* * PROPERTY AND CASUALTY COMPANIES ASSOCIATION EDITION

Transcription

1 * * PROPERTY AND CASUALTY COMPANIES ASSOCIATION EDITION ANNUAL STATEMENT For the Year Ended December, 06 OF THE CONDITION AND AFFAIRS OF THE Cypress Property & Casualty Insurance Company NAIC Group Code 0456, 0456 NAIC Company Code 095 Employer s ID Number (Current Period) (Prior Period) Organized under the Laws of Florida, State of Domicile or Port of Entry Florida Country of Domicile United States Incorporated/Organized 08/6/998 Commenced Business /7/998 Statutory Home Office 96 Gran Bay Parkway West, Suite 00, Jacksonville, FL, US (Street and Number) (City or Town, State, Country and Zip Code) Main Administrative Office 96 Gran Bay Parkway West, Suite 00 Jacksonville, FL, US (Street and Number) (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Mail Address 96 Gran Bay Parkway West, Suite 00, Jacksonville, FL, US (Street and Number or P.O. Box) (City or Town, State, Country and Zip Code) Primary Location of Books and Records 96 Gran Bay Parkway West, Suite 00 Jacksonville, FL, US (Street and Number) (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Internet Web Site Address Statutory Statement Contact Rhonda Reno (Name) (Area Code) (Telephone Number) (Extension) rreno@cypressig.com ( Address) (Fax Number) OFFICERS Name Title Name Title Joseph Newborg King, Co-Chief Executive Officer/Secretary Enda McDonnell, Co-Chief Executive Officer/President Adrian Peter Ryan, Treasurer, OTHER OFFICERS Rhonda Marie Reno, Controller Glenn Stanley Lawson, Chief Financial Officer DIRECTORS OR TRUSTEES Enda McDonnell Joseph Newborg King Ramsey Hale Campbell Adrian Peter Ryan Mark Keyser State of County of 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. Joseph Newborg King Enda McDonnell Glenn Stanley Lawson Co-Chief Executive Officer/Secretary Co-Chief Executive Officer/President Chief Financial Officer a. Is this an original filing? Yes [ X ] No [ ] Subscribed and sworn to before me b. If no: this day of,. State the amendment number. Date filed. Number of pages attached

2 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company ASSETS Current Year Prior Year 4 Assets Nonadmitted Assets Net Admitted Assets (Cols. - ) Net Admitted Assets. Bonds (Schedule D) 6,80,80 6,80,80 7,77,497. Stocks (Schedule D):. Preferred stocks Common stocks Mortgage loans on real estate (Schedule B):. First liens 0 0. Other than first liens Real estate (Schedule A): 4. Properties occupied by the company (less $ encumbrances) Properties held for the production of income (less $ encumbrances) Properties held for sale (less $ encumbrances) Cash ($ (,9), Schedule E-Part ), cash equivalents ($ 0, Schedule E-Part ) and short-term investments ($,94,509, Schedule DA),59,596,59,596,7,48 6. Contract loans (including $ premium notes) Derivatives (Schedule DB) Other invested assets (Schedule BA),800,000,800,000,800, Receivables for securities Securities lending reinvested collateral assets (Schedule DL) 0 0. Aggregate write-ins for invested assets Subtotals, cash and invested assets (Lines to ) 66,0, ,0,99 88,8,845. Title plants less $ charged off (for Title insurers only) Investment income due and accrued 8,007 8,007 46, Premiums and considerations: 5. Uncollected premiums and agents balances in the course of collection,786,757 87,477,699,80 505,88 5. Deferred premiums, agents balances and installments booked but deferred and not yet due (including $ earned but unbilled premiums) 5,9,989 5,9,989 6,45,9 5. Accrued retrospective premiums ($ ) and contracts subject to redetermination ($ ) Reinsurance: 6. Amounts recoverable from reinsurers,40,585,40,585,085,5 6. 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 4,0,459 4,0, Net deferred tax asset,77,55 0,77,55,788,5 9. Guaranty funds receivable or on deposit Electronic data processing equipment and software 0 0. Furniture and equipment, including health care delivery assets ($ ) 0,4 0, Net adjustment in assets and liabilities due to foreign exchange rates 0 0. Receivables from parent, subsidiaries and affiliates,469,56,469, Health care ($ ) and other amounts receivable Aggregate write-ins for other-than-invested assets 56,086 94,8,958 4,9 6. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines to 5) 88,4,404 9,06 87,94,68 00,440,80 7. From Separate Accounts, Segregated Accounts and Protected Cell Accounts Total (Lines 6 and 7) 88,4,404 9,06 87,94,68 00,440,80 DETAILS OF WRITE-INS 0. Other Assets - Non-admited FIGA Assessment Receivable Summary of remaining write-ins for Line from overflow page Totals (Lines 0 through 0 plus 98) (Line above) Other Assets 94,8 94, Other Receivables,958,958 4, Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 through 50 plus 598) (Line 5 above) 56,086 94,8,958 4,9

3 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company LIABILITIES, SURPLUS AND OTHER FUNDS Current Year Prior Year. Losses (Part A, Line 5, Column 8),775,464 5,49,70. Reinsurance payable on paid losses and loss adjustment expenses (Schedule F, Part, Column 6) 0. Loss adjustment expenses (Part A, Line 5, Column 9),0,55,895, Commissions payable, contingent commissions and other similar charges 0 5. Other expenses (excluding taxes, licenses and fees),77,,788,6 6. Taxes, licenses and fees (excluding federal and foreign income taxes) (,70) 88, Current federal and foreign income taxes (including $ on realized capital gains (losses)) 457,8 7. Net deferred tax liability 0 8. Borrowed money $ and interest thereon $,696 8,98 9. Unearned premiums (Part A, Line 8, Column 5) (after deducting unearned premiums for ceded reinsurance of $,64,0 and including warranty reserves of $ and accrued accident and health experience rating refunds including $ for medical loss ratio rebate per the Public Health Service Act) 8,05,04 44,79, Advance premium,975,096,65,690. Dividends declared and unpaid:. Stockholders 0. Policyholders 0. Ceded reinsurance premiums payable (net of ceding commissions) (6,45,97) (4,98,46). Funds held by company under reinsurance treaties (Schedule F, Part, Column 9) 4,750,0,94 4. Amounts withheld or retained by company for account of others 0 5. Remittances and items not allocated 9,96 6. Provision for reinsurance (including $ certified) (Schedule F, Part 8) 0,000 8,05 7. Net adjustments in assets and liabilities due to foreign exchange rates 0 8. Drafts outstanding 0 9. Payable to parent, subsidiaries and affiliates,54,6 0. Derivatives 0 0. Payable for securities 0. Payable for securities lending 0. Liability for amounts held under uninsured plans 0 4. Capital notes $ and interest thereon $ 0 5. Aggregate write-ins for liabilities,976,88,9,09 6. Total liabilities excluding protected cell liabilities (Lines through 5) 58,04,67 68,87,45 7. Protected cell liabilities 0 8. Total liabilities (Lines 6 and 7) 58,04,67 68,87,45 9. Aggregate write-ins for special surplus funds Common capital stock 700, ,000. Preferred capital stock 0. Aggregate write-ins for other-than-special surplus funds 0 0. Surplus notes,9,84 8,49, Gross paid in and contributed surplus 7,59,857 7,59, Unassigned funds (surplus) 6. Less treasury stock, at cost: (9,955,940) (4,99,676) 6. shares common (value included in Line 0 $ ) 0 6. shares preferred (value included in Line $ ) 0 7. Surplus as regards policyholders (Lines 9 to 5, less 6) (Page 4, Line 9) 9,87,74,5,88 8. Totals (Page, Line 8, Col. ) 87,94,68 00,440,8 DETAILS OF WRITE-INS 50. Other Liabilities,976,88,9, Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 through 50 plus 598) (Line 5 above),976,88,9, Summary of remaining write-ins for Line 9 from overflow page Totals (Lines 90 through 90 plus 998) (Line 9 above) Summary of remaining write-ins for Line from overflow page Totals (Lines 0 through 0 plus 98) (Line above) 0 0

