1. Susan Witcraft Minneapolis Crop Insurance Overview of Primary Market in US June 6-7, 2005

2. 2 Guy Carpenter U.S. Crop Insurance Three Classes of Business MPCI (Multiple Peril Crop Insurance) Government supported program. Rates, policy forms, underwriting guidelines and loss adjusting procedures are all established by the Federal Crop Insurance Corporation (FCIC). FCIC offers attractive inuring reinsurance protections. The Policy is “Yield” or “Revenue” based covering “All Perils”. Crop Hail Traditional crop insurance that has been around since the early 1900’s. Policy covers only Hail and Allied Coverages. Policy structured as a “percentage of insured value” basis. Named Peril Single peril coverage on specific crops or MPCI Add On / Deductible Protection.

3. 3 Guy Carpenter Crop Insurance Industry 2004 Gross Premium Breakdown Estimate Named Peril $15M MPCI$4.2B Crop Hail $427M

4. MPCI

5. 5 Guy Carpenter Multiple Peril Crop Insurance (MPCI) Loss Breakdown by Peril 1981 - 2004

6. 6 Guy Carpenter “Buy Up” This is a production or yield based policy. This traditional type coverage utilizes a farmer’s deductible level and individual Actual Production History (APH – 6- to 10- year average yield) to determine coverage. The farmer chooses a coverage level (ranging from 50% - 90%) and price election when buying a policy. Catastrophe This is also a production or yield based policy. This coverage was introduced by the FCIC in 1995 after the 1993 MPCI loss as a further “subsidy” to the market. The policy offers 50% coverage at 60% of the MPCI price election. MPCI Industry Overview Definitions of Coverage Types

7. 7 Guy Carpenter MPCI Industry Overview Definitions of Coverage Types “Buy-Up” Insurance Example (Iowa Corn) Individual Farmer APH YearAPH 199380 1994125 1995150 1996150 1997145 1998140 1999130 2000120 200160 2002100 Average APH 120 2003 Purchased Policy MPCI Level70% Price Election2.40 Amount of Insurance:$201.60 2003 Payout 2003 Actual Production: 75 Payout: 120 (APH) * 70% (Coverage Level) = 84 84 - 75 (2003 Yield) = 9 bushel loss per acre 9 * $2.40 (price election) = $21.60 Insurance loss payment per acre

8. 8 Guy Carpenter Revenue (CRC or RA) This is a revenue protection policy. This coverage was first introduced to the market in 1996 for corn and soybeans in the states of Iowa and Nebraska. The FCIC has expanded this coverage for other crops and in nearly all states. The revenue coverage guarantee is determined using the farmers APH and Chicago Board of Trade (CBOT) commodity prices. Industry Overview Definitions of MPCI Coverage Types CRC Policy Wording Definitions Minimum Guarantee - APH multiplied by the Base Price multiplied by the coverage level elected. Harvest Guarantee - APH multiplied by the Harvest Price multiplied by the coverage level elected. Final Guarantee - Greater of the Minimum or Harvest Guarantee. Assumptions APH = 150CBOT Price = $2.50Coverage Level = 70%Minimum Guarantee = $262.50 CRC Insurance Example

9. 9 Guy Carpenter CRC Insurance Example Example 1 - “2002 Type Scenario” - Yield  CBOT price  ActualMinimumHarvestHarvestFinalActual$ Loss YieldGuaranteePriceGuaranteeGuaranteeRevenue*Per Acre 80$262.50$2.75$288.75$288.75$220.00$68.75 * Current Yield multiplied by Harvest Price Example 2 - “2001 Type Scenario in Nebraska” - Yield  CBOT price  ActualMinimumHarvestHarvestFinalActual$ Loss YieldGuaranteePriceGuaranteeGuaranteeRevenue*Per Acre 80$262.50$2.25$236.25$262.50$180.00$82.50 Industry Overview Definitions of MPCI Coverage Types

