ENERGY INSURANCE MUTUAL

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ENERGY INSURANCE MUTUAL
19th ANNUALRISK MANAGERSINFORMATION MEETING
The Westin Innisbrook Golf Resort Tarpon Springs,
Florida February 27 - March 1, 2005
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Jill Dominguez
Vice President - Underwriting
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2004 UNDERWRITING OVERVIEW
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2004IN REVIEW
NEW MEMBERS 8 MEMBERS AS OF 12/31/2004 172 GROSS
PREMIUM EARNED 213,843,000
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2004 COMPAREDTO 2003
2004 2003
GROSS PREMIUM EARNED 213,843,000 179,010,000
CASUALTY 179,370,500 135,814,000
PROPERTY 34,473,000 43,196,000
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WRITTEN/EARNED PREMIUM
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WRITTEN/EARNED PREMIUM
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NEW MEMBERS IN 2004
Toronto Hydro Corporation 01/01/2004 Alabama
Electric Cooperative, Inc. 04/01/2004 Massachuse
tts Water Resources Authority 06/28/2004 Nationa
l Energy Gas Transmission, Inc. 08/01/2004 Com
plete 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
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TOTAL MEMBERSHIP
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RETENTION

• 2004 98.82
• 2003 96.05
• 2002 99.42
• 2001 99.40

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EIMS PRODUCTS - SUCCESSFUL IN MAINTAINING LARGE
AMOUNT OF CAPACITY

• GENERAL LIABILITY
• Capacity 100M as of 01/01/04
• Availability Depends on Risk
• DO/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

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EIM MEMBERSHIP MIX
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2004 CASUALTYPOLICY FORMS

• All Forms Have Been Updated to Include
• EIMs Change of Address
• 10 Day Notice of Cancellation for Nonpay
• One Year Discovery Period Wording
• NO CHANGES TO COVERAGE

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UPDATE BY LINE OF BUSINESS
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EXCESS GENERAL LIABILITY
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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

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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

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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

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EXCESS DIRECTORS AND OFFICERS LIABILITY
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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)

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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 DO Symposium, Cornerstone
  Research and Stanford Law School

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DOISSUES 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

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SP UTILITIES(ELECTRIC, GAS, PIPELINE, WATER)
UPGRADES DOWNGRADES
2004 18 33
2003 8 139
2002 15 182
2001 29 81
Outlook still predominantly negative but declined
dramatically in 2004. Average Rating - Mid-BBB
(48)
Source Standard Poors Research - US
Utility Downside Rating Actions Moderated
Significantly in 2004
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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 DO
  Symposium, and Advisen

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DO ISSUES AND TRENDS

• STILL A LOT OF UNCERTAINTY
• TRENDS
• Merger/acquisition activity picking up
• Three mergers involving six members announced
• According to Tillinghasts 2004 DO liability
  survey, six percent of DO shareholder claims
  allegations are from merger/acquisitions
• EIMs experience 16,250,000 paid in
  merger/acquisition activity related claims

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DO ISSUES AND TRENDS

• ISSUES
• SECTION 404 COMPLIANCE
• Unclear what implications are from regulatory
  enforcement or private action perspective
• EFFECT OF SETTLEMENTS
• Still in pipeline - DO 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 DO renewals!

Source The Buyers Perception of DO Realities
and Latest Trends - Towers Perrin-Tillinghast
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DOISSUES AND TRENDS
TREND? Capacity In Market Rebounding Total
Capacity In Market (Expressed in billions of
dollars) 1999 1.55 2000 1.575 2001 1.55 200
2 1.5 2003 1.35 2004 1.5 Tillinghast 2004
DO Survey Report
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DOISSUES AND TRENDS
Viable Utility Capacity 325M - 500M
Source Research by McGriff, Seibels and Williams
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EXCESS FIDUCIARY LIABILITY
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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

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EXCESSFIDUCIARY LIABILITY

• 6.9M Written Premium
• 23M Average Limit
• 38M Average Attachment Point
• 5.75M Claims Paid in 2004

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PROPERTY
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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.

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PROPERTY

• EIM 3,202,440
• EIM and NEIL 29,129,409
• NEIL FRONTS 3,321,764

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PROPERTY

• OPEN CLAIMS ACTIVITY
• 2001 1
• 2002 4
• 2003 9
• 2004 18
• LOSS RATIO
• 2001 1
• 2002 19
• 2003 23
• 2004 24

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2004 HURRICANE SEASON

• EIM LOSSES
• 600,000

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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 EIMs
  involvement.

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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

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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

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TERRORISMPOSITION
CASUALTY PROPERTY
TRIA-Certified is offered. TRIA-Certified is offered.
Do not exclude noncertified, but cap GL to 25M per Member, 125M EIM-wide. Non-certified is offered only for U.S. and Puerto Rico.
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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

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INSURANCE ADVISORY COMMITTEE
William R. Powell, ARM, CSP (Chairman) Manager, Risk Management Salt River Project   Deborah S. Gaffney Risk and Insurance Manager Southern Company   James O. Hess, Jr. Director Liability and Financial Insurance Duke Energy   Michael C. Hulsey, CPU, CLU, ARM Risk Manager City of Richmond, Dept. of Public Utilities   John E. Luley Manager Corporate Insurance Pepco Holdings Donna Pedersen McGinnis Vice President, Risk Management and Insurance Dynegy Inc. George Schuitema, ARM Manager, Corporate Risk Management The Peoples Gas Light and Coke Company Robert J. Semet, CPCU, ARM, ARe Insurance Director Exelon Corporation Michael G. Whelan, CPCU Risk Services Manager TXU Business Services Michael L. Wilson Director, Risk Management Entergy Services, Inc.
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HOW ARE WE DOING?2004 RISK MANAGER SURVEY
EIM follows reasonable, prudent, and sound
underwriting practices
98 Agree/Strongly Agree
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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
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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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