4 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company STATEMENT OF INCOME Current Year Prior Year UNDERWRITING INCOME. Premiums earned (Part, Line 5, Column 4) 5,80,07 57,00,67 DEDUCTIONS:. Losses incurred (Part, Line 5, Column 7) 9,86,54,79,7. Loss adjustment expenses incurred (Part, Line 5, Column ) 6,68,75 4,7,0 4. Other underwriting expenses incurred (Part, Line 5, Column ) 6,9,84,55,74 5. Aggregate write-ins for underwriting deductions Total underwriting deductions (Lines through 5) 6,449,00 57,906, Net income of protected cells 0 8. Net underwriting gain (loss) (Line minus Line 6 plus Line 7) (0,647,7) (706,098) INVESTMENT INCOME 9. Net investment income earned (Exhibit of Net Investment Income, Line 7) 960,86 769,40 0. Net realized capital gains (losses) less capital gains tax of $ (Exhibit of Capital Gains (Losses)) 85,44 4,00. Net investment gain (loss) (Lines 9 + 0),45,50 80,4 OTHER INCOME. Net gain (loss) from agents' or premium balances charged off (amount recovered $ amount charged off $ ) 556. Finance and service charges not included in premiums 0 4. Aggregate write-ins for miscellaneous income 9,69 (,68) 5. Total other income (Lines through 4) 9,69 (7) 6. Net income before dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes (Lines ) (9,9,004) 96,60 7. Dividends to policyholders 0 8. Net income, after dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes (Line 6 minus Line 7) (9,9,004) 96,60 9. Federal and foreign income taxes incurred (4,677,640) 0,0 0. Net income (Line 8 minus Line 9) (to Line ) (4,74,64) (6,699) CAPITAL AND SURPLUS ACCOUNT. Surplus as regards policyholders, December prior year (Page 4, Line 9, Column ),5,85,80,790. Net income (from Line 0) (4,74,64) (6,699). Net transfers (to) from Protected Cell accounts 0 4. Change in net unrealized capital gains or (losses) less capital gains tax of $ 4, Change in net unrealized foreign exchange capital gain (loss) 0 6. Change in net deferred income tax (,06,664),7 7. Change in nonadmitted assets (Exhibit of Nonadmitted Assets, Line 8, Col. ) (80,70) (96,88) 8. Change in provision for reinsurance (Page, Line 6, Column minus Column ) 98,05 (8,05) 9. Change in surplus notes,44,76 (558,84) 0. Surplus (contributed to) withdrawn from protected cells 0. Cumulative effect of changes in accounting principles 0. Capital changes:. Paid in 0. Transferred from surplus (Stock Dividend) 0. Transferred to surplus 0. Surplus adjustments:. Paid in 0. Transferred to capital (Stock Dividend) 0. Transferred from capital 0 4. Net remittances from or (to) Home Office 0 5. Dividends to stockholders 0 6. Change in treasury stock (Page, Lines 6. and 6., Column minus Column ) Aggregate write-ins for gains and losses in surplus Change in surplus as regards policyholders for the year (Lines through 7) (,5,084) (677,965) 9. Surplus as regards policyholders, December current year (Line plus Line 8) (Page, Line 7) 9,87,74,5,85 DETAILS OF WRITE-INS Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 050 through 050 plus 0598) (Line 5 above) Other Income 9,69 (,68) 40. Gain on Sale of Fixed Assets Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 through 40 plus 498) (Line 4 above) 9,69 (,68) Summary of remaining write-ins for Line 7 from overflow page Totals (Lines 70 through 70 plus 798) (Line 7 above) 0 0 4

5 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company CASH FLOW Current Year Prior Year Cash from Operations. Premiums collected net of reinsurance 46,58,754 56,945,486. Net investment income,56,65,5,99. Miscellaneous income Total (Lines through ) 48,065,89 58,457, Benefit and loss related payments,888,7,87,60 6. Net transfers to Separate Accounts, Segregated Accounts and Protected Cell Accounts Commissions, expenses paid and aggregate write-ins for deductions,05,854 5,688,4 8. Dividends paid to policyholders Federal and foreign income taxes paid (recovered) net of $ tax on capital gains (losses) (,06,664) 9, Total (Lines 5 through 9) 66,00,57 58,494,0. Net cash from operations (Line 4 minus Line 0) (7,965,8) (6,544) Cash from Investments. Proceeds from investments sold, matured or repaid:. Bonds 6,4,55 8,,475. Stocks 0 0. 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.7) 6,4,804 8,,50. Cost of investments acquired (long-term only):. Bonds 4,84,588,5,866. Stocks 0 0. Mortgage loans Real estate Other invested assets 0,800,000.6 Miscellaneous applications Total investments acquired (Lines. to.6) 4,84,588 6,, Net increase (decrease) in contract loans and premium notes Net cash from investments (Line.8 minus Line.7 minus Line 4),597,6 (8,08,56) Cash from Financing and Miscellaneous Sources 6. Cash provided (applied): 6. Surplus notes, capital notes,44,77 (558,84) 6. Capital and paid in surplus, less treasury stock Borrowed funds Net deposits on deposit-type contracts and other insurance liabilities Dividends to stockholders Other cash provided (applied) (7,94,07),5,6 7. Net cash from financing and miscellaneous sources (Lines 6. to 6.4 minus Line 6.5 plus Line 6.6) (,75,840),954,57 RECONCILIATION OF CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 8. Net change in cash, cash equivalents and short-term investments (Line, plus Lines 5 and 7) (0,0,75) (5,64,6) 9. Cash, cash equivalents and short-term investments: 9. Beginning of year,7,48 6,876,7 9. End of year (Line 8 plus Line 9.),59,596,7,48 5

