* * 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 Capitol Preferred Insurance Company, Inc NAIC Group Code 00000, NAIC Company Code 0908 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 04/09/998 Commenced Business 04/09/998 Statutory Home Office 55 Killearn Center Boulevard,, Tallahassee, FL, US 09 (Street and Number) (City or Town, State, Country and Zip Code) Main Administrative Office 55 Killearn Center Boulevard, Tallahassee, FL, US (Street and Number) (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Mail Address 55 Killearn Center Boulevard,, Tallahassee, FL, US 09 (Street and Number or P.O. Box) (City or Town, State, Country and Zip Code) Primary Location of Books and Records 55 Killearn Center Boulevard, Tallahassee, FL, US (Street and Number) (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Internet Web Site Address Statutory Statement Contact Justin Hayles Edenfield (Name) (Area Code) (Telephone Number) (Extension) jedenfield@pmains.com ( Address) (Fax Number) OFFICERS Name Title Name Title James Anthony Graganella, President & CEO Keith Edward Martin, Treasurer Kristie Beavers Mock, Secretary Byron Hamelin Wells, Vice President OTHER OFFICERS Keith Edward Martin, Vice President, DIRECTORS OR TRUSTEES James Anthony Graganella Byron Hamelin Wells Keith Edward Martin Charles William Whitaker Kristie Beavers Mock Ralph Powell State of County of Florida Leon 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. James Anthony Graganella Keith Edward Martin Kristie Beavers Mock President & CEO Treasurer Secretary 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 Capitol Preferred Insurance Company, Inc ASSETS Current Year Prior Year 4 Assets Nonadmitted Assets Net Admitted Assets (Cols. - ) Net Admitted Assets. Bonds (Schedule D) 9,50,40 9,50,40 8,65,477. 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 ($ 4,709,40, Schedule E-Part ), cash equivalents ($ 9,40,50, Schedule E-Part ) and short-term investments ($ 0, Schedule DA),849,906,849,906,580,64 6. Contract loans (including $ premium notes) Derivatives (Schedule DB) Other invested assets (Schedule BA) 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 ) 5,00,46 0 5,00,46 50,6,0. Title plants less $ charged off (for Title insurers only) Investment income due and accrued 4,464 4,464 6,67 5. Premiums and considerations: 5. Uncollected premiums and agents balances in the course of collection 04,890 8,97 85,96 78, 5. Deferred premiums, agents balances and installments booked but deferred and not yet due (including $ earned but unbilled premiums),999,0,999,0,980,08 5. Accrued retrospective premiums ($ ) and contracts subject to redetermination ($ ) Reinsurance: 6. Amounts recoverable from reinsurers Funds held by or deposited with reinsured companies 0 00, Other amounts receivable under reinsurance contracts Amounts receivable relating to uninsured plans Current federal and foreign income tax recoverable and interest thereon 460,9 460,9 84,45 8. Net deferred tax asset 64,00 64,00 706,47 9. Guaranty funds receivable or on deposit Electronic data processing equipment and software 0 0. Furniture and equipment, including health care delivery assets ($ ) 0 0. Net adjustment in assets and liabilities due to foreign exchange rates 0 0. Receivables from parent, subsidiaries and affiliates Health care ($ ) and other amounts receivable Aggregate write-ins for other-than-invested assets 64, ,90 6,6 6. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines to 5) 58,57,66 8,97 58,8,709 54,798, From Separate Accounts, Segregated Accounts and Protected Cell Accounts Total (Lines 6 and 7) 58,57,66 8,97 58,8,709 54,798,487 DETAILS OF WRITE-INS Summary of remaining write-ins for Line from overflow page Totals (Lines 0 through 0 plus 98) (Line above) Florida Insurance Guaranty Assocation Assessment,9,9, Louisiana Citizens Property Insurance Corporation 64,78 64,78, Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 through 50 plus 598) (Line 5 above) 64, ,90 6,6

3 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc LIABILITIES, SURPLUS AND OTHER FUNDS Current Year Prior Year. Losses (Part A, Line 5, Column 8) 5,77,9 6,90,. Reinsurance payable on paid losses and loss adjustment expenses (Schedule F, Part, Column 6) 0. Loss adjustment expenses (Part A, Line 5, Column 9) 96,656 84,80 4. Commissions payable, contingent commissions and other similar charges,68,77 7,6 5. Other expenses (excluding taxes, licenses and fees) 9,57 00, Taxes, licenses and fees (excluding federal and foreign income taxes) 85,576 74,79 7. Current federal and foreign income taxes (including $ on realized capital gains (losses)) 0 7. Net deferred tax liability 0 8. Borrowed money $ and interest thereon $ 0 9. Unearned premiums (Part A, Line 8, Column 5) (after deducting unearned premiums for ceded reinsurance of $ 8,95, 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) 8,00,745 8,90,47 0. Advance premium,740,4,89,596. Dividends declared and unpaid:. Stockholders 0. Policyholders 0. Ceded reinsurance premiums payable (net of ceding commissions),69,94 0,6,556. Funds held by company under reinsurance treaties (Schedule F, Part, Column 9) 685, Amounts withheld or retained by company for account of others 46,077 9, Remittances and items not allocated 0 6. Provision for reinsurance (including $ certified) (Schedule F, Part 8) Net adjustments in assets and liabilities due to foreign exchange rates 0 8. Drafts outstanding 0 9. Payable to parent, subsidiaries and affiliates 0 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 Total liabilities excluding protected cell liabilities (Lines through 5),4,04 8,79,80 7. Protected cell liabilities 0 8. Total liabilities (Lines 6 and 7),4,04 8,79,80 9. Aggregate write-ins for special surplus funds Common capital stock,875,000,875,000. Preferred capital stock 0. Aggregate write-ins for other-than-special surplus funds 0 0. Surplus notes 7,50, Gross paid in and contributed surplus 0,979,988,69, Unassigned funds (surplus) 4,49,697,0, Less treasury stock, at cost: 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) 7,004,685 6,058, Totals (Page, Line 8, Col. ) 58,8,709 54,798,487 DETAILS OF WRITE-INS 50. Florida Insurance Guaranty Association Assessment Florida Hurricane Catastrophe Fund Assessment Citizens Property Insurance Corporation Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 through 50 plus 598) (Line 5 above) Additional admitted deferred tax assets 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 Capitol Preferred Insurance Company, Inc STATEMENT OF INCOME Current Year Prior Year UNDERWRITING INCOME. Premiums earned (Part, Line 5, Column 4),04,4,864,644 DEDUCTIONS:. Losses incurred (Part, Line 5, Column 7),79,4,40,05. Loss adjustment expenses incurred (Part, Line 5, Column ),68,7,6,68 4. Other underwriting expenses incurred (Part, Line 5, Column ) (,468,65) (5,509,797) 5. Aggregate write-ins for underwriting deductions Total underwriting deductions (Lines through 5),94,94 9,54,86 7. Net income of protected cells 0 8. Net underwriting gain (loss) (Line minus Line 6 plus Line 7) 90,9,709,808 INVESTMENT INCOME 9. Net investment income earned (Exhibit of Net Investment Income, Line 7) 556,07 586, Net realized capital gains (losses) less capital gains tax of $ (Exhibit of Capital Gains (Losses)) 0. Net investment gain (loss) (Lines 9 + 0) 556,07 586,580 OTHER INCOME. Net gain (loss) from agents' or premium balances charged off (amount recovered $,070 amount charged off $ ),070 (6,97). Finance and service charges not included in premiums 85,787 66,59 4. Aggregate write-ins for miscellaneous income 7, Total other income (Lines through 4) 90,4 0,96 6. Net income before dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes (Lines ),86,687 4,99, 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),86,687 4,99, Federal and foreign income taxes incurred 604,57,5, Net income (Line 8 minus Line 9) (to Line ),78,50,84,5 CAPITAL AND SURPLUS ACCOUNT. Surplus as regards policyholders, December prior year (Page 4, Line 9, Column ) 6,058,657,90,744. Net income (from Line 0),78,50,84,5. Net transfers (to) from Protected Cell accounts 0 4. Change in net unrealized capital gains or (losses) less capital gains tax of $ 0 5. Change in net unrealized foreign exchange capital gain (loss) 0 6. Change in net deferred income tax (9,44) (6,659) 7. Change in nonadmitted assets (Exhibit of Nonadmitted Assets, Line 8, Col. ) 5,049 (,66) 8. Change in provision for reinsurance (Page, Line 6, Column minus Column ) Change in surplus notes (7,50,000) 0 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 7,50, 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 (748,77) 0 8. Change in surplus as regards policyholders for the year (Lines through 7) 946,08,54,9 9. Surplus as regards policyholders, December current year (Line plus Line 8) (Page, Line 7) 7,004,685 6,058,657 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) Florida Residential Property & Casualty JUA Takeout Bonus Commission from Brokerage of Reinsurance 7, Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 through 40 plus 498) (Line 4 above) 7, Additional Admitted Deferred Tax Asset REclassification of Additional Admitted Deferred Tax Asset to Special Surplus Funds Net assets from Merger of CPIC Holding Company (748,77) Summary of remaining write-ins for Line 7 from overflow page Totals (Lines 70 through 70 plus 798) (Line 7 above) (748,77) 0 4

