* * PROPERTY AND CASUALTY COMPANIES ASSOCIATION EDITION

Transcription

1 * * PROPERTY AND CASUALTY COMPANIES ASSOCIATION EDITION ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER, 00 OF THE CONDITION AND AFFAIRS OF THE NIC Insurance Company NAIC Group Code NAIC Company Code 0 Employer s ID Number - (Current Period) (Prior Period) Organized under the Laws of New York, State of Domicile or Port of Entry New York Country of Domicile United States Incorporated/Organized /0/ Commenced Business 0// Statutory Home Office One Penn Plaza - th Floor, New York, NY (Street and Number) (City or Town, State and Zip Code) Main Administrative Office International Drive Rye Brook, NY 0 -- (Street and Number) (City or Town, State and Zip Code) (Area Code) (Telephone Number) Mail Address International Drive, Rye Brook, NY 0 (Street and Number or P.O. Box) (City or Town, State and Zip Code) Primary Location of Books and Records International Drive Rye Brook, NY (Street and Number) (City or Town, State and Zip Code) (Area Code) (Telephone Number) Internet Website Address Statutory Statement Contact Mary Elizabeth Lynn --0 (Name) (Area Code) (Telephone Number) (Extension) mlynn@navg.com --0 ( Address) (Fax Number) Policyowner Relations Contact International Drive Rye Brook, NY 0 -- (Street and Number) (City or Town, State and Zip Code) (Area Code) (Telephone Number) (Extension) OFFICERS Name Title Name Title Stanley Adam Galanski, President & CEO Paul John Malvasio, Executive Vice President & CFO Elliot Scott Orol, Senior Vice President & Secretary Salvatore Alfred Margarella, Vice President & Treasurer OTHER OFFICERS Richard Scott Eisdorfer, Senior Vice President Jane Ellen Keller, Senior Vice President Bradley Dale Wiley, Senior Vice President Callum McIntosh Duncan, Vice President Ramona Lucinda Eiseman, Vice President Jeff Lyle Saunders, Vice President Christopher Mohr Steinbach, Vice President Charles Derek Valentine, Vice President DIRECTORS OR TRUSTEES Michael Louis Civisca Terence Norman Deeks (Chairman) Christopher Carmine Duca Richard Scott Eisdorfer Stanley Adam Galanski Noel Higgitt Christopher Alban Johnson Russell John Johnson John Wayne Jones Jane Ellen Keller Paul John Malvasio Salvatore Alfred Margarella Gregory Donald Olson Richard Charles Fitzgerald Rea Jeff Lyle Saunders Bradley Dale Wiley State of New York County of New York ss The officers of this reporting entity, being duly sworn, each depose and say that they are the described officers of said reporting entity, and that on the reporting period stated above, all of the herein described assets were the absolute property of the said reporting entity, free and clear from any liens or claims thereon, except as herein stated, and that this statement, together with related exhibits, schedules and explanations therein contained, annexed or referred to is a full and true statement of all the assets and liabilities and of the condition and affairs of the said reporting entity as of the reporting period stated above, and of its income and deductions therefrom for the period ended, and have been completed in accordance with the NAIC Annual Statement Instructions and Accounting Practices and Procedures Manual except to the extent that: () state law may differ; or, () that state rules or regulations require differences in reporting not related to accounting practices and procedures, according to the best of their information, knowledge and belief, respectively. Furthermore, the scope of this attestation by the described officers also includes the related corresponding electronic filing with the NAIC, when required, that is an exact copy (except for formatting differences due to electronic filing) of the enclosed statement. The electronic filing may be requested by various regulators in lieu of or in addition to the enclosed statement. Stanley Adam Galanski Elliot Scott Orol Salvatore Alfred Margarella President & CEO Senior Vice President & Secretary Vice President & Treasurer a. Is this an original filing? Yes [ X ] No [ ] Subscribed and sworn to before me this b. If no, day of February, 00. State the amendment number. Date filed. Number of pages attached Agustin R. Cruz, Notary Public, State of New York April 0, 00 No. 0CR Qualified in Queens County

2 ASSETS Current Year Prior Year Net Admitted Assets Net Admitted Assets Nonadmitted Assets (Cols. - ) Assets. Bonds (Schedule D) 0,, 0,,,0,. Stocks (Schedule D):. Preferred stocks. Common stocks. Mortgage loans on real estate (Schedule B):. First liens. Other than first liens. Real estate (Schedule A):. Properties occupied by the company (less $ encumbrances). Properties held for the production of income (less $ encumbrances). Properties held for sale (less $ encumbrances). Cash ($,,0, Schedule E, Part ), cash equivalents ($, Schedule E, Part ) and short-term investments ($, Schedule DA),,0,,0,0,0. Contract loans, (including $ premium notes). Other invested assets (Schedule BA). Receivables for securities,,. Aggregate write-ins for invested assets 0. Subtotals, cash and invested assets (Lines to ) 0,0,0 0,0,0 0,,. Title plants less $ charged off (for Title insurers only). Investment income due and accrued,,,. Premiums and considerations:. Uncollected premiums and agents balances in the course of collection,0,,0,,,. Deferred premiums, agents balances and installments booked but deferred and not yet due (including $ but unbilled premium). Accrued retrospective premium. Reinsurance:. Amounts recoverable from reinsurers. Funds held by or deposited with reinsured companies. Other amounts receivable under reinsurance contracts. Amounts receivable relating to uninsured plans earned. Current federal and foreign income tax recoverable and interest thereon. Net deferred tax asset. Guaranty funds receivable or on deposit. Electronic data processing equipment and software. Furniture and equipment, including health care delivery assets ($ ) 0. Net adjustment in assets and liabilities due to foreign exchange rates. Receivables from parent, subsidiaries and affiliates. Health care ($ ) and other amounts receivable. Aggregate write-ins for other than invested assets. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines 0 to ),,,,,,. From Separate Accounts, Segregated Accounts and Protected Cell Accounts. Total (Lines and ),,,,,, DETAILS OF WRITE-INS 0. Summary of remaining write-ins for Line from overflow page 0. Totals (Lines 00 thru 00 plus 0)(Line above) Summary of remaining write-ins for Line from overflow page. Totals (Lines 0 thru 0 plus )(Line above)