6 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company UNDERWRITING AND INVESTMENT EXHIBIT Line of Business PART - PREMIUMS EARNED Net Premiums Written per Column 6, Part B Unearned Premiums Dec. Prior Year - per Col., Last Year s Part Unearned Premiums Dec. Current Year - per Col. 5 Part A 4 Premiums Earned During Year (Cols. + - ). Fire,9,905,04,47 886,6,6,50. Allied lines,40,44,99,996,077,977,00,6. Farmowners multiple peril Homeowners multiple peril 9,70,57 4,766,89 9,64,97 5,, Commercial multiple peril Mortgage guaranty Ocean marine Inland marine,700,67 597,96 8,58,465,98 0. Financial guaranty Medical professional liability-occurrence Medical professional liability-claims-made Earthquake Group accident and health Credit accident and health (group and individual) Other accident and health Workers' compensation Other liability-occurrence,69,09 5,770, 5,874,548,588, Other liability-claims-made Excess workers compensation Products liability-occurrence Products liability-claims-made ,9. Private passenger auto liability ,9.4 Commercial auto liability Auto physical damage Aircraft (all perils) Fidelity Surety Burglary and theft Boiler and machinery Credit International Warranty Reinsurance-nonproportional assumed property Reinsurance-nonproportional assumed liability Reinsurance-nonproportional assumed financial lines Aggregate write-ins for other lines of business TOTALS 5,458,6 44,79,069 8,05,04 5,80,07 DETAILS OF WRITE-INS Sum. of remaining write-ins for Line 4 from overflow page Totals (Lines 40 through 40 plus 498) (Line 4 above)

7 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company Line of Business UNDERWRITING AND INVESTMENT EXHIBIT PART A - RECAPITULATION OF ALL PREMIUMS Amount Unearned (Running One Year or Less from Date of Policy) (a) Amount Unearned (Running More Than One Year from Date of Policy) (a) Earned but Unbilled Premium 4 Reserve for Rate Credits and Retrospective Adjustments Based on Experience 5 Total Reserve for Unearned Premiums Cols Fire 886,6 886,6. Allied lines,077,977,077,977. Farmowners multiple peril 0 4. Homeowners multiple peril 9,64,97 9,64,97 5. Commercial multiple peril 0 6. Mortgage guaranty 0 8. Ocean marine 0 9. Inland marine 8,58 8,58 0. Financial guaranty 0. Medical professional liability-occurrence 0. Medical professional liability-claims-made 0. Earthquake 0. Group accident and health 0 4. Credit accident and health (group and individual) 0 5. Other accident and health 0 6. Workers' compensation 0 7. Other liability-occurrence 5,874,548 5,874, Other liability-claims-made 0 7. Excess workers compensation 0 8. Products liability-occurrence 0 8. Products liability-claims-made 0 9.,9.Private passenger auto liability 0 9.,9.4Commercial auto liability 0. Auto physical damage 0. Aircraft (all perils) 0. Fidelity 0 4. Surety 0 6. Burglary and theft 0 7. Boiler and machinery 0 8. Credit 0 9. International 0 0. Warranty 0. Reinsurance-nonproportional assumed property 0. Reinsurance-nonproportional assumed liability 0. Reinsurance-nonproportional assumed financial lines 0 4. Aggregate write-ins for other lines of business TOTALS 8,05, ,05,04 6. Accrued retrospective premiums based on experience 7. Earned but unbilled premiums 8. Balance (Sum of Lines 5 through 7) 8,05,04 DETAILS OF WRITE-INS Sum. of remaining write-ins for Line 4 from overflow page Totals (Lines 40 through 40 plus 498) (Line 4 above) (a) State here basis of computation used in each case. 7

8 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company UNDERWRITING AND INVESTMENT EXHIBIT PART B - PREMIUMS WRITTEN Line of Business Reinsurance Assumed Reinsurance Ceded From From To To Affiliates Non-Affiliates Affiliates Non-Affiliates Direct Business (a) Net Premiums Written Cols Fire,707,7 (59),5,949,9,905. Allied lines,68,76 (,76),54,657,40,44. Farmowners multiple peril 0 4. Homeowners multiple peril 6,4,56 (,495) 4,9,4 9,70,57 5. Commercial multiple peril 0 6. Mortgage guaranty 0 8. Ocean marine 0 9. Inland marine,769,6 69,466,700,67 0. Financial guaranty 0. Medical professional liability-occurrence 0. Medical professional liability-claims-made 0. Earthquake 0. Group accident and health 0 4. Credit accident and health (group and individual) 0 5. Other accident and health 0 6. Workers' compensation 0 7. Other liability-occurrence,684,85 99,64,69,09 7. Other liability-claims-made 0 7. Excess workers compensation 0 8. Products liability-occurrence 0 8. Products liability-claimsmade 0 9.,9. Private passenger auto liability 0 9.,9.4 Commercial auto liability 0. Auto physical damage 0. Aircraft (all perils) 0. Fidelity 0 4. Surety 0 6. Burglary and theft 0 7. Boiler and machinery 0 8. Credit 0 9. International 0 0. Warranty 0. Reinsurancenonproportional assumed property XXX 0. Reinsurancenonproportional assumed liability XXX 0. Reinsurancenonproportional assumed financial lines XXX 0 4. Aggregate write-ins for other lines of business TOTALS 8,979,975 0 (4,775) 0 47,507,08 5,458,6 DETAILS OF WRITE-INS Sum. of remaining writeins for Line 4 from overflow page Totals (Lines 40 through 40 plus 498) (Line 4 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 recorded on an annualized basis $ 8

9 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company 9 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. 8) Prior Year (Cols ) Percentage of Losses Incurred (Col. 7, Part ) to Premiums Earned (Col. 4, Part ) Reinsurance Line of Business Direct Business Assumed. Fire,70,54 40,46,967,89 6,89 78,50,6, Allied lines 88,05 0,44 67,709 5,0 0,69 8, Farmowners multiple peril Homeowners multiple peril 0,68,695 0,890 4,679,99 6,50,86,55,79 7,58,87,7, Commercial multiple peril Mortgage guaranty Ocean marine Inland marine 57,5 57,5 00,05 77,8 79, Financial guaranty Medical professional liability-occurrence Medical professional liability-claims-made Earthquake Group accident and health Credit accident and health (group and individual) Other accident and health Workers' compensation Other liability-occurrence,99,786,99,786 8,46,57 6,804,88 4,649, Other liability-claims-made Excess workers compensation Products liability-occurrence Products liability-claims-made ,9. Private passenger auto liability ,9.4 Commercial auto liability Auto physical damage Aircraft (all perils) Fidelity Surety Burglary and theft Boiler and machinery Credit International Warranty Reinsurance-nonproportional assumed property XXX Reinsurance-nonproportional assumed liability XXX Reinsurance-nonproportional assumed financial lines XXX Aggregate write-ins for other lines of business TOTALS 7,7, 0,890 5,0,06,5,797,775,464 5,49,70 9,86, DETAILS OF WRITE-INS Sum. of remaining write-ins for Line 4 from overflow page Totals (Lines 40 through ) (Line 4 above)