5 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc CASH FLOW Current Year Prior Year Cash from Operations. Premiums collected net of reinsurance,845,74 5,997,507. Net investment income 58,47 58,88. Miscellaneous income 90,4 0,96 4. Total (Lines through ) 5,0,9 6,68,7 5. Benefit and loss related payments 4,574,88 0,60,64 6. Net transfers to Separate Accounts, Segregated Accounts and Protected Cell Accounts Commissions, expenses paid and aggregate write-ins for deductions (,76,44) (,400,549) 8. Dividends paid to policyholders Federal and foreign income taxes paid (recovered) net of $ tax on capital gains (losses) 880,998,4,90 0. Total (Lines 5 through 9),694,9 9,7,475. Net cash from operations (Line 4 minus Line 0),609,59 7,50,56 Cash from Investments. Proceeds from investments sold, matured or repaid:. Bonds 8,970,000,865,000. 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) 8,970,000,865,000. Cost of investments acquired (long-term only):. Bonds 9,585,000,75,4. Stocks 0 0. Mortgage loans Real estate Other invested assets Miscellaneous applications Total investments acquired (Lines. to.6) 9,585,000,75,4 4. Net increase (decrease) in contract loans and premium notes Net cash from investments (Line.8 minus Line.7 minus Line 4) (65,000) (50,4) Cash from Financing and Miscellaneous Sources 6. Cash provided (applied): 6. Surplus notes, capital notes (7,50,000) 0 6. Capital and paid in surplus, less treasury stock 7,50, Borrowed funds Net deposits on deposit-type contracts and other insurance liabilities Dividends to stockholders Other cash provided (applied) (75,57) (6,959) 7. Net cash from financing and miscellaneous sources (Lines 6. to 6.4 minus Line 6.5 plus Line 6.6) (75,57) (6,959) 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),69,8 6,75, Cash, cash equivalents and short-term investments: 9. Beginning of year,580,64 4,844,79 9. End of year (Line 8 plus Line 9.),849,906,580,64 5

6 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc 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 4,947,447,95,49,00,66 4,898,60. Allied lines Farmowners multiple peril Homeowners multiple peril 8,44,887 5,49,785 5,98,8 8,466, Commercial multiple peril Mortgage guaranty Ocean marine Inland marine 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 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 (47,59) 87, 97 (60,667) 6. 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,4,74 8,90,47 8,00,745,04,4 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 Capitol Preferred Insurance Company, Inc 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,00,66,00,66. Allied lines 0. Farmowners multiple peril 0 4. Homeowners multiple peril 5,98,8 5,98,8 5. Commercial multiple peril 0 6. Mortgage guaranty 0 8. Ocean marine 0 9. Inland marine 0 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 0 7. 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 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 8,00, ,00, Accrued retrospective premiums based on experience 7. Earned but unbilled premiums 8. Balance (Sum of Lines 5 through 7) 8,00,745 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. Pro-Rata 7

8 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc 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 4,4,700 69,966 9,85,9 4,947,447. Allied lines 4,4,49 4,4,49 0. Farmowners multiple peril 0 4. Homeowners multiple peril 44,7,6 47,66 6,645,54 8,44, Commercial multiple peril 0 6. Mortgage guaranty 0 8. Ocean marine 0 9. Inland marine 0 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 0 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 500 (48,09) (47,59) 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 7,090, ,9 0 60,695,79,4,74 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 Capitol Preferred Insurance Company, Inc 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 8,9,40 8,55 4,70,99,790,60,6,07,90,40,48,9 7.. Allied lines Farmowners multiple peril Homeowners multiple peril 9,06,84 0,80,06,64 8,005,47 4,48,766 4,86,6 7,767, Commercial multiple peril Mortgage guaranty Ocean marine Inland marine 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 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 0,400 7,47 (7,07) 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 7,40,74 49,056 5,78,56,796,074 5,77,9 6,90,,79, 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 Capitol Preferred Insurance Company, Inc 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,05,56 4,500,085,767 95,889,65,54 70,75 768,40,6,07 75,6. Allied lines 0 0. Farmowners multiple peril Homeowners multiple peril 6,0,88 58,004,45,0,95,69,468,984,0,95,47 4,48, ,9 5. Commercial multiple peril Mortgage guaranty Ocean marine Inland marine 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 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,400 0,400, 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 8,48,74 6,504 4,500,970,909,908,84,57 9,045,6,87 5,77,9 96,656 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 Capitol Preferred Insurance Company, Inc. Claim adjustment services: UNDERWRITING AND INVESTMENT EXHIBIT PART - EXPENSES Loss Adjustment Expenses Other Underwriting Expenses Investment Expenses. Direct,9,5,9,5. Reinsurance assumed 0. Reinsurance ceded,9,5,9,5.4 Net claim adjustment services ( ) Commission and brokerage:. Direct, excluding contingent 7,86,67 7,86,67. Reinsurance assumed, excluding contingent 9, 9,. Reinsurance ceded, excluding contingent 9,758,7 9,758,7.4 Contingent-direct 0.5 Contingent-reinsurance assumed 0.6 Contingent-reinsurance ceded 0.7 Policy and membership fees,0,75,0,75.8 Net commission and brokerage ( ) 0 (0,69,7) 0 (0,69,7). Allowances to manager and agents 0 4. Advertising 0,45 0,40 0,85 5. Boards, bureaus and associations 8,594 49,0 57,66 6. Surveys and underwriting reports 0 7. Audit of assureds' records 0 8. Salary and related items: 8. Salaries,00,946,6,0 5,74,48 8. Payroll taxes 0,857 6, , Employee relations and welfare 50,80 84,9,7,69 0. Insurance 8,484 8,5 0,995. Directors' fees 0. Travel and travel items 0,69 469,58 780,0. Rent and rent items,09 47,474 79,50 4. Equipment 78, ,860 76,69 5. Cost or depreciation of EDP equipment and software 0 6. Printing and stationery 50,50 0,87 5, 7. Postage, telephone and telegraph, exchange and express 7,79 50,865 4, Legal and auditing 56,666 6,9 9, Totals (Lines to 8),68,7 6,486,04 0 0,69,75 0. Taxes, licenses and fees: 0. State and local insurance taxes deducting guaranty association credits of $ 99,90 99,90 0. Insurance department licenses and fees 599,6 599,6 0. Gross guaranty association assessments All other (excluding federal and foreign income and real estate) Total taxes, licenses and fees ( ) 0 698, ,90. Real estate expenses 0. Real estate taxes 0. Reimbursements by uninsured plans 0 4. Aggregate write-ins for miscellaneous expenses 0 975, , Total expenses incurred,68,7 (,468,65) 0 (a),5, Less unpaid expenses-current year 96,656,06,44,068, Add unpaid expenses-prior year 84,80 84,98 0,684,6 8. Amounts receivable relating to uninsured plans, prior year Amounts receivable relating to uninsured plans, current year 0 0. TOTAL EXPENSES PAID (Lines ),564,45 (,7,09) 0 (68,658) DETAILS OF WRITE-INS 40. Miscellaneous Policy Processing & Production 975, , Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 through 40 plus 498) (Line 4 above) 0 975, ,796 (a) Includes management fees of $ 9,056,6 to affiliates and $ to non-affiliates. 4 Total