3 . Losses (Part A, Line, Column ) LIABILITIES, SURPLUS AND OTHER FUNDS Current Year. Reinsurance payable on paid losses and loss adjustment expenses (Schedule F, Part, Column ). Loss adjustment expenses (Part A, Line, Column ). Commissions payable, contingent commissions and other similar charges Prior Year. Other expenses (excluding taxes, licenses and fees),000,000. Taxes, licenses and fees (excluding federal and foreign income taxes).current federal and foreign income taxes (including $, on realized capital gains (losses)),,00,. Net deferred tax liability. Borrowed money $ and interest thereon $. Unearned premiums (Part A, Line, Column ) (after deducting unearned premiums for ceded reinsurance of $ reserves of $ ) 0. Advance premium. Dividends declared and unpaid:. Stockholders. Policyholders,, and including warranty. Ceded reinsurance premiums payable (net of ceding commissions),0,,,. Funds held by company under reinsurance treaties (Schedule F, Part, Column ). Amounts withheld or retained by company for account of others. Remittances and items not allocated. Provision for reinsurance (Schedule F, Part ). Net adjustments in assets and liabilities due to foreign exchange rates. Drafts outstanding. Payable to parent, subsidiaries and affiliates,, 0. Payable for securities,000. Liability for amounts held under uninsured plans. Capital notes $ and interest thereon $. Aggregate write-ins for liabilities. Total liabilities excluding protected cell liabilities (Lines through ),, 0,,. Protected cell liabilities. Total liabilities (Lines and ),, 0,,. Aggregate write-ins for special surplus funds. Common capital stock,000,000,000,000. Preferred capital stock 0. Aggregate write-ins for other than special surplus funds. Surplus notes. Gross paid in and contributed surplus,000,000,000,000. Unassigned funds (surplus),,,,0. Less treasury stock, at cost:. shares common (value included in Line $ ). shares preferred (value included in Line $ ). Surplus as regards policyholders (Lines to, less ) (Page, Line ) 0,, 0,,0. Totals (Page, Line, Col. ),,,, DETAILS OF WRITE-INS. Summary of remaining write-ins for Line from overflow page. Totals (Lines 0 through 0 plus ) (Line above) Summary of remaining write-ins for Line from overflow page. Totals (Lines 0 through 0 plus ) (Line above) Summary of remaining write-ins for Line 0 from overflow page 0. Totals (Lines 00 through 00 plus 0) (Line 0 above)

4 UNDERWRITING INCOME. Premiums earned (Part, Line, Column ) STATEMENT OF INCOME Current Year Prior Year DEDUCTIONS:. Losses incurred (Part, Line, Column ). Loss expenses incurred (Part, Line, Column ). Other underwriting expenses incurred (Part, Line, Column ). Aggregate write-ins for underwriting deductions. Total underwriting deductions (Lines through ). Net income of protected cells. Net underwriting gain (loss) (Line minus Line plus Line ) INVESTMENT INCOME. Net investment income earned (Exhibit of Net Investment Income, Line ),,,0, 0. Net realized capital gains (losses) less capital gains tax of $ (,) (Exhibit of Capital Gains (Losses)) (,0),. Net investment gain (loss) (Lines + 0),0,,, OTHER INCOME. Net gain (loss) from agents' or premium balances charged off (amount recovered $ amount charged off $ ). Finance and service charges not included in premiums. Aggregate write-ins for miscellaneous income. Total other income (Lines through ). Net income before dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes (Lines + + ),0,,,. Dividends to policyholders. Net income, after dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes (Line minus Line ),0,,,. Federal and foreign income taxes incurred,,,0 0. Net income (Line minus Line ) (to Line ),,,, CAPITAL AND SURPLUS ACCOUNT. Surplus as regards policyholders, December prior year (Page, Line, Column ) 0,,0,,. Net income (from Line 0),,,,. Net transfers (to) from Protected Cell accounts. Change in net unrealized capital gains or (losses) less capital gains tax of $ (,) 0,. Change in net unrealized foreign exchange capital gain (loss). Change in net deferred income tax. Change in nonadmitted assets (Exhibit of Nonadmitted Assets, Line, Col. ). Change in provision for reinsurance (Page, Line, Column minus Column ). Change in surplus notes 0. Surplus (contributed to) withdrawn from protected cells. Cumulative effect of changes in accounting principles. Capital changes:.. Paid in.. Transferred from surplus (Stock Dividend).. Transferred to surplus. Surplus adjustments:.. Paid in 0,000,000.. Transferred to capital (Stock Dividend).. Transferred from capital. Net remittances from or (to) Home Office. Dividends to stockholders. Change in treasury stock (Page, Lines. and., Column minus Column ). Aggregate write-ins for gains and losses in surplus. Change in surplus as regards policyholders for the year (Lines through ),,,,. Surplus as regards policyholders, December current year (Line plus Line ) (Page, Line ) 0,, 0,,0 DETAILS OF WRITE-INS Summary of remaining write-ins for Line from overflow page 0. Totals (Lines 00 through 00 plus 0) (Line above) Summary of remaining write-ins for Line from overflow page. Totals (Lines 0 through 0 plus ) (Line above) Summary of remaining write-ins for Line from overflow page. Totals (Lines 0 through 0 plus ) (Line above)