10 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company UNDERWRITING AND INVESTMENT EXHIBIT PART A - UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES Reported Losses Incurred But Not Reported Net Losses Excl. Incurred But Not Reported (Cols. + - ) Net Losses Unpaid (Cols ) Net Unpaid Loss Adjustment Expenses Reinsurance Deduct Reinsurance Reinsurance Reinsurance Line of Business Direct Assumed Recoverable Direct Assumed Ceded. Fire 85,470 0,0 55,50 5,607 7,966 6,89 6,. Allied lines 0 8, ,854 5,0 47,64. Farmowners multiple peril Homeowners multiple peril 4,66,85 5,000,08,07,99,84 6,96,44 6,846,46,55,79,65,68 5. Commercial multiple peril Mortgage guaranty Ocean marine Inland marine 0 00,05 00,05 0. Financial guaranty 0 0. Medical professional liability-occurrence 0 0. Medical professional liability-claims-made 0 0. Earthquake 0 0. Group accident and health 0 (a) 0 4. Credit accident and health (group and individual) Other accident and health 0 (a) 0 6. Workers' compensation Other liability-occurrence,70,96,70,96 5,790,596 49,9 8,46,57,77, Other liability-claims-made Excess workers compensation Products liability-occurrence Products liability-claims-made ,9. Private passenger auto liability ,9.4 Commercial auto liability 0 0. Auto physical damage 0 0. Aircraft (all perils) 0 0. Fidelity Surety Burglary and theft Boiler and machinery Credit International Warranty 0 0. Reinsurance-nonproportional assumed property XXX 0 XXX 0. Reinsurance-nonproportional assumed liability XXX 0 XXX 0. Reinsurance-nonproportional assumed financial lines XXX 0 XXX 0 4. Aggregate write-ins for other lines of business TOTALS 7,7,57 5,000,,57 6,75,60,89, ,9,50,775,464,0,55 DETAILS OF WRITE-INS Sum. of remaining write-ins for Line 4 from overflow page Totals (Lines 40 through ) (Line 4 above) (a) Including $ for present value of life indemnity claims.

11 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company. Claim adjustment services: UNDERWRITING AND INVESTMENT EXHIBIT PART - EXPENSES Loss Adjustment Expenses Other Underwriting Expenses Investment Expenses. Direct 6,50,6 6,50,6. Reinsurance assumed 6,0 6,0. Reinsurance ceded,56,07,56,07.4 Net claim adjustment services ( ) 4,90, ,90,00. Commission and brokerage:. Direct, excluding contingent 7,00,98 7,00,98. Reinsurance assumed, excluding contingent 0. Reinsurance ceded, excluding contingent 6,867,686 6,867,686.4 Contingent-direct 0.5 Contingent-reinsurance assumed 0.6 Contingent-reinsurance ceded 0.7 Policy and membership fees 0.8 Net commission and brokerage ( ) 0 0,4, 0 0,4,. Allowances to manager and agents,599,40,599,40 4. Advertising 687 7,04 7,79 5. Boards, bureaus and associations 4,909 4, Surveys and underwriting reports 0 7. Audit of assureds' records 0 8. Salary and related items: 8. Salaries 50,8 4,5,49 5,0,8 8. Payroll taxes 0,5 74,69 05, 9. Employee relations and welfare 09,96 989,4,099,58 0. Insurance 4,07 6,66 40,707. Directors' fees 50,50 50,50. Travel and travel items,49 09,8,487. Rent and rent items 55,85 50,47 558,5 4. Equipment Cost or depreciation of EDP equipment and software 74,084,466,759,740,84 6. Printing and stationery 6,8 57,48 6, Postage, telephone and telegraph, exchange and express,56,06 5,6 8. Legal and auditing 66,580 60,99 670,57 9. Totals (Lines to 8),086,50,80,54 0,896, Taxes, licenses and fees: 0. State and local insurance taxes deducting guaranty association credits of $ 576,76 576,76 0. Insurance department licenses and fees 70,550 70, Gross guaranty association assessments All other (excluding federal and foreign income and real estate) 4,440 4, Total taxes, licenses and fees ( ) 0 65, ,68. Real estate expenses 0. Real estate taxes 0. Reimbursements by uninsured plans Aggregate write-ins for miscellaneous expenses 6,95,74,00 0,94,79,9 5. Total expenses incurred 6,68,75 6,9,84 0,94 (a),790,85 6. Less unpaid expenses-current year,0,55,440, 4,54,86 7. Add unpaid expenses-prior year,895,484,8,45 0 5,77,97 8. Amounts receivable relating to uninsured plans, prior year Amounts receivable relating to uninsured plans, current year 0 0. TOTAL EXPENSES PAID (Lines ) 7,06,604 6,6,706 0,94,56,504 DETAILS OF WRITE-INS 40. Bank/Investment Fees 78,006 0,94 8, Miscellaneous Expenses 6,95,56,004,797, Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 through 40 plus 498) (Line 4 above) 6,95,74,00 0,94,79,9 (a) Includes management fees of $ to affiliates and $ to non-affiliates. 4 Total