12 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc EXHIBIT OF NET INVESTMENT INCOME Collected During Year Earned During Year. U.S. Government bonds (a),700,700. Bonds exempt from U.S. tax (a). Other bonds (unaffiliated) (a) 5,79 540,7. 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),79,0 7. Derivative instruments (f) 8. Other invested assets 9. Aggregate write-ins for investment income Total gross investment income 58, ,07. Investment expenses (g). 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 7. Net investment income (Line 0 minus Line 6) 556,07 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 $ 50 accrual of discount less $ 87 amortization of premium and less $ 44 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 $ 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 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 0. Other bonds (unaffiliated) 0. 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) 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 Capitol Preferred Insurance Company, Inc 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 8,97,976 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 Guaranty funds receivable or on deposit Electronic data processing equipment and software Furniture and equipment, including health care delivery assets 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 to 5) 8,97,976 5, From Separate Accounts, Segregated Accounts and Protected Cell Accounts Total (Lines 6 and 7) 8,97,976 5,049 DETAILS OF WRITE-INS Summary of remaining write-ins for Line from overflow page Totals (Lines 0 through 0 plus 98) (Line above) Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 through 50 plus 598) (Line 5 above) 0 0 0

14 STATEMENT AS OF DECEMBER, 06 OF THE Capitol Preferred Insurance Company Inc. NOTES TO FINANCIAL STATEMENTS. Summary of Significant Accounting Policies A. Accounting Practices State of Domicile NET INCOME () Company state basis (Page 4, Line 0, Columns & )...FL $...,78,50 $...,84,5 () State Prescribed Practices that increase/(decrease) NAIC SAP: () State Permitted Practices that increase/(decrease) NAIC SAP: (4) NAIC SAP (--=4)...FL $...,78,50 $...,84,5 SURPLUS (5) Company state basis (Page, Line 7, Columns & )...FL $...7,004,685 $... 6,058,657 (6) State Prescribed Practices that increase/(decrease) NAIC SAP: (7) State Permitted Practices that increase/(decrease) NAIC SAP: (8) NAIC SAP (5-6-7=8)...FL $...7,004,685 $... 6,058,657 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. Actual results could differ from those estimates. 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. C. Accounting Policy Premiums are earned over the terms of the related insurance policies and reinsurance contracts. Unearned premium reserves are maintained to cover the unexpired portion of premiums written. Such reserves are computed using pro-rata methods for direct business and are based on reports received from ceding entities for reinsurance. Expenses incurred in connection with acquiring new business 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 amortized cost using the pro-rata method. When applicable, common stocks are stated at market 4. When applicable, preferred stocks are stated at cost 5. The Company has no mortgage loans 6. The Company has no loan backed securities 7. The Company has no investments in subsidiaries, controlled or affiliated companies 8. The Company has no investments in joint ventures, partnerships or limited liability companies 9. The Company has no investments in derivatives 0. The Company has no premium deficiency calculations. Unpaid losses and loss adjustment expenses include an amount determined from individual case estimates and loss data and an amount based on historical data, for losses incurred but not reported. Such liabilities are based on assumptions and estimates and while management believes the amount is adequate, the ultimate liability may be either in excess of, or less than the amount provided. The methodologies for making such estimates and for establishing the resulting liability are continually monitored and any adjustments are recorded in the period determined. The company has no environmental remediation, toxic waste or asbestos exposures.. The Company has not modified its capitalization policy from the prior period.. The Company has no pharmaceutical rebate receivables. D. Going Concern There are no issues that would cause management to believe there is any reason or doubt that the Company will continue as a going concern.. Accounting Changes and Corrections of Errors A. There were no material changes in accounting principles and/or corrections of errors during the current period.. Business Combinations and Goodwill A. Statutory Purchase Method The Company had no business combinations. B. Statutory Merger The Company merged with a Preferred Holding Company, Inc. on May, 06. The transaction was accounted for as a statutory merger. The Company issued 5,000 voting shares of common stock in exchange for all common stock of Preferred Holding Company, Inc. Pre-merger separate company revenue, net income, and other surplus adjustments for the five months ended May, 06 were $5,576,9, $57,89, $0, respectively for the company and $77,84, $568,546, and $0, respectively for Preferred Holding Company, Inc. There was $748,77 negative adjustment made directly to the Capital and Surplus of the Company as a result of the merger. C. Impairment Loss The Company had no business combinations. 4. Discontinued Operations The Company had no discontinued operations. 5. Investments A. Mortgage Loans, including Mezzanine Real Estate Loans B. Debt Restructuring C. Reverse Mortgages The Company has no mortgage loans. The Company has no restructured debt. D. Loan-Backed Securities The Company has no reverse mortgages. The Company has no Loan-Backed securities. E. Repurchase Agreements and/or Securities Lending Transactions F. Real Estate The Company has no repurchase agreements.. The Company had no impairment losses related to owned real estate.. The Company has no real estate classified as available for sale.. The Company has no real estate transactions related to the sale of real estate. 4. The Company does not participate in retail land sales operations. 5. The Company does not hold any real estate with participating mortgage loan features. G. Investments in Low Income Housing Tax Credits (LIHTC) The Company has no investments in low income housing tax credits. 4