5 CASH FLOW Current Year Prior Year Cash from Operations. Premiums collected net of reinsurance. Net investment income,,,,. Miscellaneous income. Total (Lines through ),,,,. Benefit and loss related payments. Net transfers to Separate, Segregated Accounts and Protected Cell Accounts. Commissions, expenses paid and aggregate write-ins for deductions. Dividends paid to policyholders. Federal and foreign income taxes paid (recovered) $,, net of tax on capital gains (losses),,,, 0. Total (Lines through ),,,,. Net cash from operations (Line minus Line 0),,0,, Cash from Investments. Proceeds from investments sold, matured or repaid:. Bonds,,,,. Stocks. Mortgage loans. Real estate. Other invested assets. Net gains or (losses) on cash, cash equivalents and short-term investments,,. Miscellaneous proceeds,. Total investment proceeds (Lines. to.),,,,0. Cost of investments acquired (long-term only):. Bonds,,,0,0. Stocks. Mortgage loans. Real estate. Other invested assets. Miscellaneous applications,0,,. Total investments acquired (Lines. to.) 0,,,0,. Net increase (decrease) in contract loans and premium notes. Net cash from investments (Line. minus Line. minus Line ) (,0,) (,,) Cash from Financing and Miscellaneous Sources. Cash provided (applied):. Surplus notes, capital notes. Capital and paid in surplus, less treasury stock 0,000,000. Borrowed funds. Net deposits on deposit-type contracts and other insurance liabilities. Dividends to stockholders. Other cash provided (applied),,. Net cash from financing and miscellaneous sources (Line. to Line. minus Line. plus Line.), 0,00, RECONCILIATION OF CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS. Net change in cash, cash equivalents and short-term investments (Line, plus Lines and Line ) (,,),,. Cash, cash equivalents and short-term investments:. Beginning of year,0,0,,. End of year (Line plus Line.),,0,0,0

6 , Part Part A

7 . Fire Line of Business. Allied lines. Farmowners multiple peril. Homeowners multiple peril UNDERWRITING AND INVESTMENT EXHIBIT Direct Business (a) PART B - PREMIUMS WRITTEN Reinsurance Reinsurance Ceded From From To To Affiliates Non-Affiliates Affiliates Non-Affiliates. Commercial multiple peril,,,,. Mortgage guaranty. Ocean marine 0, 0,. Inland marine 0. Financial guaranty. Medical malpractice - occurrence. Medical malpractice - claims-made. Earthquake. Group accident and health. Credit accident and health (group and individual). Other accident and health. Workers' compensation. Other liability - occurrence,,0,,0. Other liability - claims-made. Products liability - occurrence. Products liability - claims-made.,. Private passenger auto liability.,. Commercial auto liability. Auto physical damage. Aircraft (all perils). Fidelity. Surety. Burglary and theft. Boiler and machinery. Credit. International 0. Reinsurance - Nonproportional Property. Reinsurance - Nonproportional Liability. Reinsurance - Nonproportional Financial Lines. Aggregate write-ins for other lines of business,,,,. TOTALS,,,, DETAILS OF WRITE-INS. Summary of remaining writeins for Line from overflow page. Totals (Lines 0 through 0 plus ) (Line above) (a) Does the company s direct premiums written include premiums recorded on an installment basis? Yes [ ] No [ X ] If yes:. The amount of such installment premiums $. Amount at which such installment premiums would have been reported had they been reported on an annualized basis $ Net Premiums Written Cols

8 UNDERWRITING AND INVESTMENT EXHIBIT PART - LOSSES PAID AND INCURRED Losses Paid Less Salvage Net Losses Unpaid Net Losses Losses Incurred Reinsurance Net Payments Current Year Unpaid Current Year Recovered (Cols. + - ) (Part A, Col. ) Prior Year (Cols. + - ) Reinsurance Line of Business Direct Business. Fire. Allied lines. Farmowners multiple peril. Homeowners multiple peril. Commercial multiple peril,,. Mortgage guaranty. Ocean marine. Inland marine 0. Financial guaranty. Medical malpractice - occurrence. Medical malpractice - claims-made. Earthquake. Group accident and health. Credit accident and health (group and individual). Other accident and health. Workers' compensation. Other liability - occurrence,,0,,0. Other liability - claims-made,,,,. Products liability - occurrence. Products liability - claims-made.,. Private passenger auto liability.,. Commercial auto liability. Auto physical damage. Aircraft (all perils). Fidelity. Surety. Burglary and theft. Boiler and machinery. Credit. International 0. Reinsurance - Nonproportional Property. Reinsurance - Nonproportional Liability. Reinsurance - Nonproportional Financial Lines. Aggregate write-ins for other lines of business. TOTALS,,,, DETAILS OF WRITE-INS Summary of remaining write-ins for Line from overflow page. Totals (Lines 0 through 0 + ) (Line above) Percentage of Losses Incurred (Col., Part ) to Premiums Earned (Col., Part )

9 0 UNDERWRITING AND INVESTMENT EXHIBIT PART A - UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES Reinsurance Reported Losses Incurred But Not Reported Deduct Reinsurance Recoverable from Net Losses Excl. Authorized and Incurred But Net Losses Unauthorized Not Reported Reinsurance Reinsurance Unpaid Companies (Cols. + - ) Direct Ceded (Cols ) Line of Business Direct. Fire. Allied lines. Farmowners multiple peril. Homeowners multiple peril. Commercial multiple peril,,0,,0,0,0,0,0. Mortgage guaranty. Ocean marine,0,0. Inland marine 0. Financial guaranty. Medical malpractice - occurrence. Medical malpractice - claims-made. Earthquake. Group accident and health. Credit accident and health (group and individual). Other accident and health. Workers' compensation. Other liability - occurrence,,0,,0 00,0, 00,0,. Other liability - claims-made,,,,,,,,. Products liability - occurrence. Products liability - claims-made.,. Private passenger auto liability.,. Commercial auto liability. Auto physical damage. Aircraft (all perils). Fidelity. Surety. Burglary and theft. Boiler and machinery. Credit. International 0. Reinsurance - Nonproportional Property. Reinsurance - Nonproportional Liability. Reinsurance - Nonproportional Financial Lines. Aggregate write-ins for other lines of business. TOTALS 0,0, 0,0,,0,,0, DETAILS OF WRITE-INS Summary of remaining write-ins for Line from overflow page. Totals (Lines 0 through 0 + ) (Line above) (a) Including $ for present value of life indemnity claims. (a) (a) Unpaid Loss Adjustment Expenses