12 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company EXHIBIT OF NET INVESTMENT INCOME Collected During Year Earned During Year. U.S. Government bonds (a),7,07. Bonds exempt from U.S. tax (a) 99,046 44,4. Other bonds (unaffiliated) (a),04,7 997,75. Bonds of affiliates (a) 0. Preferred stocks (unaffiliated) (b) 0. Preferred stocks of affiliates (b) 0. Common stocks (unaffiliated) 0. Common stocks of affiliates 0. Mortgage loans (c) 4. Real estate (d) 5. Contract loans 6. Cash, cash equivalents and short-term investments (e) 8,587 8, Derivative instruments (f) 8. Other invested assets 9. Aggregate write-ins for investment income Total gross investment income,6,46,6,580. Investment expenses (g) 0,94. Investment taxes, licenses and fees, excluding federal income taxes (g). Interest expense (h) 4. Depreciation on real estate and other invested assets (i) 5. Aggregate write-ins for deductions from investment income 0 6. Total deductions (Lines through 5) 0,94 7. Net investment income (Line 0 minus Line 6) 960,86 DETAILS OF WRITE-INS Summary of remaining write-ins for Line 9 from overflow page Totals (Lines 090 through 090 plus 0998) (Line 9 above) Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 through 50 plus 598) (Line 5 above) 0 (a) Includes $ 4,45 accrual of discount less $ 669,77 amortization of premium and less $ 55,09 paid for accrued interest on purchases. (b) Includes $ accrual of discount less $ amortization of premium and less $ 0 paid for accrued dividends on purchases. (c) Includes $ 0 accrual of discount less $ 0 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 $ 7,9 accrual of discount less $,886 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 Total Realized Capital Gain (Loss) (Columns + ) 4 Change in Unrealized Capital Gain (Loss) 5 Change in Unrealized Foreign Exchange Capital Gain (Loss). U.S. Government bonds 0. Bonds exempt from U.S. tax 49, ,476. Other bonds (unaffiliated) 5,9 5,9 4,556. Bonds of affiliates Preferred stocks (unaffiliated) Preferred stocks of affiliates Common stocks (unaffiliated) Common stocks of affiliates Mortgage loans Real estate Contract loans 0 6. Cash, cash equivalents and short-term investments Derivative instruments 0 8. Other invested assets Aggregate write-ins for capital gains (losses) Total capital gains (losses) 85,4 0 85,4 4,556 0 DETAILS OF WRITE-INS Summary of remaining write-ins for Line 9 from overflow page Totals (Lines 090 through 090 plus 0998) (Line 9 above)

13 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company EXHIBIT OF NONADMITTED ASSETS Current Year Total Nonadmitted Assets Prior Year Total Nonadmitted Assets Change in Total Nonadmitted Assets (Col. - Col. ). 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): 4. 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 Derivatives (Schedule DB) Other invested assets (Schedule BA) Receivables for securities Securities lending reinvested collateral assets (Schedule DL) Aggregate write-ins for invested assets Subtotals, cash and invested assets (Lines to ) Title plants (for Title insurers only) Investment income due and accrued Premiums and considerations: 5. Uncollected premiums and agents balances in the course of collection 87,477 7,50 (6,7) 5. Deferred premiums, agents balances and installments booked but deferred and not yet due Accrued retrospective premiums and contracts subject to redetermination Reinsurance: 6. 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 0,96,96 9. Guaranty funds receivable or on deposit Electronic data processing equipment and software 0,69,69. Furniture and equipment, including health care delivery assets 0,4 8,759 8,8. 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 94,8 6,99 (77,89) 6. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines to 5) 9,06, (80,70) 7. From Separate Accounts, Segregated Accounts and Protected Cell Accounts Total (Lines 6 and 7) 9,06, (80,70) DETAILS OF WRITE-INS Summary of remaining write-ins for Line from overflow page Totals (Lines 0 through 0 plus 98) (Line above) Other Assests 94,8 6,99 (77,89) Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 through 50 plus 598) (Line 5 above) 94,8 6,99 (77,89)

14 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company NOTES TO FINANCIAL STATEMENTS Note Summary of Significant Accounting Policies A. Accounting Practices The accompanying financial statements have been completed in conformity with the NAIC Accounting Practices and Procedures manual and in conformity with the state laws of Florida. 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 Policy Premiums are earned over the term of the related insurance policies. Unearned premium reserves are established to cover the unexpired portion of premiums written calculated on a pro rata basis. Expenses incurred in connection with acquiring new 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:. Short-term investments are stated at amortized cost.. Bonds not backed by other loans are stated at either amortized cost, using the interest method, or the lower of amortized cost or fair market value.. The Company does not own common stocks. 4. The Company does not own preferred stocks. 5. The Company does not own mortgage loans. 6. Loan-backed securities are stated at either amortized cost, using the interest method, or the lower of amortized cost or fair market value. The retrospective adjustment method is used to value all securities except for interest only securities, EITF 99-0 eligible securities or securities where the yield had become negative, that are valued using the prospective method. 7. The Company owns a surplus debenture issued by one of its sister companies. As a Schedule BA asset, the surplus debenture is stated at the lower of cost or fair market value. 8. The Company has no investments in joint ventures, partnerships or limited liability companies. 9. The Company does not invest in derivatives. 0. The Company anticipates investment income as a factor in the premium deficiency calculation, in accordance with SSAP No. 5, Property-Casualty Contracts Premiums.. Unpaid losses and loss adjustment expenses include an amount determined on individual case basis estimates and an amount, based on past experience, for losses incurred but not reported. Management believes that such amounts are adequate, but because such liabilities are necessarily based on estimates and assumptions, the ultimate liability may be in excess of or less than the amounts provided. The process of making such estimates and for establishing the resulting liabilities are continually reviewed and any adjustments are reflected in the period determined.. The Company has not modified its capitalization policy from the prior period.. The Company does not have pharmaceutical rebate receivables. Note Accounting Changes and Corrections of Errors A. The Company did not have any material changes in its financial statements as a result of a change in accounting principles or correction of errors. Note Business Combinations and Goodwill A.. The Company did not enter into any business combinations or record any goodwill on its balance sheet at December, 06 and 05. B. The Company did not enter into any business combination taking the form of a statutory merger at December, 06 and 05. C. The Company did not recognize an impairment loss at December, 06 and 05. Note 4 Discontinued Operations The Company did not discontinue any operations at December, 06 and 05. Note 5 Investments A. Mortgage Loans The Company did not invest in mortgage loans at December, 06 and 05. B. Debt Restructuring The Company was not a creditor in restructured debt at December, 06 and 05. C. Reverse Mortgages The Company did not invest in reverse mortgages at December, 06 and 05. D. Loan-Backed Securities () Prepayment assumptions for Mortgage-Backed, Loan-Backed and Structured Securities were generated using a third party prepayment model. The prepayment model uses a number of factors to estimate prepayment activity including the time of 4