15 STATEMENT AS OF DECEMBER, 06 OF THE Capitol Preferred Insurance Company Inc. NOTES TO FINANCIAL STATEMENTS H. Restricted Assets () Restricted Assets (Including Pledged) Gross Restricted 8 Percentage Current Year G/A Supporting Protected Cell Account Activity (a) Total Protected Cell Account Restricted Assets Protected Cell Account Assets Supporting G/A Activity (b) Increase/ (Decrease) (5 minus 6) Total Current Year Admitted Restricted Admitted Restricted to Total Admitted Assets Restricted Asset Category Total General Account (G/A) Total ( plus ) Total From Prior Year Gross Restricted to Total Assets j. On deposit with states...755, , , , % n. Other restricted assets o. Total Restricted Assets $...755,556 $...0 $... 0 $...0 $ ,556 $...754,96 $ $...755,08.% () Detail of Assets Pledged as Collateral Not Captured in Other Categories (Contracts that Share Similar Characteristics, Such as Reinsurance and Derivatives, Are Reported in the Aggregate) None () Detail of Other Restricted Assets (Contracts that Share Similar Characteristics, Such as Reinsurance and Derivatives, Are Reported in the Aggregate) None (4) Collateral received and reflected as assets within the reporting entity s financial statements. None I. Working Capital Finance Investments None J. Offsetting and Netting of Assets and Liabilities None K. Structured Notes None L. 5* Securities None 6. Joint Ventures, Partnerships and Limited Liability Companies A. The Company has no investments in Joint Ventures, Partnerships or Limited Liability Companies that exceed 0% of its admitted assets. B. The Company has no investments in Joint Ventures, Partnerships or Limited Liability Companies and had no impairment write downs. 7. Investment Income A. No investment income was excluded from any investment income due and accrued. B. None 8. Derivative Instruments A. The Company has no derivative instruments. B. The Company has no derivative instruments. C. The Company has no derivative instruments. D. The Company has no derivative instruments. E. The Company has no derivative instruments. F. The Company has no derivative instruments. 9. Income Taxes A. The components of the net deferred tax asset/(liability) at December are as follows:. //06 () () () Ordinary Capital (Col +) Total (a) Gross Deferred Tax Assets $... 64,00 $... $...64,00 (b) Statutory Valuation Allowance Adjustments $... $... $...0 (c) Adjusted Gross Deferred Tax Assets (a - b) $... 64,00 $... 0 $...64,00 (d) Deferred Tax Assets Nonadmitted $... 0 $... $...0 (e) Subtotal Net Admitted Deferred Tax Asset (c -d ) $... 64,00 $... 0 $...64,00 (f) Deferred Tax Liabilities $... $... $...0 (g) Net Admitted Deferred Tax Asset/(Net Deferred Tax Liability) (e - f) $... 64,00 $... 0 $...64,00 (4) Ordinary //05 (5) Capital (6) (Col 4+5) Total (a) Gross Deferred Tax Assets $ ,47 $... 0 $...706,47 (b) Statutory Valuation Allowance Adjustments $... 0 $... 0 $...0 (c) Adjusted Gross Deferred Tax Assets (a - b) $ ,47 $... 0 $...706,47 (d) Deferred Tax Assets Nonadmitted $... 0 $... 0 $...0 (e) Subtotal Net Admitted Deferred Tax Asset (c -d ) $ ,47 $... 0 $...706,47 (f) Deferred Tax Liabilities $... 0 $... 0 $...0 (g) Net Admitted Deferred Tax Asset/(Net Deferred Tax Liability) (e - f) $ ,47 $... 0 $...706,47 (7) (Col -4) Ordinary Change (8) (Col -5) Capital (9) (Col 7+8) Total (a) Gross Deferred Tax Assets $...(9,44) $... 0 $...(9,44) (b) Statutory Valuation Allowance Adjustments $... 0 $... 0 $...0 (c) Adjusted Gross Deferred Tax Assets (a - b) $...(9,44) $... 0 $...(9,44) (d) Deferred Tax Assets Nonadmitted $... 0 $... 0 $...0 (e) Subtotal Net Admitted Deferred Tax Asset (c -d ) $...(9,44) $... 0 $...(9,44) (f) Deferred Tax Liabilities $... 0 $... 0 $...0 (g) Net Admitted Deferred Tax Asset/(Net Deferred Tax Liability) (e - f) $...(9,44) $... 0 $...(9,44). //06 () () () 4. Ordinary Capital (Col +) Total

16 STATEMENT AS OF DECEMBER, 06 OF THE Capitol Preferred Insurance Company Inc. NOTES TO FINANCIAL STATEMENTS Admission Calculation Components SSAP No. 0 (a) Federal Income Taxes Paid In Prior Years Recoverable Through Loss Carrybacks. $... 64,00 $... $...64,00 (b) Adjusted Gross Deferred Tax Assets Expected To Be Realized (Excluding The Amount Of Deferred Tax Assets From (a) above) After Application of the Threshold Limitation. (The Lesser of (b) and (b) Below) $... $... $...0. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date. $... $... $...0. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold. XXX XXX $... (c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From (a) and (b) above) Offset by Gross Deferred Tax Liabilities. $... $... $...0 (d) Deferred Tax Assets Admitted as the result of application of SSAP No. 0. Total ((a) + (b) + (c)) $... 64,00 $... 0 $...64,00 (4) Ordinary //05 (5) Capital (6) (Col 4+5) Total (a) Federal Income Taxes Paid In Prior Years Recoverable Through Loss Carrybacks. $... 0 $... 0 $...0 (b) Adjusted Gross Deferred Tax Assets Expected To Be Realized (Excluding The Amount Of Deferred Tax Assets From (a) above) After Application of the Threshold Limitation. (The Lesser of (b) and (b) Below) $ ,47 $... 0 $...706,47. Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date. $ ,47 $... 0 $...706,47. Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold. XXX XXX $...,74,84 (c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From (a) and (b) above) Offset by Gross Deferred Tax Liabilities. $... 0 $... 0 $...0 (d) Deferred Tax Assets Admitted as the result of application of SSAP No. 0. Total ((a) + (b) + (c)) $ ,47 $... 0 $...706,47 (7) (Col -4) Ordinary Change (8) (Col -5) Capital (9) (Col 7+8) Total (a) Federal Income Taxes Paid In Prior Years Recoverable Through Loss Carrybacks. $... 64,00 $... 0 $...64,00 (b) Adjusted Gross Deferred Tax Assets Expected To Be Realized (Excluding The Amount Of Deferred Tax Assets From (a) above) After Application of the Threshold Limitation. (The Lesser of (b) and (b) Below) $...(706,47) $... 0 $...(706,47). Adjusted Gross Deferred Tax Assets Expected to be Realized Following the Balance Sheet Date. $...(706,47) $... 0 $...(706,47). Adjusted Gross Deferred Tax Assets Allowed per Limitation Threshold. XXX XXX $...(,74,84) (c) Adjusted Gross Deferred Tax Assets (Excluding The Amount Of Deferred Tax Assets From (a) and (b) above) Offset by Gross Deferred Tax Liabilities. $... 0 $... 0 $...0 (d) Deferred Tax Assets Admitted as the result of application of SSAP No. 0. Total ((a) + (b) + (c)) $...(9,44) $... 0 $...(9,44) (a) (b) Ratio Percentage Used To Determine Recovery Period And Threshold Limitation Amount. Amount Of Adjusted Capital And Surplus Used To Determine Recovery Period And Threshold Limitation In (b) Above...., $... 6,409, $... 7,857, //06 () () Ordinary Capital Impact of Tax-Planning Strategies (a) Determination Of Adjusted Gross Deferred Tax Assets And Net Admitted Deferred Tax Assets, By Tax Character As A Percentage.. Adjusted Gross DTAs Amount From Note 9A(c)... 64, Percentage Of Adjusted Gross DTAs By Tax Character Attributable To The Impact Of Tax Planning Strategies. Net Admitted Adjusted Gross DTAs Amount From Note 9A(e)... 64, Percentage Of Net Admitted Adjusted Gross DTAs By Tax Character Admitted Because Of The Impact Of Tax Planning Strategies () //05 (4) Ordinary Capital (a) Determination Of Adjusted Gross Deferred Tax Assets And Net Admitted Deferred Tax Assets, By Tax Character As A Percentage.. Adjusted Gross DTAs Amount From Note 9A(c) , Percentage Of Adjusted Gross DTAs By Tax Character Attributable To The Impact Of Tax Planning Strategies. Net Admitted Adjusted Gross DTAs Amount From Note 9A(e) , Percentage Of Net Admitted Adjusted Gross DTAs By Tax Character Admitted Because Of The Impact Of Tax Planning Strategies (5) (Col -) Ordinary Change (6) (Col -4) Capital (a) Determination Of Adjusted Gross Deferred Tax Assets And Net Admitted Deferred Tax Assets, By Tax Character As A Percentage.. Adjusted Gross DTAs Amount From Note 9A(c)... (9,44) Percentage Of Adjusted Gross DTAs By Tax Character Attributable To The Impact Of Tax Planning Strategies. Net Admitted Adjusted Gross DTAs Amount From Note 9A(e)... (9,44) Percentage Of Net Admitted Adjusted Gross DTAs By Tax Character Admitted Because Of The Impact Of Tax Planning Strategies (b) Does the Company's tax-planning strategies include the use of reinsurance? Yes No...X... C. Current income taxes incurred consist of the following major components: () //06 () //05 () (Col -) Change. Current Income Tax (a) Federal $ ,95.0 $...,5,549.0 $...(08,54) (b) Foreign $... $ $...0 (c) Subtotal $ ,95.0 $...,5,549.0 $...(08,54) (d) Federal income tax on net capital gains $... $ $...0 (e) Utilization of capital loss carry-forwards $... $ $...0 (f) Other $...(0,758.0) $ $...(0,758) (g) Federal and foreign income taxes incurred $ ,57.0 $...,5,549.0 $...(5,0). Deferred Tax Assets: (a) Ordinary () Discounting of unpaid losses $... 49,55 $... 84,07 $...(4,555) 4.