10. 10 Guy Carpenter CRC Insurance Example Example 3 - “1994 Type Scenario” - Yield  CBOT price  ActualMinimumHarvestHarvestFinalActual$ Loss YieldGuaranteePriceGuaranteeGuaranteeRevenue*Per Acre 175$262.50$2.25$236.25$262.50$393.75$0 * Current Yield multiplied by Harvest Price Example 4 - Yield  CBOT price  ActualMinimumHarvestHarvestFinalActual$ Loss YieldGuaranteePriceGuaranteeGuaranteeRevenue*Per Acre 175$262.50$2.75$288.75$288.75$481.25$0 Industry Overview Definitions of MPCI Coverage Types

11. 11 Guy Carpenter MPCI Historical Perspective – “Late 1990’s” Crop Insurance Reform and 1996 Farm bill spurred MPCI sales. FCIC ceased to deliver the MPCI product under bill. Increased premium subsidy for farmers in 1999 Introduction of Revenue products in 1996.

12. 12 Guy Carpenter MPCI 2004 Industry Gross Premium by State WA MTND OR ID WY MN CA NV UT CO SD AZNM NE KS TX MO WI IA MI ME NY ILIN OH PA WV VA KY OKAR LA MS AL TN GA NC SC FL VT NH MA RI DE CT MD NJ $0 to $25M $25M to $50M Greater than $100M $50M to $100M AK HI

13. 13 Guy Carpenter MPCI Standard Reinsurance Agreement (SRA) SRA - a Contract between the Government (FCIC) and the private insurance company. Proportional and non proportional reinsurances available. The SRA allows ceding companies to cede or designate each crop contract (policy) to one of the following seven funds: – Assigned Risk – Developmental – Cat – Developmental – Buy-up – Developmental – Revenue – Commercial – Cat – Commercial – Buy-up – Commercial – Revenue Ceding companies utilize historical experience, market knowledge and underwriting models to determine the business they wish to retain and the undesirable business they wish to cede to the FCIC.

14. 14 Guy Carpenter Standard Reinsurance Agreement Proportional Reinsurance – A Assigned Risk Fund – Company’s less desirable business - “Social Fund”. – FCIC sets cession limits by state, based on loss history. – 75%-85% of the business is proportionately ceded to FCIC. Developmental Fund – Accommodates business where “uncertainty” exists or where Assigned Risk limits are exceeded. – Up to 65% of gross premiums can be ceded to FCIC. Commercial Fund – Accommodates a Company’s most profitable business. – Highest profit potential and highest risk potential. – Up to 50% of gross premiums can be ceded to FCIC.

15. 15 Guy Carpenter Standard Reinsurance Agreement Non Proportional Reinsurance

16. 16 Guy Carpenter Standard Reinsurance Agreement Non Proportional Reinsurance Maximum Net Gains By State Maximum Net Loss By State

17. 17 Guy Carpenter Standard Reinsurance Agreement Effect on Net Gain/Loss of Non Proportional Reinsurance

18. 18 Guy Carpenter Standard Reinsurance Agreement Proportional Reinsurance – B FCIC assumes a 5% share of the total gain or loss of a Company’s book of business. Provision first introduced for the 2005 crop season. Due to the profitable nature of the business, this provision is the Government’s way of reducing their cost to service and manage the MPCI Program.

19. 19 Guy Carpenter SRA Gross U/W Gain Calculation Examples

20. 20 Guy Carpenter SRA Net U/W Gain Calculation Examples “After Proportional Cessions” State Net Premium (000's) Net Loss (000's)Net LR Net Premium (000's) Net Loss (000's)Net LR Net Premium (000's) Net Loss (000's)Net LR Net Premium (000's) Net Loss (000's)Net LR MN$50$80160%$0 (1) $00%$1,800$90050%$1,850$98053% IA$25 100%$200 (1) $13065%$1,700$1,10565%$1,925$1,26065% CA$65 100%$500 (1) $1,100220%$3,000 100%$3,565$4,165117% TX$450$990220%$700 (2) $700100%$2,000$1,30065%$3,150$2,99095% Total$590$1,160197%$1,400$1,930138%$8,500$6,305 74% $10,490$9,39590% (1) 100% Retained (2) 35% Retained Assigned Risk Developmental Buy-up Commercial Buy-upTotal Overall Loss Ratio Goes Down with Proportional Cessions