15 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company NOTES TO FINANCIAL STATEMENTS year (seasonality), current levels of interest rates (refinancing incentive), economic activity (including housing turnover) and term and age of the underlying collateral (burnout, seasoning). The fair values of all securities were determined in accordance with SSAP No. 7. Fair values were obtained from pricing services such as Bank of America Merrill Lynch Index, Interactive Data Corporation, Reuters, Standard and Poor s, Pricing Direct, Bloomberg, or, if not available, from pricing services provided by brokers. () Not applicable. () Not applicable. (4) Loan-Backed Securities with Unrealized Losses: Unrealized Losses Fair Value Unrealized Losses Less Than Months (06,0),558,566 Unrealized Losses Greater Than Months (06,8),877,408 (,48) 4,45,974 (5) The Company evaluates its investment portfolio on a regular basis to identify securities that may be other-than-temporarily impaired. When such impairments occur, the decrease in fair value is reported in net income as a realized investment loss and a new cost basis is established. The analysis takes into account relevant factors, both quantitative and qualitative in nature. Among the factors considered are the following: a) The length of time and the extent to which fair value has been less than cost; b) Issuer-specific considerations, including an issuer's short-term prospects and financial condition, recent news that may have an adverse impact on its results, and an event of missed or late payment or default; c) The occurrence of a significant economic event that may affect the industry in which an issuer participates; and d) For loan-backed and structured securities, the undiscounted estimated future cash flows as compared to the current book value. With respect to securities where the decline in fair value is determined to be temporary and the security's value is not written down, a subsequent decision may be made to sell that security and realize a loss. If we do not expect that a security's decline in fair value will be fully recovered prior to the expected time of sale, we would record an other-than-temporary impairment in the period in which the decision to sell is made. The Company s exposure to subprime mortgages is limited to investments within the fixed income investment portfolio which contains securities collateralized by mortgages that could have characteristics of subprime lending. Such characteristics include an interest rate above prime to borrowers who do not qualify for prime rate loans, borrowers with low credit ratings (FICO scores), unconventionally high initial loan-to-value ratios, and borrowers with less than conventional documentation of their income and/or net assets. The Company minimizes risk exposure by holding securities which carry the highest quality credit ratings and by monitoring the underlying collateral performance on an ongoing basis. At December, 06, the Company did not have any investments classified as subprime holdings. Realized gains and losses resulting from sales are recorded on a specific identification method and are included in net investment income. E. Repurchase Agreements and/or Securities Lending Transactions The Company does not participate in repurchase agreements and/or securities lending. F. Real Estate The Company did not have any real estate investments at December, 06 and 05. G. Low-Income Housing Tax Credits The Company does not invest in low-income housing. H. Restricted Assets The Company has no assets pledged to others as collateral or otherwise restricted. I. Working Capital Finance Investments The Company does not have any working capital finance investments. 4.

16 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company NOTES TO FINANCIAL STATEMENTS J. Offsetting and Netting of Assets and Liabilities The Company does not net assets and liabilities. K. Structured Notes The Company does not have any structured notes. L. Securities Note 6 Joint Ventures, Partnerships and Limited Liability Companies A. The Company had no investments in Joint Ventures, Partnerships or Limited Liability Companies at December, 06 and 05. B. Not applicable. Note 7 Investment Income A. Schedule D Part lists investment income due and accrued with amounts over 90 days past due that is recognized as non-admitted and excluded from surplus. B. There was no investment income due and accrued with amounts over 90 days past due. Note 8 Derivative Investments The Company did not hold or issue any derivative instruments other than embedded call options in certain bonds in its investment portfolio. Note 9 Income Taxes A. Components of the net deferred tax assets (DTAs) and deferred tax liabilities (DTLs):. DTA/DTL components: December, 06 December, 05 Change Description Ordinary Capital Total Ordinary Capital Total Ordinary Capital Total Gross DTAs,77,55 -,77,55,790,86 -,790,86 (,06,0) - (,06,0) Statutory valuation allowance adjustment , Adjusted gross DTAs,77,55 -,77,55,790,86 -,790,86 (,06,0) - (,06,0) Adjusted gross DTAs nonadmitted Sub-total admitted adjusted gross DTA,77,55 -,77,55,790,86 -,790,86 (,06,0) - (,06,0) Gross DTLs (66) - (66) Net admitted DTA/(DTL),77,55 -,77,55,788,55 0,788,55 (,06,70) - (,06,70). Admission calculation components: 4.

17 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company NOTES TO FINANCIAL STATEMENTS. Applicable ratio for realization limitation threshold table: 4. No tax planning strategies were used to utilize the Company s adjusted gross DTA s and net admitted DTA s: B. The Company does not have any temporary differences for which a DTL is required to be established by SSAP 0 paragraph. C. Significant components of income taxes incurred:. Current income taxes incurred consist of the following major components: December, 06 December, 05 Current federal income tax expense/(benefit) (4,64,06) 9,79 Foreign income tax expense/(benefit) - - Subtotal (4,8,57) 9,79 Tax expense/(benefit) on realized capital gains /(losses) 0,56 Utilization of capital loss carryforwards - - Other, including prior year underaccrual (overaccrual) (4,577) - Federal and foreign income taxes incurred (4,677,640) 0,0 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows:. DTA s resulting from book/tax differences in: December, 06 December, 05 Change DTAs resulting from book/tax differences in: Ordinary Discounting of unpaid losses and LAE 59,976 4,74 (8,78) Unearned premiums,040,700,95,645 (,54,945) Investments,48,48 0 Fixed assets,4 0,679 (98,57) Nonadmitted assets,9 -,9 Net operating loss carryforward Tax credit carryforward 4,7-4,7 Other (including items <5% of total ordinary tax assets) 5,769-5,769 Gross ordinary DTAs,77,55,790,86 (,06,0) Statutory valuation adjustment - ordinary Nonadmitted ordinary DTAs Admitted ordinary DTAs,77,55,790,86 (,06,0) Capital Other (separately disclose items >5%) Gross capital DTAs Nonadmitted capital DTAs Admitted DTAs,77,55,790,86 (,06,0) DTLs resulting from book/tax differences in: Ordinary Investments - 4 (4) Fixed assets Salvage and subrogation Other (separately disclose items >5%) -,67 (,67) Ordinary DTLs -,66 (,66) Capital Other (separately disclose items >5%) Capital DTLs DTL's -,66 (,66) Net deferred tax assets/liabilities,77,55,788,55 (,06,70) The change in net deferred income taxes is comprised of the following (this analysis is exclusive of nonadmitted assets as the Change in Nonadmitted Assets is reported separately from the Change in Net Deferred Income Taxes in the surplus section of the Annual Statement): December, 06 December, 05 Balance Sheet Change Total deferred tax assets,77,55,790,86 (,06,0) Total deferred tax liabilities,66 (,66) Net deferred tax assets/liabilities,77,55,788,55 (,06,70) Statutory valuation allowance adjustment Net deferred tax assets/liabilities after SVA,77,55,788,55 (,06,70) Tax effect of unrealized gains/(losses) - Statutory valuation allowance adjustment allocated to unrealized (+) - Other intraperiod allocation of deferred tax movement - Change in net deferred income tax [(change)/benefit] (,06,70) 4.