17 STATEMENT AS OF DECEMBER, 06 OF THE Capitol Preferred Insurance Company Inc. NOTES TO FINANCIAL STATEMENTS () Unearned premium reserve $ ,45 $ , $...(,880) () Policyholder reserves $... $... 0 $...0 (4) Investments $... $... 0 $...0 (5) Deferred acquisition costs $... $... 0 $...0 (6) Policyholder dividends accrual $... $... 0 $...0 (7) Fixed assets $... $... 0 $...0 (8) Compensation and benefits accrual $... $... 0 $...0 (9) Pension accrual $... $... 0 $...0 (0) Receivables - nonadmitted $... $... 0 $...0 () Net operating loss carry-forward $... $... 0 $...0 () Tax credit carry-forward $... $... 0 $...0 () Other (including items <5% of total ordinary tax assets) $... $... 5,000 $...(5,000) (99) Subtotal $... 64,00 $ ,48 $...(9,45) (b) Statutory valuation allowance adjustment $... $... 0 $...0 (c) Nonadmitted $... $... 0 $...0 (d) Admitted ordinary deferred tax assets (a99 - b - c) $... 64,00 $ ,48 $...(9,45) (e) Capital: () Investments $... $... 0 $...0 () Net capital loss carry-forward $... $... 0 $...0 () Real estate $... $... 0 $...0 (4) Other (including items <5% of total capital tax assets) $... $... 0 $...0 (99) Subtotal $... 0 $... 0 $...0 (f) Statutory valuation allowance adjustment $... $... 0 $...0 (g) Nonadmitted $... $... 0 $...0 (h) Admitted capital deferred tax assets (e99 - f - g) $... 0 $... 0 $...0 (i) Admitted deferred tax assets (d + h) $... 64,00 $ ,48 $...(9,45). Deferred Tax Liabilities: (a) Ordinary () Investments $... $... 0 $...0 () Fixed assets $... $... 0 $...0 () Deferred and uncollected premium $... $... 0 $...0 (4) Policyholder reserves $... $... 0 $...0 (5) Other (including items<5% of total ordinary tax liabilities) $... $... 0 $...0 (99) Subtotal $... 0 $... 0 $...0 (b) Capital: () Investments $... $... 0 $...0 () Real estate $... $... 0 $...0 () Other (including items <5% of total capital tax liabilities) $... $... 0 $...0 (99) Subtotal $... 0 $... 0 $...0 (c) Deferred tax liabilities (a99 + b99) $... 0 $... 0 $ Net deferred tax assets/liabilities (i - c) $... 64,00 $ ,48 $...(9,45) D Among the more significant book to tax adjustments were the following: The significant items causing a difference between the statutory federal income tax rate and the effective income tax rate are as follows: December, 06 Effective Tax Rate Provision computed at statutory rate $8, % Change in nonadmitted assets 0 0.0% Tax exempt income deduction 0 0.0% Dividends received deduction 0 0.0% Accrued dividend from 00% owned affiliate 0 0.0% Goodwill amortization 0 0.0% Proration of tax exempt investment income 0 0.0% Other than temporary impairments 0 0.0% Disallowed travel and entertainment 0 0.0% Taxes recovered - - RAR 0 0.0% Prior year over/under accrual (47,4) -6.% Nondeductible expenses,69 0.5% Totals $675,74 8.% Federal and foreign income taxes incurred $604,57 5.% Realized capital gains (losses) tax 0 0.0% Change in net deferred income taxes 7,97.% $675,74 8.% E. Operating Loss and Tax Credit Carry-forward and Protective Tax Deposits: a. At December, 05, the company had no operating loss carry-forwards originating in the following years available to offset against future taxable income. b. The following is income tax expense for 04 and 05 that is available for recoupment in the event of future net losses: 04 $759, $97,7 c. The company did not have any protective tax deposits under IRC Section 660. F. Consolidated Federal Income Tax Return a. The company s federal income tax return is consolidated with Preferred Holding Company Inc. b. The method of allocation between the Companies is adjusted to written agreements approved by the Board of Directors. Allocation is based upon separate return calculation with current credit for net loss. Any intercompany balances are settled as soon as practicable. G. The Company has no tax loss contingencies for which it is reasonably possible that the total liability will significantly increase within twelve months of the reporting date. 4.

18 STATEMENT AS OF DECEMBER, 06 OF THE Capitol Preferred Insurance Company Inc. NOTES TO FINANCIAL STATEMENTS 0. Information Concerning Parent, Subsidiaries, Affiliates and Other Related Parties A,B.C On October 8, 004, the Company issued Subordinated Surplus Debentures in the amounts of $6,000,000, $,000,000 and $400,000 to Pattco Inc., Preferred Managing Agency and Preferred Holding Company respectively. In addition, on December, 004 issued a Subordinated Surplus Debenture to Alan Baker in the amount of $400,000. During 005, additional Subordinated Surplus Debentures in the aggregate amounts of $6,840,000 were issued to Preferred Holding Company and additional Subordinated Surplus Debentures in the aggregate amount of $,70,000 were issued to Van Fishback. On July, 005, with regulatory approval, the Surplus Note in the amount of $,000,000 originally issued to Preferred Managing Agency on October 8, 004 was transferred to Pattco Inc. Effective January, 009, with regulatory approval, the Company consolidated and exchanged several surplus notes and debentures with certain of the Company's investors. The interest rates were amended to the Long Term Applicable Federal Rates in effect which is more favorable to the Company than the original interest rate. Effective May, 06 with regulatory approved all surplus notes were paid in full. D. At December, 06 and December, 05, $,68,77 and $7,6, respectively was reported as commission payable to Preferred Managing Agency, Inc. There are no guarantees or undertakings, written or otherwise, for the benefit of an affiliate or related party that results in a material contingent exposure of the reporting entity's or any related party's assets or liabilities. E. There are no guarantees or undertakings, written or otherwise, for the benefit of an affiliate or related party that results in a material contingent exposure of the reporting entity s or any related party s assets or liabilities. F. The Company has a managing general agency agreement with Preferred Managing Agency, Inc. G % of the outstanding shares of the Company are owned by CPIC Holding Company, LLC., a Florida Limited Liability Corporation. H. The Company has no stock ownership in any affiliated entity or parent. I. The Company has no investment in a SCA entity that exceeds 0% of admitted assets of the insurer. J. The Company has no investments in impaired SCA entities. K. The Company has no investments in a foreign insurance subsidiary. L. The company has no investments in any downstream non-insurance holding companies. M. The company has no SCA investments. N. The company has no SCA investments.. Debt During the year ended December, 06 all outstanding surplus notes of $7,50,000 were transferred into paid in capital as a condition of the purchase of stock held by the controlling investors. This amounted to 84% of the outstanding common stock. Unapproved and unpaid interest on the notes was waived as a condition of the purchase.. Retirement Plans, Deferred Compensation, Postemployment Benefits and Compensated Absences and Other Postretirement Benefit Plans. A.B.C.D. Defined Benefit Plan None E. Defined Contribution Plan None F. Multiemployer Plans The Company does not have any multiemployer plans or benefits. G. Consolidated/Holding Company Plans The 40(K) Retirement plan under which the Company's employees can participate is sponsored by Preferred Managing Agency, LLC. Under the plan, company employees are eligible to participate in a 40(K) Retirement Plan under which employees may contribute up to $8,000 per year with the Company matching up to a maximum of 4% of each participating employee's compensation. The Company has no legal obligation for benefits under the plan. H. Postemployment Benefits & Compensation Absences The Company has no obligations for postemployment benefits or compensated absences. I. Impact of Medicare Modernization Act on Postretirement Benefits None.. Capital and Surplus, Dividend Restrictions and Quasi-Reorganizations. The Company has 0,000 shares authorized and 8,750 shares issued and outstanding of its $00 par value common stock.. The Company has no preferred stock.. The maximum amount of dividends which can be paid by State of Florida insurance companies to shareholders without prior approval of the Insurance Commissioner is subject to restrictions relating to statutory surplus. Cash dividends may only be paid out of accumulated surplus funds derived from net operating profits and realized capital gains not exceeding 0% of such surplus in any one year, although there are no restrictions on cash dividend payments out of profits and gains derived during the immediately preceding calendar year. 4. No dividends have been paid by the Company. 5. Refer to the limitations of () above. 6. There were no restrictions placed on the Company's surplus, including for whom the surplus is being held. 7. Not applicable. 8. No stock is held by the Company, including stock of affiliated companies for special purposes. a. none b. none c. none 9. No changes in balances of special surplus funds. 0. The portion of unassigned funds (surplus) represented or reduced by cumulative unrealized gains and losses is $ 0. Surplus Notes The Company has no outstanding surplus notes. The impact of any restatement due to prior quasi-reorganizations is as follows: None. The Company has had no quasi-reorganizations in the prior 0 years. 4. Liabilities, Contingencies and Assessments A. Contingent Commitments The company has no commitments or contingent commitments to a SCA entity, joint venture, partnership, or limited liability company. B. Assessments () None () a. Assets recognized from paid and accrued premium tax offsets and policy surcharges prior year-end b. None c. None $...0. d. Assets recognized from paid and accrued premium tax offsets and policy surcharges current year-end C. Gain Contingencies The Company had no gain contingencies during the periods covered by this statement. $...0 D. Claims Related Extra Contractual Obligation and Bad Faith Losses Stemming from Lawsuits The company paid the following amounts in the reporting period to settle claims related extra contractual obligations or bad faith claims stemming from lawsuits. Direct Claims related ECO and bad faith losses paid during the reporting period $0 4.4