21. 21 Guy Carpenter SRA Net U/W Gain Calculation Examples “After Non-Proportional Cessions” State Net Premium (000's) U/W Gain/Loss (000's)Net L/R Net Premium (000's) U/W Gain/Loss (000's)Net L/R Net Premium (000's) U/W Gain/Loss (000's)Net L/R Net Premium (000's) U/W Gain/Loss (000's)Net L/R MN$50($2)103%$0 100%$1,800$78157%$1,850$78058% IA$25$0100%$200$4279%$1,700$55967%$1,925$60169% CA$65$0100%$500($135)127%$3,000$0100%$3,565($135)104% TX$450($24)105%$700$0100%$2,000$65867%$3,150$63480% Total$590($26)104%$1,400($93)113%$8,500$1,99924%$10,490$1,88082% Total U/W Gain18% Assigned Risk Developmental Buy-up Commercial Buy-upTotal Overall Loss Ratio Goes Down Further with Non- Proportional Cessions

22. 22 Guy Carpenter MPCI Historical Industry Underwriting Results

23. 23 Guy Carpenter MPCI Expenses FCIC A&O Reimbursement Summary Continued reduction in the A&O has put many companies in an operational deficit position between 2 -10% of Net Retained Premiums.

24. 24 Guy Carpenter MPCI Cash Flow Example Iowa Farmer Insurance Company / MGA / Agent FCIC Insurance Company Needs to purchase MPCI Policy to protect Corn by no later than March 15 th for crops planted in Summer of previous season through Spring of current season Operating Account  Premium Collections from Insured  Monthly settlements with FCIC  A & O Expense Reimbursement  Premium Due FCIC Funds most of the transactions like payments for agent commissions, LAE, etc. Settlement on 3/31 of following year of U/W gain/loss from FCIC Escrow Account In the name of FCIC to fund claim payment requests FCIC funds account within 3 days of receiving certified claim Insurance Company funds their own claim payment account from escrow to pay the Farmer Guy Carpenter / Reinsurer Premium Losses Reinsurance contract runs from 1/1 to 12/31 of current year and protects U/W after SRA for crops planted through 3/15 of current year. Single premium/loss transaction within 30 days after settlement with FCIC

25. 25 Guy Carpenter Crop Hail

26. 26 Guy Carpenter Industry Growth Historical Perspective Crop Hail Industry Historical Premium Prior to the advent of the Multi-Peril Crop Insurance, Farmers managed their agricultural risk through Crop Hail coverages and various disaster relief programs. With the increased popularity of CRC coverages, and higher MPCI subsidies to the Farmer, Crop Hail insurance products started to decline as a risk management tool. With the profitability of MPCI business, ceding companies targeted growth in the MPCI class by offering agents more competitive hail products.

27. 27 Guy Carpenter Crop Hail 2004 Industry Premium by State WA MTND OR ID WY MN CA NV UT CO SD AZNM NE KS TX MO WI IA MI ME NY ILIN OH PA WVVA KY OKAR LA MS AL TN GA NC SC FL VT NH MA RI DE CT MD NJ $0 to $1M $1M to $5M Greater than $10M $5M to $10M

28. 28 Guy Carpenter Crop Hail Historical Industry Premium and Loss Ratios 1988362,842,00036% 1989374,948,00055% 1990410,681,00077% 1991412,480,00061% 1992423,054,000110% 1993486,958,00081% 1994515,819,00087% 1995531,409,00058% YearPremiumLoss Ratio 1996630,965,00072% 1997594,026,00057% 1998576,464,00083% 1999508,108,00076% 2000468,405,00068% 2001433,743,00069% 2002405,003,000 70% 2003422,216,00056% 2004427,694,000 57% YearPremiumLoss Ratio

29. Susan Witcraft Minneapolis Crop Insurance Overview of Primary Market in US June 6-7, 2005