18 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company NOTES TO FINANCIAL STATEMENTS D. Reconciliation of total statutory income taxes reported to tax at statutory tax rate: The provision for federal income taxes incurred is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes including realized capital gains/losses. The significant items causing these differences are as follows: Description Amount Tax Effect Effective Tax Rate Income Before Taxes (including all realized capital gains/(losses)) (9,9,004) (,9,8) 4.00% Temporary difference recorded (9,06) (,9).4% directly to surplus Tax-Exempt Interest % Dividends Received Deduction % Statutory Valuation Allowance % adjustment Amended Annual Statement 0.00% adjustment - - Statutory Valuation Allowance Adjustment % Prior year accrual adjustment (845,0) (87,40).00% Other % Total (0,69,4) (,6,976) 8.5% Federal income taxed incurred [expense/(benefit)] (4,677,640) 49.7% Tax on capital gains/(losses) Change in net deferred income tax [charge/(benefit)],06,664 -.% Total statutory income taxes (,6,976) 8.5% E. Carryforwards, recoverable taxes, and IRC 660 deposits: At December, 06, the Company had net operating loss carryforwards expiring through the year 06 per year pursuant to Internal Revenue Code 8 of: $0 At December, 06, the Company does not have any capital loss carryforwards. At December, 06, the Company has AMT credit carryforwards, which does not expire of: $4,7 Income taxes, ordinary and capital, available for recoupment in the event of future losses include: Available from tax year Ordinary Capital Total ,590-95,590 04,6,76 -,6,76 F. The Company s federal income tax return is consolidated with the following entities: a. Cypress Group Holdings, Inc. Service First Insurance Group Cypress Texas Insurance Company The Company has a written agreement, approved by the Company's Board of Directors, which sets forth the manner in which the total combined federal income tax is allocated to each subsidiary which is a party to the consolidation. The consolidated current federal income tax liability is settled among 4Is and its subsidiaries as if each had filed a separate company return. Taxes are settled annually. Taxes are computed by applying the maximum federal income tax rate to the separate taxable income or loss. Allocations of current credit for net operating losses are specified in the tax allocation agreement with the consolidating companies. G. Federal and Foreign Federal Income Tax Loss Contingencies The Company does not have any tax loss contingencies for which it is reasonably possible that the total liability will significantly increase within twelve months of December, 06. Note 0 Information Concerning Parent, Subsidiaries, Affiliates and Other Related Parties A. All outstanding shares of the Company are owned by Cypress Group Holdings, Inc. (Parent), a Delaware corporation. As previously reported to the Florida Office of Insurance Regulation (FLOIR), the investors of the Company s parent (Cypress Insurance Group, Inc.) entered a sales agreement with a third-party. The Form A was filed with the FLOIR and was approved July 4, 04, the same date the sale of the Company s Parent (Cypress Insurance Group, Inc.) was completed. Effective December, 04, Cypress Insurance Group, Inc., was merged with and into Cypress Group Holdings, Inc., a Florida Corporation (CGH), with CGH being the surviving corporation. The Company did not pay dividends in 06 and 05 to its Parent. The Company has outstanding subordinated surplus debentures, approved by the Florida Office of Insurance Regulation (OIR), payable to its Parent for $9 million. The interest due on these debentures was $47,959 and $45,000 for the years ended 06 and 05, respectively and the cumulative amount due is $4,86,986. These amounts are not reflected in the financial statements because the terms of the debentures require that the interest can only be paid out of unassigned surplus. 4.4

19 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company NOTES TO FINANCIAL STATEMENTS Principal and/or interest payments related to these subordinated debentures may not be paid without prior approval of the Florida OIR. B. & C. The Company incurred $7,00,98 and $7,484,87 in commission expense payable to affiliates, during 06 and 05, respectively. Effective December, 05, the Company acquired a $.8 million dollar surplus debenture issued by one its sister companies, Cypress Texas Insurance Company (CTIC). The purchase was reflected as a payable to parent, subsidiaries and affiliates on the Statement of Assets, Liabilities, Surplus and Other Funds at December, 05 and was settled on January 7, 06. The surplus debenture has a term of twenty-five years and carries an interest rate of.0% Effective December nd, 06 the Company issued a $4 million dollar subordinated surplus debenture note to its Parent, which was approved by the OIR on December 0, 06. The purchase was reflected as a receivable from parent, subsidiaries and affiliates on the Statement of Assets, Liabilities, Surplus and Other Funds at December, 06 and was settled on February, 07. The surplus debenture carries an interest rate of.0%. The Company entered a 0% Quota-Share treaty effective January, 05 for all personal lines business under substantially the same terms as the previous treaty. Effective July, 05, the Company terminated the 05 0% Quota-Share contract. As a result of the termination, $4,46,900 of ceded unearned premium was returned to the Company, Effective August, 06, the Company entered into a 40% Quota-Share treaty for all personal lines business with an affiliate within the Parent s Holding Company Group. Under provisions of the quota-share treaties, the Company ceded $4,674,857 in written premium and recognized $6,867,686 in ceding commission for the year ended December, 06. Under provisions of the quota-share treaties, the Company ceded $4,88 in written premium and recognized $,69,99 in ceding commission for the year ended December, 05. D. Net amounts received (due) to affiliated companies were $,469,56 and ($,54,6,) at December, 06 and 05, respectively. The Company settles most intercompany balances on a monthly basis. E. The Company has no guarantees or undertakings for the benefit of an affiliate as of December, 06. F. The Company has a Managing General Agent Agreement with its affiliate Service First Insurance Group, LLC (SFIG,LLC). Under the Agreement, SFIG, LLC provides marketing Support claims administration and collects premiums on behalf of the Company. G. All outstanding shares of the Company are owned by Cypress Group Holdings, Inc. (Parent) a Delaware Corporation. H. The Company does not own any shares in its Parent or affiliates as of December, 06. I. The Company does not have an investment in SCA entities as of December, 06. J. Non Applicable. K. Non Applicable. L. Non Applicable. M. Non Applicable. N. Non Applicable. Note All Other Debt The Company issued a surplus note to the State Board of Administration of Florida (SBA) for $0.5 million on February, 007, which was amended on July, 008. The surplus note has a 0-year maturity with interest payable quarterly at the 0-year U.S. Treasury Bond rate. The company made principal payments of $558,84 and $558,84 and in 06 and 05. The surplus note had an outstanding principal of $,9,84 and $,49,647 as of December, 06 and December, 05. All payments under the note require authorization of the OIR. During 06 and 05 the Company paid $56,640 and $87,76, respectively, in interest on these notes. The interest rate fluctuates quarterly at the 0-year U.S. Treasury Bond rate. Effective May 7, 0, the Florida Legislature amended the terms under Section Florida Statutes to allow the renegotiation of specified terms of the SBA Surplus Note Program. As amended, a participating insurer may reduce or eliminate its applicable minimum premium-to-surplus ratios by agreeing to an accelerated payback schedule. Having made a $,500,000 million principal payment in 00, the Company met Option which states that If your Company agrees to accelerate the payment period of the note by at least 5 years, the State Board of Administration must agree to exempt the Company from the minimum premium-to-surplus ratios for the remaining term of the note. The Company and the SBA amended the note December 8, 0 thereby eliminating all penalty interest for the duration of the note. Note Retirement Plans, Deferred Compensation and Other Postretirement Benefit Plans A. Defined Benefit Plan The Company had no employee defined benefit or defined contribution retirement plans as of //6. B. Non Applicable. C. Non Applicable. D. Non Applicable. 4.5