10 UNDERWRITING AND INVESTMENT EXHIBIT PART - EXPENSES Loss Adjustment Expenses Other Underwriting Expenses Investment Expenses Total. Claim adjustment services:. Direct,,0,,0. Reinsurance assumed. Reinsurance ceded,,0,,0. Net claim adjustment services ( ). Commission and brokerage:. Direct, excluding contingent,,,,. Reinsurance assumed, excluding contingent. Reinsurance ceded, excluding contingent,,,,. Contingent-direct. Contingent-reinsurance assumed. Contingent-reinsurance ceded. Policy and membership fees. Net commission and brokerage ( ). Allowances to manager and agents. Advertising. Boards, bureaus and associations. Surveys and underwriting reports. Audit of assureds' records. Salary and related items:. Salaries. Payroll taxes. Employee relations and welfare 0. Insurance. Directors' fees. Travel and travel items. Rent and rent items. Equipment. Cost or depreciation of EDP equipment and software. Printing and stationery. Postage, telephone and telegraph, exchange and express. Legal and auditing,,. Totals (Lines to ),, 0. Taxes, licenses and fees: 0. State and local insurance taxes deducting guaranty association credits of $ 0. Insurance department licenses and fees 0. Gross guaranty association assessments 0. All other (excluding federal and foreign income and real estate) 0. Total taxes, licenses and fees ( ). Real estate expenses. Real estate taxes. Reimbursements by uninsured plans. Aggregate write-ins for miscellaneous expenses. Total expenses incurred, (a),. Less unpaid expenses - current year,000,000. Add unpaid expenses - prior year,000,000. Amounts receivable relating to uninsured plans, prior year. Amounts receivable relating to uninsured plans, current year 0. TOTAL EXPENSES PAID (Lines ),, DETAILS OF WRITE-INS. Summary of remaining write-ins for Line from overflow page. Totals (Lines 0 through 0 plus ) (Line above) (a) Includes management fees of $ to affiliates and $ to non-affiliates.

11 EXHIBIT OF NET INVESTMENT INCOME Collected During Year Earned During Year. U.S. Government bonds (a),0,. Bonds exempt from U.S. tax (a),0,0. Other bonds (unaffiliated) (a),,,,. Bonds of affiliates (a). Preferred stocks (unaffiliated) (b). Preferred stocks of affiliates (b). Common stocks (unaffiliated). Common stocks of affiliates. Mortgage loans (c). Real estate (d). Contract loans. Cash, cash equivalents and short-term investments (e),,. Derivative instruments (f). Other invested assets. Aggregate write-ins for investment income 0. Total gross investment income,,,,0. Investment expenses (g),. Investment taxes, licenses and fees, excluding federal income taxes (g). Interest expense (h). Depreciation on real estate and other invested assets (i). Aggregate write-ins for deductions from investment income. Total (Lines through ),. Net Investment Income - (Line 0 minus Line ),, DETAILS OF WRITE-INS Summary of remaining write-ins for Line from overflow page 0. Totals (Lines 00 through 00 plus 0) (Line, above) Summary of remaining write-ins for Line from overflow page. Total (Lines 0 through 0 plus ) (Line, above) (a) Includes $, accrual of discount less $, amortization of premium and less $, paid for accrued interest on purchases. (b) Includes $ accrual of discount less $ amortization of premium and less $ paid for accrued dividends on purchases. (c) Includes $ accrual of discount less $ amortization of premium and less $ paid for accrued interest on purchases. (d) Includes $ for company s occupancy of its own buildings; and excludes $ interest on encumbrances. (e) Includes $, accrual of discount less $ amortization of premium and less $ paid for accrued interest on purchases. (f) Includes $ accrual of discount less $ amortization of premium. (g) Includes $, investment expenses and $ investment taxes, licenses and fees, excluding federal income taxes, attributable to segregated and Separate Accounts. (h) Includes $ interest on surplus notes and $ interest on capital notes. (i) Includes $ depreciation on real estate and $ depreciation on other invested assets. EXHIBIT OF CAPITAL GAINS (LOSSES) Realized Gain (Loss) On Sales or Maturity Other Realized Adjustments Unrealized Increases (Decreases) by Adjustment Total. U.S. Government bonds (,) (,). Bonds exempt from U.S. tax. Other bonds (unaffiliated) (,) (,). Bonds of affiliates. Preferred stocks (unaffiliated). Preferred stocks of affiliates. Common stocks (unaffiliated). Common stocks of affiliates. Mortgage loans. Real estate. Contract loans. Cash, cash equivalents and short-term investments (0) (0). Derivative instruments. Other invested assets. Aggregate write-ins for capital gains (losses) 0. Total capital gains (losses) (,) (,) DETAILS OF WRITE-INS Summary of remaining write-ins for Line from overflow page 0. Totals (Lines 00 through 00 plus 0) (Line, above)

