2004 CASUALTYPOLICY FORMS All Forms Have Been Updated to Include: • EIM’s Change of Address • 10 Day Notice of Cancellation for Nonpay • One Year Discovery Period Wording NO CHANGES TO COVERAGE

  14. UPDATE BY LINE OF BUSINESS

  15. EXCESS GENERAL LIABILITY

  16. EXCESS GENERAL LIABILITY OVERVIEW • $90,301,000 Gross Premium Earned (2004) • $71,530, 000 Gross Premium Earned (2003) • 171 EGL Policyholders • $73M Average Limit • $38M Average Attachment Point

  17. EXCESS GENERAL LIABILITY OVERVIEW BEHIND THE NUMBERS • Eight New Members • Three Members Placed Under Parent • Pricing Adjustments • Additional Premium for Additional Limits • Additional Premium for Coverage Enhancements, e.g. EPLI, WC

  18. EXCESSGENERAL LIABILITY EXCESS FORM CAN ALSO INCLUDE: • Excess EPLI (53% of Membership) • Excess Workers Comp. (20% of Membership) • Excess Professional Liability* (12% of Membership) $65M Max Sublimit • Drop Down Over Specific Aggregates in Underlying Policy (61% of Membership) • * Usually ISOs/RTOs

  19. EXCESS DIRECTORS AND OFFICERS LIABILITY

  20. EXCESS DIRECTORS AND OFFICERS/FIDUCIARY OVERVIEW 102 EDO Policies $43M Average Limit $46M Average Attachment Point $89,069,000 Gross Premium Earned (2004) $64,284,000 Gross Premium Earned (2003)

  21. SOME GOOD NEWS IN 2004 Top Three Industries with LARGEST Numbers of Securities Class Action Lawsuits*: • Food and Beverage • Agricultural and Pharmaceutical • Technology and Communication Top Three Industries with LEAST Exposure: • Industrial • Basic Materials • UTILITIES *Source: PLUS 2005 D&O Symposium, Cornerstone Research and Stanford Law School

  22. D&OISSUES AND TRENDS POSITIVES Utilities going “back to basics” seeing positive results. UTILITIES’ CLAIM SUSCEPTIBILITY*FREQUENCY 2003 31% 2003 1.04 2004 30% 2004 .85 EIM CLAIMS FILED: 2000 10 2003 24 2001 17 2004 22 2002 37 *Ten year period Source: Tillinghast

  23. S&P UTILITIES(ELECTRIC, GAS, PIPELINE, WATER) Outlook still predominantly negative but declined dramatically in 2004. Average Rating - Mid-BBB (48%) *Source: Standard & Poor’s Research - “US Utility Downside Rating Actions Moderated Significantly in 2004”

  24. NOW FOR SOME BAD NEWS • More Institutional Investors Suing • Suits Seeking Damages of More Than $100M Becoming Commonplace - EIM Coverage a “Working Layer”? • Average Cost of Securities Class Action Settlements in 2004 up from $25M to $33M in 2003- in 2000, average settlement was $15M.* *Sources: William Lerach, PLUS 2005 D&O Symposium, and Advisen

  25. D&O ISSUES AND TRENDS STILL A LOT OF UNCERTAINTY TRENDS • Merger/acquisition activity picking up • Three mergers involving six members announced • According to Tillinghast’s 2004 D&O liability survey, six percent of D&O shareholder claims allegations are from merger/acquisitions • EIM’s experience: $16,250,000 paid in merger/acquisition activity related claims

  26. D&O ISSUES AND TRENDS ISSUES SECTION 404 COMPLIANCE • Unclear what implications are from regulatory enforcement or private action perspective EFFECT OF SETTLEMENTS • Still in pipeline - D&O claims estimated at $10B to settle minimum; probably $25B total • EIM $256M in case reserves as of 12/31/04 • At the same time, more capacity, lower rates in market • Competition on difficult D&O renewals! Source: “The Buyers Perception of D&O Realities and Latest Trends” - Towers Perrin-Tillinghast

  27. D&OISSUES AND TRENDS TREND? Capacity In Market Rebounding* Total Capacity In Market: (Expressed in billions of dollars) 1999 $1.55 2000 $1.575 2001 $1.55 2002 $1.5 2003 $1.35 2004 $1.5 *Tillinghast 2004 D&O Survey Report

  28. D&OISSUES AND TRENDS Viable Utility Capacity $325M - $500M Source: Research by McGriff, Seibels and Williams

  29. EXCESS FIDUCIARY LIABILITY

  30. EXCESSFIDUCIARY LIABILITY • Maximum Limit of Liability Offered to Members: $25M • Member Must Have at Least $35M in Underlying Limits • 43 Members (25%) Purchase Excess Fiduciary Liability

  31. EXCESSFIDUCIARY LIABILITY • $6.9M Written Premium • $23M Average Limit • $38M Average Attachment Point • $5.75M Claims Paid in 2004

  32. PROPERTY

  33. PROPERTY Participation in Members’ Property Programs 12/31/2002 25 12/31/2003 40 12/31/2004 53 We are currently involved with 75 Programs.

  34. PROPERTY EIM $ 3,202,440 EIM and NEIL $29,129,409 NEIL FRONTS $ 3,321,764

  35. PROPERTY OPEN CLAIMS ACTIVITY 2001 1 2002 4 2003 9 2004 18 LOSS RATIO 2001 1% 2002 19% 2003 23% 2004 24%

  36. 2004 HURRICANE SEASON EIM LOSSES $600,000

  37. PROPERTY Please consider advising your broker to send EIM your property submission. If a large portion of your property coverage is with a direct writer or one carrier, we ask that you consider EIM’s involvement.

  38. COVERAGE CAN BE CONSIDERED ON A PRIMARY BASIS IF: Account is a quality-engineered and maintained risk • Deductibles meet minimum guidelines for equipment at risk and coverage requested • Rates contemplate the exposures presented by the risk, claims experience, and coverage form

  39. CAPACITY AND SUBLIMITS Capacity Provided on a Quota Share Basis Only Maximum Capacity is $15M Earthquake, Flood, and Wind Exposures Will Be Monitored Accounts with Zone A Flood and/or Catastrophe Exposures May Be Subject to Reduced Capacity and/or Limits and/or Higher Deductibles Earthquake and Flood Must Be Written with Annual Aggregates

  40. TERRORISMPOSITION

  41. TERRORISMPOSITION UPDATE ON TRIA MODELING • Currently evaluating EIM book to determine exposure • EIM may provide limits equal to policy limit, a sublimit, or decline to write

  42. INSURANCE ADVISORY COMMITTEE

  43. HOW ARE WE DOING?2004 RISK MANAGER SURVEY EIM follows reasonable, prudent, and sound underwriting practices: 98% Agree/Strongly Agree

  44. HOW ARE WE DOING?2004 RISK MANAGER SURVEY EIM provides added value in form of broad coverage, price stability, consistent limits, and financial strength: 94% Agree/Strongly Agree

  45. HOW ARE WE DOING?2004 RISK MANAGER SURVEY Overall, EIM meets my expectations in level of service: 100% Agree/Strongly Agree

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