20 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company NOTES TO FINANCIAL STATEMENTS E. Defined Contribution Plans See G. F. Multiemployer Plans The Company does not participate in multiemployer plans. G. Consolidated/Holding Company Plans The Company s employees participate in a 40(K) defined contribution plan sponsored by the Parent Company. Participation is offered to all employees who are over the age of 8. The Plan provides for Company-matching of all employee contributions up to 6% of gross compensation. Gross contributions to the Plan were $9,0 and $9,476 in 06 and 05, respectively. Employees are eligible for these employer contributions immediately. H. Postemployment Benefits and Compensated Absences As of December, 06, the Company has no liability for postemployment or compensated absences. I. Impact of Medicare Modernization Act on Postretirement Benefits (INT 04-7) The Company has no post-retirement benefit plans. Note Capital and Surplus, Dividend Restrictions and Quasi-Reorganizations () The Company has 7 million shares authorized, 700,000 shares issued and outstanding. All shares are Class A shares with a par value of $.00. () The Company has no preferred stock outstanding. () Without prior approval of its domiciliary commissioner, dividends to shareholders are limited by the laws of the state of Florida, the Company s state of incorporation, to $0, an amount that is based on restrictions relating to statutory surplus. (4) No dividends were paid by the company in either December, 06 or December, 05. (5) Within the limitations of () above, there are no restrictions placed on the portion of the Company s profits that may be paid as ordinary dividends to shareholders. (6) There were no restrictions placed on the Company s surplus, including for whom the surplus is being held. (7) There are no advances to surplus not repaid. (8) There is no stock held by the Company for special purposes. (9) There are no balances of special surplus funds for December, 06. (0) The portion of unassigned funds (surplus) represented or reduced by cumulative unrealized gains and losses is $0. () The Company issued $9 million in subordinated surplus notes to its parent Cypress Holdings, Inc. for cash, with the approval of the Florida Office of Insurance Regulation. The following table summarizes the terms of these notes. Date Issued Interest Rate Par Value Principal or Interest Paid in Current Year Date of Maturity //999 7% $,000,000 0 No fixed date 9/0/004 6 /4% $,000,000 0 No fixed date //06 % $4,000,000 0 No fixed date Interest is paid annually with prior approval of the Florida OIR out of the unassigned surplus of the Company. No principal payment may be made on these notes without prior approval of the Florida OIR. Unpaid interest of $47,959 for 06 and $45,000 for prior years on these subordinated debentures is not reflected in the accompanying financial statements for 06. The surplus notes rank pari passu with any other future surplus notes of the parent and with other similarly subordinated claims. The Company received a $0.5 million unencumbered surplus contribution from its parent on January 0, 007 as a prerequisite for a surplus note issued to the State Board of Administration of Florida (SBA). The Company received the surplus note funds from the SBA on February, 007. The surplus note, dated February, 007 and amended July, 008, has a 0-year maturity with interest payable quarterly at the 0-year U.S. Treasury Bond rate. All payments under the note require authorization of the OIR. Under the terms of the SBA Surplus Note, the SBA is a class creditor as defined in Florida Statute Section 6.7 and as such, in a reorganization, dissolution or liquidation is paid in full before CPCI s shareholders receive any return of capital or funds. () The Company has not had any quasi-reorganizations. () The Company has not had a quasi-reorganization in the prior ten years. Note 4 Contingencies A. Contingent Commitments The Company had no contingent commitments as of December, 06. B. Assessments The Company has $,87 and $4,9 in assessments receivable as of December, 06 and December, 05, respectively. All these assessments are required under Florida Statutes and the Company anticipates will be fully recovered from policyholders in the coming year. C. Gain Contingencies 4.6

21 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Cypress Property & Casualty Insurance Company NOTES TO FINANCIAL STATEMENTS The Company was unaware of any gain contingencies at December, 06. D. Claims Related Extra Contractual Obligations and Bad Faith Losses Stemming from Lawsuits The Company did not pay any claims related extra contractual obligations or bad faith losses from lawsuits as of December, 06. E. Product Warranties The Company had no product warranties as of December, 06. F. Joint and Several Liabilities The Company had no joint and several liabilities as of December, 06. G. All Other Contingencies The Company had no other contingencies as of December, 06. Note 5 Leases A. Lessee Operating Lease The Company leases office space under an operating lease agreement that expires on February 8, 07 for itself and other related parties from Steinmann Windsor park, LLC. The Company leases office space under an operating lease agreement with IVC Flagler TT, LLC that expires March, 05. Gross rental expense as of December, 06 and December, 05 was $45,95 and $50,748 respectively. The minimum aggregate rental commitments as determined by operating lease agreements at December, 06 are as follows: The Company is not involved in any material sales-leaseback transactions. B. Lessor Leases The Company does not have any investment in leases. Note 6 Information About Financial Instruments With Off-Balance- Sheet Risk and Financial Instruments With Concentrations of Credit Risk A. The Company does not have any financial instruments with off-balance sheet risk. Note 7 Sale, Transfer and Servicing of Financial Assets and Extinguishments of Liabilities A. Transfer of Receivables Reported as Sales The Company has transferred no receivables reported as sales in accordance with SSAP No. 4, Sale of Premium Receivables. B. Transfer and Servicing of Financial Assets The Company has no transactions reportable under SSAP No. 9R, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities. C. Wash Sales The Company did not have any wash sales as defined in paragraph 9 of SSAP No. 9R. Note 8 Gain or Loss to the Reporting Entity from Uninsured Plans and the Uninsured Portion of Partially Insured Plans A. ASO Plans The Company had no ASO plans as of December, 06. B. ASC Plans The Company had no ASC Plans as of December, 06. C. Medicare or Similarly Structured Cost Based Reimbursement Contract The Company has no Medicare or similarly structured cost based reimbursement contracts at December, 05. Note 9 Direct Premium Written/Produced by Managing General Agents/Third Party Administrators The Company s direct property and commercial insurance is written through Service First Insurance Group, LLC, under a managing general agency (MGA) agreement. The terms of that agreement give the MGA the authority to collect premiums (P), bind coverage (B), underwrite policies (U) and adjust claims (CA). The following information regarding the MGA is listed below: 4.7