12 . Bonds (Schedule D). Stocks (Schedule D):. Preferred stocks. Common stocks. Mortgage loans on real estate (Schedule B):. First liens. Other than first liens. Real estate (Schedule A):. Properties occupied by the company. Properties held for the production of income. Properties held for sale. Cash, (Schedule-E, Part ), cash equivalents (Schedule-E, Part ) and short-term investments (Schedule DA). Contract loans. Other invested assets (Schedule BA). Receivables for securities. Aggregate write-ins for invested assets 0. Subtotals, cash and invested assets (Lines to ). Title plants (for Title insurers only). Investment income due and accrued EXHIBIT OF NONADMITTED ASSETS Current Year Total Nonadmitted Assets. Premiums and considerations:. Uncollected premiums and agents balances in the course of collection. Deferred premiums, agents balances and installments booked but deferred and not yet due. Accrued retrospective premium. Reinsurance:. Amounts recoverable from reinsurers. Funds held by or deposited with reinsured companies. Other amounts receivable under reinsurance contracts. Amounts receivable relating to uninsured plans. Current federal and foreign income tax recoverable and interest thereon. Net deferred tax asset. Guaranty funds receivable or on deposit. Electronic data processing equipment and software. Furniture and equipment, including health care delivery assets 0. Net adjustment in assets and liabilities due to foreign exchange rates. Receivables from parent, subsidiaries and affiliates. Health care and other amounts receivable. Aggregate write-ins for other than invested assets. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines 0 to ). From Separate Accounts, Segregated Accounts and Protected Cell Accounts. Total (Lines and ) DETAILS OF WRITE-INS 0. Summary of remaining write-ins for Line from overflow page 0. Totals (Lines 00 through 00 plus 0)(Line above) Summary of remaining write-ins for Line from overflow page. Totals (Lines 0 through 0 plus )(Line above) Prior Year Nonadmitted Assets Change in Total Nonadmitted Assets (Col. - Col. )

13 NOTES TO FINANCIAL STATEMENTS. Summary of Significant Accounting Policies A. Accounting Practices The financial statements of NIC Insurance Company are presented on the basis of accounting practices prescribed or permitted by the New York Insurance Department. The New York Insurance Department recognizes only statutory accounting practices prescribed or permitted by the state of New York for determining and reporting the financial condition and results of operations of an insurance company for determining its solvency under the New York Insurance Law. The National Association of Insurance Commissioners (the NAIC ) Accounting Practices and Procedures Manual (NAIC SAP) has been adopted as a component of prescribed or permitted practices by the State of New York. B. Use of Estimates in the Preparation of the Financial Statements The preparation of financial statements in conformity with Statutory Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. It also requires disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. C. Accounting Policies Premiums are earned over the terms of the related insurance policies and reinsurance contracts. Unearned premium reserves are established to cover the unexpired portion of premiums written. Such reserves are computed by pro rata methods for direct business and are based on reports received from ceding companies for reinsurance. Expenses incurred in connection with acquiring new insurance business, including such acquisition costs as sales commissions, are charged to operations as incurred. Expenses incurred are reduced for ceding allowances received or receivable. In addition, the company uses the following accounting policies: ) ) ) ) ) Asset values are generally stated as follows: Short-term investments are valued at amortized cost. Bonds not backed by other loans, asset and mortgage backed bonds and structured securities are valued at amortized cost using the effective interest method; and common stocks in which the Company has an interest of less than 0% are valued at market. Prepayment assumptions for loan backed bonds and structured securities were obtained from broker/dealer survey values or from outside investment managers. The assumptions are consistent with the current interest rate and economic environment. The retrospective adjustment method is used for these securities. Any securities that are permanently impaired are written down to realizable value using factors that recognize maintaining the original yield on the bond. The Company has no mortgage loans or derivatives. The Company anticipates investment income as a factor in the premium deficiency calculation, in accordance with SSAP No., Property Casualty Contracts-Premiums. Unpaid losses and loss adjustment expenses include an amount determined from individual case estimates and loss reports and an amount, based on past experience, for losses incurred but not reported. Such liabilities are necessarily based on assumptions and estimates and while management believes the amount is adequate, the ultimate liability may be excess of or less than the amount provided. The methods for making such estimates and for establishing the resulting liabilities are continually reviewed and any adjustments are reflected in the period determined..... Accounting Changes and Corrections of Errors - None Business Combinations and Goodwill - None Discontinued Operations None Investments A. Mortgage Loans None

14 . NOTES TO FINANCIAL STATEMENTS B. C. D. E. F. G. Debt Restructuring - None Reverse Mortgages None Loan Backed Securities See item.c. above. Repurchase Agreements None Real Estate None Low-Income Housing Tax Credits - None.. Joint Ventures, Partnerships and Limited Liability Companies - None Investment Income A. Any due and accrued investment income over 0 days past due would be excluded from surplus. B. At December, 00, there was no due and accrued investment income excluded from surplus... Derivative Investments - None Income Taxes A. B. C. D. There were no DTAs or DTLs recognized in the Company s Assets, Liabilities, Surplus or Other Funds Unrecognized Deferred Tax Liabilities - None The total income tax incurred is current and there were no deferred tax amounts as of December, 00. Reconciliation of Federal Income Tax Rate to Actual Effective Rate The significant items causing a difference between the statutory federal income tax rate and NIC s effective income rate are as follows: Amount Tax Effected Income before taxes $,00,0 $,, TIPS expense (,0) (,) Tax exempt interest deduction (,0) (,0) Total adjustments (,) (,) Taxable income $,0,0 $,, E. Operating Loss and Tax Credit Carry Forwards : ) ) The Company has no operating loss or tax credit carry forwards. The amount of Federal income tax incurred and available for recoupment in the event of future net losses is: current year $,,; first preceding year $,00,; second preceding year $0,. F. Federal Income Tax Allocation ) ) The Company s federal income tax return is consolidated with the following entities: The Navigators Group, Inc. Navigators Insurance Company Navigators Management Company, Inc. Navigators Insurance Services of Washington, Inc. Navigators California Insurance Services, Inc Navigators Insurance Services of Texas, Inc. The method of allocation between the companies is subject to written agreement, approved by the Board of Directors. Allocation is based upon separate return calculations. Intercompany tax balances are settled in the first quarter. 0. Information Concerning Parent, Subsidiaries and Affiliates