19 STATEMENT AS OF DECEMBER, 06 OF THE Capitol Preferred Insurance Company Inc. NOTES TO FINANCIAL STATEMENTS Number of claims where amounts were paid to settle claims related extra contractual obligations or bad faith claims resulting from lawsuits during the reporting period. ( a ) ( b ) ( c ) ( d ) ( e ) 0-5 Claims 6-50 Claims 5-00 Claims Claims More than 500 Claims Indicate whether claim count information is disclosed per claim or per claimant. ( f ) Per Claim [ x ] ( g ) Per Claimant [ ] E. Product Warranties The Company has no product warranty liabilities F. Joint and Several Liabilities None G. All Other Contingencies Various lawsuits against the Company have arisen in the normal course of the Company s business. Contingent liabilities from litigation and other matters are not considered material in relation to the financial position of the company. 5. Leases A. Lessee Operating Lease () None () a. At January, 07, the minimum aggregate rental commitments are as follows: B. Lessor Leases None Year Ending December Operating Leases. 05 $ $ $ $ $ Total $ Information About Financial Instruments With Off-Balance-Sheet Risk And Financial Instruments With Concentrations of Credit Risk The Company has no financial instruments with off-balance sheet risk.. None. None. None 4. None 7. Sale, Transfer and Servicing of Financial Assets and Extinguishments of Liabilities A. Transfers of Receivables Reported as Sales The Company had no transfers of receivables reported as sales. B. Transfer and Servicing of Financial Assets The Company had no transactions within this category. C. Wash Sales. The Company had no securities sold and reacquired within 0 days of the sale date to enhance the Company s investment portfolio yield.. The Company had no NAIC designation or below securities transactions during the reporting period. 8. Gain or Loss to the Reporting Entity from Uninsured Plans and the Uninsured Portion of Partially Insured Plans A. ASO Plans None B. ASC Plans None C. Medicare or Other Similarly Structured Cost Based Reimbursement Contracts None 9. Direct Premium Written/Produced by Managing General Agents/Third Party Administrators MGA FEIN Excl Contract Types of Bus Written Types of Auth Granted Total Direct Prem Written/Prod By Preferred Managing Agency Inc Y HO/DF/Surety U, CA, B, C $68,855,86 Tallahassee, FL 0. Fair Value Measurements A. () Fair Value Measurements at Reporting Date Description for each class of asset or liability (Level ) (Level ) (Level ) Total Preferred Stock Common Stock Industrial & Misc Derivative Assets Separate Account Assets Total Assets at Fair Value Liabilities at Fair Value

20 STATEMENT AS OF DECEMBER, 06 OF THE Capitol Preferred Insurance Company Inc. NOTES TO FINANCIAL STATEMENTS () Fair Value Measurements in (Level ) of the Fair Value Hierarchy Total gains Total gains Purchases, Balance Transfers in Transfers out (losses) in (losses) in issuance, Balance //05 Level of Level net income surplus settlements //06 Equity Securities Separate account assets Derivative Liabilities B. None C. The Company s policy is to recognize transfers in and out as of the actual date of the event or change in circumstances. D. Not Practicable to Estimate Fair Value. Other Items A. Extraordinary Items There were no extraordinary items during 06 and 05. B. Troubled Debt Restructuring The Company had no troubled debt restructuring. C. Other Disclosures Assets, consisting of certificates of deposit, money markets, and US Treasury Notes in the amounts of $755,556 and $754,96 of December, 06 and December, 05, respectively, were on deposit with the State of Florida and Insurance Commissioners of Georgia, Louisiana, and South Carolina as required for statutory deposits as required by law. These are reported in Schedule E Part Special Deposits. Agents' Balances Agents' Balances or Uncollected Premiums per Statementbefore reduction for ceded reinsurance balances payable $85,96 Premiums Collected from "Controlled" or "Controlling" persons $0 Premiums Collected from "Controlled" or "Controlling" persons within 5 working days immediately preceding reporting period; F.S (5) (a). $0 *Amount if Applicable Trust Fund $0 Letter of Credit $0 Financial Guaranty Bond $0 Total of lines (4), (5) & (6) $0 () minus () minus (7); should not exceed zero $0 Build up funds in the aggregate amount of $496 are maintained in trust funds on behalf of bail bond agents are held by the Company in a fiduciary capacity to indemnify the Company for losses and any other agreed upon costs related to a bail bond executed by a bail bond agent. D. Business Interruption Insurance Recoveries The Company had no business interruption recoveries during the reporting period. E. State Transferable Tax Credit The Company does not have any transferable tax credits. F. Subprime Mortgage Related Risk Exposure The Company has no direct or indirect investments in subprime or subprime backed securities G. The company has no insurance-linked securities.. Events Subsequent There have been no known events subsequent to December, 06 which may have a material effect on the financial condition of the Company.. Reinsurance A. Unsecured Reinsurance Recoverable FEMA,,000 Florida Hurricane CAT Fund,69,0 B. Reinsurance Recoverable in Dispute C. Reinsurance Assumed and Ceded () Assumed Reinsurance Ceded Reinsurance Net Premium Reserve Commission Equity Premium Reserve Commission Equity Premium Reserve Commission Equity a. Affiliates $... $... $... $... $... $... b. All Other $...64,59 $...7,65 $...8,95, $... 7,809,46 $...(8,8,97) $...(7,65,594) c. TOTAL $...64,59 $...7,65 $... 8,95, $... 7,809,46 $...(8,8,97) $...(7,65,594) d. Direct Unearned Premium Reserve $...6,58,78 Line (c) of Ceded Reinsurance Premium Reserve Column must equal Page, Line 9, first inside amount. () REINSURANCE Direct Assumed Ceded Net a. Contingent Commission $... $... $... (,94,8) $... (,94,8) b. Sliding Scale Adjustments $... $... $... $... c. Other Profit Commission Arrangements $... $... $... $... d. TOTAL $... $... $... (,94,8) $... (,94,8) () D. Uncollectible Reinsurance () The Company has written off in the current year reinsurance balances due (from the companies listed below) in the amount of: $, which is reflected as: a. Losses incurred $... b. Loss adjustment expenses incurred $... c. Premiums earned $... d. Other $... E. Commutation of Ceded Reinsurance The Company has reported in its operations in the current year as a result of commutation of reinsurance with the companies listed 4.6