15 . NOTES TO FINANCIAL STATEMENTS A. All outstanding shares of NIC Insurance Company are owned by Navigators Insurance Company ( Parent ), an insurance company domiciled in the State of New York. B. C. D. E. The company received a surplus contribution of $0,000,000 from its parent in October 00. The Company ceded $,,000 of premiums to Navigators Insurance Company under a reinsurance agreement whereby the Company cedes all its business to its Parent. The Company incurred commission expense of $,, under agency agreements with Navigators California Insurance Services, Inc. ( NCIS ) and Navigators Management Company, Inc. ( NMC ), insurance agencies owned by The Navigators Group, Inc., the Company s ultimate parent. The only amounts due between the Company and its affiliates are insurance related items which are settled monthly when due. Guarantees of Contingencies for Related Parties - None F. See item 0.C above and Schedule Y contained herein for material arrangements with related parties. G. H. I. J. K. See items 0. A and 0. F above concerning the relationship with other companies under common control. The Company does not own any shares of its Parent or affiliated companies. The Company owns no investment in an SCA. The Company owns no investment in an impaired SCA. The Company owns no investment in a foreign insurance subsidiary... Debt - None Retirement Plans, Deferred Compensation, Postemployment Benefits and Compensated Absences and Other Postretirement Benefit Plans A. B. C. D. E. Defined Benefit Plans None Defined Contribution Plans None Multiemployer Plans None Consolidated/Holding Company Plans - The Company participates in a defined contribution Money Purchase Plan and a 0(k) Plan sponsored by its Parent. It does not have or participate in any other post retirement benefit plans. Postemployment Benefits and Compensated Absences - The Company has no post employment benefits except as disclosed in item.d above.. Capital and Surplus, Shareholders Dividend Restrictions and Quasi-Reorganizations. The Company has 0 common shares authorized, issued and outstanding with a $0,000 par value.. The Company has no preferred stock outstanding.. The maximum amount of dividends which may be paid by State of New York insurance companies to shareholders without prior approval of the Insurance Commissioner is subject to restrictions relating to statutory surplus and investment income. The maximum dividend which may be paid without prior approval is 0% of the Company s statutory surplus.. Subject to. above, there are no restrictions placed on the portion of profits that may be paid as ordinary dividends to the Company s stockholders.. Subject to. above, there are no restrictions placed on the Company s surplus.. The Company is not a mutual.. There is no stock held by the Company for special purposes.. There are no special surplus funds.

16 . NOTES TO FINANCIAL STATEMENTS. The unassigned funds (surplus) represented has not been reduced by any cumulative unrealized gains and losses. 0. Surplus Notes None. Quasi-reorganization - None Contingencies - None other than various lawsuits that have arisen in the normal course of the Company s business which are not considered material in relation to the financial position of the company. Leases None Financial Instruments with Off-Balance Risk and with Concentration of Credit Risk None Sale, Transfer and Servicing of Financial Assets and Extinguishments of Liabilities None Gain or Loss from Uninsured Plans and the Uninsured Portion of Partially Insured Plans None Direct Premium Written/Produced by Managing General Agents/Third Party Administrators: Type of Type of Direct Exclusive Business Authority Premium Name and Address FEI Number Contract Written Granted* Written Navigators Management Company Inc. One Penn Plaza U, C, CA, New York, NY 0-0 No Liability R, B, P $,, Navigators CA Ins. Svcs., Inc. California Street, Suite 0 San Francisco, CA 0-0 No Liability U, R, B, P,0, Navigators Ins. Svcs. of TX, Inc. Sage Park One U, C, CA Sage, Suite -0 No Liability R, B, P,0, Navigators Ins. Svcs. of W A, Inc. 0 Fourth A venue, Suite 0 Seattle, W A - No Liability U, R, B, P,, Total $,, *Type of Authority Granted: U = Underwriting, C = Claims Payments, CA = Claims Adjusting, B = Binding Authority, R = Reinsurance, P = Premium Collection 0. September Events: The Company has not incurred any losses from the September Events. However, given the uncertainty surrounding this event, the estimates may change over time as additional information becomes available.. Other Items: A. B. C. D. E. Extraordinary Items None Troubled Debt Restructuring None Other Disclosures - None Uncollectible Premiums Receivable - Uncollectible amounts are written off as they are identified. Business Interruption Insurance Recoveries - None.. Events Subsequent On January, 00, the Company changed its name to Navigators Specialty Insurance Company. Reinsurance: A. Unsecured Reinsurance Recoverables

17 . NOTES TO FINANCIAL STATEMENTS The Company has unsecured reinsurance receivables for losses, paid and unpaid including IBNR, loss adjustment expenses and unearned premium exceeding % of policyholders surplus of $,, with Navigators Insurance Company (NAIC Group Code 00, Federal ID# -0. NAIC # 0), its parent company. B. C. Reinsurance Recoverables in Dispute None Reinsurance and Ceded: ) The following table summarizes ceded and assumed unearned premiums and the related commission equity at December, 00. () () () () () () Net Unearned Commission Unearned Commission Unearned Commission Premiums Equity Premiums Equity Premiums Equity a. Affiliates $ - $ - $,, $,, $ (,,) $ (,,) b. All other c. Total $ - $ - $,, $,, $ (,,) $ (,,) d. Direct Unearned Premium Reserve $,, ) The Company has no additional or return commission predicated on loss experience or on any other form of profit sharing arrangements in this annual statement as a result of existing contractual arrangements. D. Uncollectible Reinsurance None E. Commutation of Ceded Reinsurance None F. Retroactive Reinsurance None G. Reinsurance Accounted for as a Deposit - None.. Retrospectively Rated Contracts and Contracts Subject to Redetermination - None Changes in Net Incurred Losses and Loss Adjustment Expenses The Company has no net incurred losses or loss adjustment expenses as the result of all of its business being ceded to its Parent.. Intercompany Pooling Arrangements Pursuant to a reinsurance agreement, the Company cedes 00% of its gross written premium to its Parent Structured Settlements None Health Care receivables None Participating Accident and Health Policies None Premium Deficiency Reserves None High Deductibles None Discounting of Liabilities for Unpaid Losses and Loss Adjustment Expenses None Asbestos/Environmental Reserves A. Does the Company have on the books, or has it ever written an insured for which you have identified a potential for the existence of, a liability due to asbestos losses? Yes (X) No ( ) All reserves are ceded to the Company's Parent. B. C. D. There are no ending reserves for Bulk + IBNR included in A (Loss and LAE). There are no ending reserves for loss adjustment expenses included in A (Case, Bulk + IBNR). Does the company have on the books, or has it ever written an insured for which you have defined a potential for the existence of, a liability due to environmental losses? Yes ( ) No (X)

18 . NOTES TO FINANCIAL STATEMENTS. Subscriber Savings Accounts - None. Multiple Peril Crop Insurance - None

19 SUMMARY INVESTMENT SCHEDULE Investment Categories Amount Gross Investment Holdings Percentage Admitted Assets as Reported in the Annual Statement Amount Percentage. Bonds:. U.S. treasury securities,,.0,,.0. U.S. government agency obligations (excluding mortgage-backed securities):. Issued by U.S. government agencies. Issued by U.S. government sponsored agencies. Foreign government (including Canada, excluding mortgaged-backed securities), 0., 0.. Securities issued by states, territories, and possessions and political subdivisions in the U.S.:. States, territories and possessions general obligations, 0., 0.. Political subdivisions of states, territories and possessions and political subdivisions general obligations,0 0.0, Revenue and assessment obligations, 0., 0.. Industrial development and similar obligations,,0.,,0.. Mortgage-backed securities (includes residential and commercial MBS):. Pass-through securities:. Issued or guaranteed by GNMA,,.0,,.0. Issued or guaranteed by FNMA and FHLMC,,0.,,0.. All other. CMOs and REMICs:. Issued or guaranteed by GNMA, FNMA, FHLMC or VA,,.,,.. Issued by non-u.s. Government issuers and collateralized by mortgage-backed securities issued or guaranteed by agencies shown in Line.. All other,,.,,.. Other debt and other fixed income securities (excluding short-term):. Unaffiliated domestic securities (includes credit tenant loans rated by the SVO),,.,,.. Unaffiliated foreign securities,,.0,,.0. Affiliated securities. Equity interests:. Investments in mutual funds. Preferred stocks:. Affiliated. Unaffiliated. Publicly traded equity securities (excluding preferred stocks):. Affiliated. Unaffiliated. Other equity securities:. Affiliated. Unaffiliated. Other equity interests including tangible personal property under lease:. Affiliated. Unaffiliated. Mortgage loans:. Construction and land development. Agricultural. Single family residential properties. Multifamily residential properties. Commercial loans. Mezzanine real estate loans. Real estate investments:. Property occupied by the company. Property held for the production of income (including $ of property acquired in satisfaction of debt). Property held for sale (including $ property acquired in satisfaction of debt). Contract loans. Receivables for securities, 0.0, 0.0. Cash, cash equivalents and short-term investments,,0.0,,0.0. Other invested assets 0. Total invested assets 0,0, ,0,

20 GENERAL INTERROGATORIES PART - COMMON INTERROGATORIES GENERAL. Is the reporting entity a member of an Insurance Holding Company System consisting of two or more affiliated persons, one or more of which is an insurer? Yes [ X ] No [ ]. If yes, did the reporting entity register and file with its domiciliary State Insurance Commissioner, Director or Superintendent, or with such regulatory official of the state of domicile of the principal insurer in the Holding Company System, a registration statement providing disclosure substantially similar to the standards adopted by the National Association of Insurance Commissioners (NAIC) in its Model Insurance Holding Company System Regulatory Act and model regulations pertaining thereto, or is the reporting entity subject to standards and disclosure requirements substantially similar to those required by such Act and regulations? Yes [ X ] No [ ] NA [ ]. State Regulating? New York. Has any change been made during the year of this statement in the charter, by-laws, articles of incorporation, or deed of settlement of the reporting entity? Yes [ ] No [ X ]. If yes, date of change:. State as of what date the latest financial examination of the reporting entity was made or is being made. //00. State the as of date that the latest financial examination report became available from either the state of domicile or the reporting entity. This date should be the date of the examined balance sheet and not the date the report was completed or released. //00. State as of what date the latest financial examination report became available to other states or the public from either the state of domicile or the reporting entity. This is the release date or completion date of the examination report and not the date of the examination (balance sheet date). 0//00. By what department or departments? New York State Insurance Department. During the period covered by this statement, did any agent, broker, sales representative, non-affiliated sales/service organization or any combination thereof under common control (other than salaried employees of the reporting entity), receive credit or commissions for or control a substantial part (more than 0 percent of any major line of business measured on direct premiums) of:. sales of new business? Yes [ X ] No [ ]. renewals? Yes [ X ] No [ ]. During the period covered by this statement, did any sales/service organization owned in whole or in part by the reporting entity or an affiliate, receive credit or commissions for or control a substantial part (more than 0 percent of any major line of business measured on direct premiums) of:. sales of new business? Yes [ X ] No [ ]. renewals? Yes [ X ] No [ ]. Has the reporting entity been a party to a merger or consolidation during the period covered by this statement? Yes [ ] No [ X ]. If yes, provide the name of the entity, NAIC Company Code, and state of domicile (use two letter state abbreviation) for any entity that has ceased to exist as a result of the merger or consolidation. Name of Entity NAIC Company Code State of Domicile. Has the reporting entity had any Certificates of Authority, licenses or registrations (including corporate registration, if applicable) suspended or revoked by any governmental entity during the reporting period? Yes [ ] No [ X ]. If yes, give full information. Does any foreign (non-united States) person or entity directly or indirectly control 0% or more of the reporting entity? Yes [ ] No [ X ]. If yes,. State the percentage of foreign control;. State the nationality(s) of the foreign person(s) or entity(s) or if the entity is a mutual or reciprocal, the nationality of its manager or attorney in fact; and identify the type of entity(s) (e.g., individual, corporation or government, manager or attorney in fact). Nationality Type of Entity