21 STATEMENT AS OF DECEMBER, 06 OF THE Capitol Preferred Insurance Company Inc. NOTES TO FINANCIAL STATEMENTS below, amounts that are reflected as: () Losses incurred $... () Loss adjustment expenses incurred $... () Premiums earned $... (4) Other $... F. Retroactive Reinsurance The Company has no retroactive reinsurance agreements. G. Reinsurance Accounted for as a Deposit None H. Disclosures for the transfer of property and casualty run-off agreements None I. Certified Reinsurer Rating Downgraded or Status Subject to Revocation () Reporting Entity Ceding to Certified Reinsurer Whose Rating Was Downgraded or Status Subject to Revocation a. None () Reporting Entity s Certified Reinsurer Rating Downgraded or Status Subject to Revocation a. None J. Reinsurance Agreements Qualifying for Reinsurance The company has no retroactive reinsurance agreements covering asbestos and pollution liabilities which qualify for reinsurer aggregation in accordance with SSAP 6R-Property and Casualty Reinsurance. 4. Retrospectively Rated Contracts & Contracts Subject to Redetermination The Company has no retrospectively rated contracts 5. Changes in Incurred Losses and Loss Adjustment Expenses Reserves as of December, 05 were $7,,5. As of December, 06, $,94,645 has been paid for incurred loss and loss adjustment expenses attributable to insured events of prior years. Reserves remaining for prior years are now $,0,04 as a result of re-estimation of unpaid claims and claims adjustment expenses. Therefore, there has been $,5,564 favorable prior-year development since December, 05. This is generally the result of ongoing analysis of recent loss development trends and original estimates are increased or decreased as additional information becomes available. 6. Intercompany Pooling Arrangements The Company has no intercompany pooling arrangements. 7. Structured Settlements A. Loss Reserves Eliminated by Annuities Unrecorded Loss Contingencies $...0 $ Health Care Receivables The Company has no health care receivables. 9. Participating Policies The Company has no participating policies. 0. Premium Deficiency Reserves. Liability carried for premium deficiency reserves $ Date of the most recent evaluation of this liability......//06. Was anticipated investment income utilized in the calculation? Yes [ x ] No [ ]. High Deductibles The Company has no reserve credits recorded for high deductibles on unpaid claims and no amounts have been billed or are recoverable.. Discounting of Liabilities for Unpaid Losses or Unpaid Loss Adjustment Expenses A. Tabular Discount None B. Non-tabular Discount None. Asbestos/Environmental Reserves The company does not have on the books nor has it ever written an insured for which it has identified a potential for the existence of a liability due to asbestos losses. 4. Subscriber Savings Accounts Not Applicable 5. Multiple Peril Crop Insurance The Company has no multi-peril crop insurance policies. 6. Financial Guaranty Insurance The Company has no financial guaranty insurance contracts. 4.7

22 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc 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, complete Schedule Y, Parts, A and.. 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 [ ] N/A [ ]. State Regulating?. 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. //0. 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. /0/0. 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). 05//05.4 By what department or departments? Florida Office of Insurance Regulations.5 Have all financial statement adjustments within the latest financial examination report been accounted for in a subsequent financial statement filed with Departments? Yes [ ] No [ ] N/A [ X ].6 Have all of the recommendations within the latest financial examination report been complied with? Yes [ X ] No [ ] N/A [ ] Florida 4. 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: 4. sales of new business? Yes [ X ] No [ ] 4. renewals? Yes [ X ] No [ ] 4. 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: 4. sales of new business? Yes [ ] No [ X ] 4. renewals? Yes [ ] No [ X ] 5. Has the reporting entity been a party to a merger or consolidation during the period covered by this statement? Yes [ ] No [ X ] 5. 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 6. 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 ] 6. If yes, give full information 7. Does any foreign (non-united States) person or entity directly or indirectly control 0% or more of the reporting entity? Yes [ ] No [ X ] 7. If yes, 7. 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, government, manager or attorneyin-fact). Nationality Type of Entity 5

23 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc GENERAL INTERROGATORIES 8. Is the company a subsidiary of a bank holding company regulated by the Federal Reserve Board? Yes [ ] No [ X ] 8. If response to 8. is yes, please identify the name of the bank holding company. 8. Is the company affiliated with one or more banks, thrifts or securities firms? Yes [ ] No [ X ] 8.4 If response to 8. is yes, please provide the names and locations (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 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 4 OCC 5 FDIC 6 SEC 9. What is the name and address of the independent certified public accountant or accounting firm retained to conduct the annual audit? Mountjoy, Chilton, & Medley, Louisville KY 0. Has the insurer been granted any exemptions to the prohibited non-audit services provided by the certified independent public accountant requirements as allowed in Section 7H of the Annual Financial Reporting Model Regulation (Model Audit Rule), or substantially similar state law or regulation? Yes [ ] No [ X ] 0. If the response to 0. is yes, provide information related to this exemption: 0. Has the insurer been granted any exemptions related to the other requirements of the Annual Financial Reporting Model Regulation as allowed for in Section 8A of the Model Regulation, or substantially similar state law or regulation? Yes [ ] No [ X ] 0.4 If the response to 0. is yes, provide information related to this exemption: 0.5 Has the reporting entity established an Audit Committee in compliance with the domiciliary state insurance laws? Yes [ X ] No [ ] N/A [ ] 0.6 If the response to 0.5 is no or n/a, please explain. 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? Arthur Randolph, Principal and Consulting Actuary, Pinnacle Actuarial Resources, Atlanta, GA. Does the reporting entity own any securities of a real estate holding company or otherwise hold real estate indirectly? Yes [ ] No [ X ]. If yes, provide explanation. Name of real estate holding company. Number of parcels involved 0. Total book/adjusted carrying value $. 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 [ ].4 If answer to (.) is yes, has the domiciliary or entry state approved the changes? Yes [ ] No [ ] N/A [ ] 4. Are the senior officers (principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) of the reporting entity subject to a code of ethics, which includes the following standards? Yes [ X ] No [ ] a. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; b. Full, fair, accurate, timely and understandable disclosure in the periodic reports required to be filed by the reporting entity; c. Compliance with applicable governmental laws, rules and regulations; d. The prompt internal reporting of violations to an appropriate person or persons identified in the code; and e. Accountability for adherence to the code. 4. If the response to 4. is no, please explain: 4. Has the code of ethics for senior managers been amended? Yes [ ] No [ X ] 4. If the response to 4. is yes, provide information related to amendment(s) 4. Have any provisions of the code of ethics been waived for any of the specified officers? Yes [ ] No [ X ] 4. If the response to 4. is yes, provide the nature of any waiver(s). 5.