21 GENERAL INTERROGATORIES. Is the company a subsidiary of a bank holding company regulated by the Federal Reserve Board? Yes [ ] No [ X ]. If response to. is yes, please identify the name of the bank holding company.. Is the company affiliated with one or more banks, thrifts or securities firms? Yes [ ] No [ X ]. If response to. is yes, please provide the names and location (city and state of the main office) of any affiliates regulated by a federal financial regulatory services agency [i.e. the Federal Reserve Board (FRB), the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), the Federal Deposit Insurance Corporation (FDIC) and the Securities Exchange Commission (SEC) and identify the affiliate s primary federal regulator.] Affiliate Name Location (City, State) FRB OCC OTS FDIC SEC. What is the name and address of the independent certified public accountant or accounting firm retained to conduct the annual audit? KPMG, Park Avenue, New York, NY 0 0. What is the name, address and affiliation (officer/employee of the reporting entity or actuary/consultant associated with an actuarial consulting firm) of the individual providing the statement of actuarial opinion/certification? Claus S. Metzner, F.S.A., F.C.A.S., M.A.A.A., Aktuar-SAV, Actuary Milliman USA, Coldbrook Road, South Glastonbury, CT 00. Does the reporting entity own any securities of a real estate holding company or otherwise hold real estate indirectly? Yes [ ] No [ X ]. Name of real estate holding company. Number of parcels involved. Total book/adjusted carrying value $. If yes, provide explanation. FOR UNITED STATES BRANCHES OF ALIEN REPORTING ENTITIES ONLY:. What changes have been made during the year in the United States Manager or the United States Trustees of the reporting entity?. Does this statement contain all business transacted for the reporting entity through its United States Branch on risks wherever located? Yes [ ] No [ ]. Have there been any changes made to any of the trust indentures during the year? Yes [ ] No [ ]. If answer to (.) is yes, has the domiciliary or entry state approved the changes? Yes [ ] No [ ] NA [ ] BOARD OF DIRECTORS. Is the purchase or sale of all investments of the reporting entity passed upon either by the board of directors or a subordinate committee thereof? Yes [ X ] No [ ]. Does the reporting entity keep a complete permanent record of the proceedings of its board of directors and all subordinate committees thereof? Yes [ X ] No [ ]. Has the reporting entity an established procedure for disclosure to its board of directors or trustees of any material interest or affiliation on the part of any of its officers, directors, trustees or responsible employees that is in conflict or likely to conflict with the official duties of such person? Yes [ X ] No [ ] FINANCIAL. Total amount loaned during the year (inclusive of Separate Accounts, exclusive of policy loans):. To directors or other officers $. To stockholders not officers $. Trustees, supreme or grand (Fraternal only) $. Total amount of loans outstanding at end of year (inclusive of Separate Accounts, exclusive of policy loans):. To directors or other officers $. To stockholders not officers $. Trustees, supreme or grand (Fraternal only) $. Were any of the assets reported in this statement subject to a contractual obligation to transfer to another party without the liability for such obligation being reported in this statement? Yes [ ] No [ X ]. If yes, state the amount thereof at December of the current year:. Rented from others $. Borrowed from others $. Leased from others $. Other $. Does this statement include payments for assessments as described in the Annual Statement Instructions other than guaranty fund or guaranty association assessments? Yes [ ] No [ X ]. If answer is yes,. Amount paid as losses or risk adjustment $. Amount paid as expenses $. Other amounts paid $. Does the reporting entity report any amounts due from the parent, subsidiaries or affiliates on Page of this statement? Yes [ ] No [ X ]. If yes, indicated any amounts receivable from parent included in the Page amount: $.

22 . GENERAL INTERROGATORIES INVESTMENT 0. Were all the stocks, bonds and other securities owned December of current year, over which the reporting entity has exclusive control, in the actual possession of the reporting entity on said date, except as shown by Schedule E - Part - Special Deposits? Yes [ ] No [ X ] 0. If no, give full and complete information relating thereto: Securities are held in the company's custody account at Brown Brothers Harriman & Co.. Were any of the stocks, bonds or other assets of the reporting entity owned at December of the current year not exclusively under the control of the reporting entity, except as shown on the Schedule E - Part - Special Deposits, or has the reporting entity sold or transferred any assets subject to a put option contract that is currently in force? (Exclude securities subject to Interrogatory.) Yes [ ] No [ X ]. If yes, state the amount thereof at December of the current year:. Loaned to others $. For category (.) provide the following:. Subject to repurchase agreements $. Subject to reverse repurchase agreements $. Subject to dollar repurchase agreements $. Subject to reverse dollar repurchase agreements $. Pledged as collateral $. Placed under option agreements $. Letter stock or other securities restricted as to sale $. Other $ Nature of Restriction Description Amount. Does the reporting entity have any hedging transactions reported on Schedule DB? Yes [ ] No [ X ]. If yes, has a comprehensive description of the hedging program been made available to the domiciliary state? Yes [ ] No [ ] NA [ X ] If no, attach a description with this statement.. Were any preferred stocks or bonds owned as of December of the current year mandatorily convertible into equity, or, at the option of the issuer, convertible into equity? Yes [ ] No [ X ]. If yes, state the amount thereof at December of the current year. $