24 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc GENERAL INTERROGATORIES 5. Is the reporting entity the beneficiary of a Letter of Credit that is unrelated to reinsurance where the issuing or confirming bank is not on the SVO Bank List? Yes [ ] No [ X ] 5. If the response to 5. is yes, indicate the American Bankers Association (ABA) Routing Number and the name of the issuing or confirming bank of the Letter of Credit and describe the circumstances in which the Letter of Credit is triggered. 4 American Bankers Association (ABA) Routing Number Issuing or Confirming Bank Name Circumstances That Can Trigger the Letter of Credit Amount BOARD OF DIRECTORS 6. 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 [ ] 7. 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 [ ] 8. 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 is likely to conflict with the official duties of such person? Yes [ X ] No [ ] FINANCIAL 9. Has this statement been prepared using a basis of accounting other than Statutory Accounting Principles (e.g., Generally Accepted Accounting Principles)? Yes [ ] No [ X ] 0. Total amount loaned during the year (inclusive of Separate Accounts, exclusive of policy loans): 0. To directors or other officers $ 0 0. To stockholders not officers $ 0 0. Trustees, supreme or grand (Fraternal only) $ 0 0. Total amount of loans outstanding at the end of year (inclusive of Separate Accounts, exclusive of policy loans): 0. To directors or other officers $ 0 0. To stockholders not officers $ 0 0. Trustees, supreme or grand (Fraternal only) $ 0. Were any assets reported in this statement subject to a contractual obligation to transfer to another party without the liability for such obligation being reported in the 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 $.4 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 parent, subsidiaries or affiliates on Page of this statement? Yes [ ] No [ X ]. If yes, indicate any amounts receivable from parent included in the Page amount: $ INVESTMENT 4.0 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? (other than securities lending programs addressed in 4.0) Yes [ X ] No [ ] 4.0 If no, give full and complete information, relating thereto 4.0 For security lending programs, provide a description of the program including value for collateral and amount of loaned securities, and whether collateral is carried on or off-balance sheet. (an alternative is to reference Note 7 where this information is also provided) 4.04 Does the company s security lending program meet the requirements for a conforming program as outlined in the Risk-Based Capital Instructions? Yes [ ] No [ ] NA [ X ] 4.05 If answer to 4.04 is yes, report amount of collateral for conforming programs. $ 4.06 If answer to 4.04 is no, report amount of collateral for other programs. $ 4.07 Does your securities lending program require 0% (domestic securities) and 05% (foreign securities) from the counterparty at the outset of the contract? Yes [ ] No [ ] NA [ X ] 4.08 Does the reporting entity non-admit when the collateral received from the counterparty falls below 00%? Yes [ ] No [ ] NA [ X ] 4.09 Does the reporting entity or the reporting entity s securities lending agent utilize the Master Securities Lending Agreement (MSLA) to conduct securities lending? Yes [ ] No [ ] NA [ X ] 4.0 For the reporting entity s security lending program, state the amount of the following as of December of the current year: 4.0 Total fair value of reinvested collateral assets reported on Schedule DL, Parts and $ 4.0 Total book adjusted/carrying value of reinvested collateral assets reported on Schedule DL, Parts and $ 4.0 Total payable for securities lending reported on the liability page $ 5.

25 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc GENERAL INTERROGATORIES 5. 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 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. and 4.0). Yes [ X ] No [ ] 5. If yes, state the amount thereof at December of the current year: 5. For category (5.6) provide the following: 5. Subject to repurchase agreements $ 5. Subject to reverse repurchase agreements $ 5. Subject to dollar repurchase agreements $ 5.4 Subject to reverse dollar repurchase agreements $ 5.5 Placed under option agreements $ 5.6 Letter stock or securities restricted as to sale excluding FHLB Capital Stock $ 5.7 FHLB Capital Stock $ 5.8 On deposit with states $ 755, On deposit with other regulatory bodies $ 5.0 Pledged as collateral excluding collateral pledged to an FHLB $ 5. Pledged as collateral to FHLB including assets backing funding agreements $ 5. Other $ Nature of Restriction Description Amount 6. Does the reporting entity have any hedging transactions reported on Schedule DB? Yes [ ] No [ X ] 6. If yes, has a comprehensive description of the hedging program been made available to the domiciliary state? Yes [ ] No [ ] N/A [ X ] If no, attach a description with this statement. 7. 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 ] 7. If yes, state the amount thereof at December of the current year. $ 8. Excluding items in Schedule E Part Special Deposits, real estate, mortgage loans and investments held physically in the reporting entity s offices, vaults or safety deposit boxes, were all stocks, bonds and other securities, owned throughout the current year held pursuant to a custodial agreement with a qualified bank or trust company in accordance with Section, III General Examination Considerations, F. Outsourcing of Critical Functions, Custodial or Safekeeping agreements of the NAIC Financial Condition Examiners Handbook? Yes [ X ] No [ ] 8.0 For agreements that comply with the requirements of the NAIC Financial Condition Examiners Handbook, complete the following: SunTrust Capital Markets Merill Lynch Name of Custodian(s) Custodian s Address 00 South Orange Avenue, Orlando, FL 5 South Monroe Street, Tallahassee, FL 8.0 For all agreements that do not comply with the requirements of the NAIC Financial Condition Examiners Handbook, provide the name, location and a complete explanation: Name(s) Location(s) Complete Explanation(s) 8.0 Have there been any changes, including name changes, in the custodian(s) identified in 8.0 during the current year? Yes [ ] No [ X ] 8.04 If yes, give full and complete information relating thereto: Old Custodian New Custodian Date of Change 4 Reason 5.

26 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc GENERAL INTERROGATORIES 8.05 Investment management Identify all investment advisors, investment managers, broker/dealers, including individuals that have the authority to make investment decisions on behalf of the reporting entity. For assets that are managed internally by employees of the reporting entity, note as such. [ that have access to the investment accounts ; handle securities ] James Graganella Keith Martin J.Troy Krause Justin Edenfield Name of Firm or Individual I I I I Affiliation For those firms/individuals listed in the table for Question 8.05, do any firms/individuals unaffiliated with the reporting entity (i.e., designated with a U ) manage more than 0% of the reporting entity s assets? Yes [ ] No [ X ] For firms/individuals unaffiliated with the reporting entity (i.e., designated with a U ) listed in the table for Question 8.05, does the total assets under management aggregate to more than 50% of the reporting entity s assets? Yes [ ] No [ X ] 8.06 For those firms or individuals listed in the table for 8.05 with an affiliation code of A (affiliated) or U (unaffiliated), provide the information for the table below. Central Registration Depository Number Name of Firm or Individual Legal Entity Identifier (LEI) 4 Registered With 5 Investment Management Agreement (IMA) Filed 9. Does the reporting entity have any diversified mutual funds reported in Schedule D - Part (diversified according to the Securities and Exchange Commission (SEC) in the Investment Company Act of 940 [Section 5 (b) ()])? Yes [ ] No [ X ] 9. If yes, complete the following schedule: CUSIP # Name of Mutual Fund Book/Adjusted Carrying Value TOTAL 0 9. For each mutual fund listed in the table above, complete the following schedule: Name of Mutual Fund (from above table) Name of Significant Holding of the Mutual Fund Amount of Mutual Fund s Book/Adjusted Carrying Value Attributable to the Holding 4 Date of Valuation 0. Provide the following information for all short-term and long-term bonds and all preferred stocks. Do not substitute amortized value or statement value for fair value. Statement (Admitted) Value Fair Value Excess of Statement over Fair Value (-), or Fair Value over Statement (+) 0. Bonds 9,50,40 8,05,449 (,97,89) 0. Preferred Stocks Totals 9,50,40 8,05,449 (,97,89) 0.4 Describe the sources or methods utilized in determining the fair values: Fair value provided by National Financial Service. Was the rate used to calculate fair value determined by a broker or custodian for any of the securities in Schedule D? Yes [ X ] No [ ]. If the answer to. is yes, does the reporting entity have a copy of the broker s or custodian s pricing policy (hard copy or electronic copy) for all brokers or custodians used as a pricing source? Yes [ X ] No [ ]. If the answer to. is no, describe the reporting entity s process for determining a reliable pricing source for purposes of disclosure of fair value for Schedule D:. Have all the filing requirements of the Purposes and Procedures Manual of the NAIC Investment Analysis Office been followed? Yes [ X ] No [ ]. If no, list exceptions: 5.4

27 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc GENERAL INTERROGATORIES OTHER. Amount of payments to trade associations, service organizations and statistical or rating bureaus, if any? $ 7,794. List the name of the organization and the amount paid if any such payment represented 5% or more of the total payments to trade associations, service organizations and statistical or rating bureaus during the period covered by this statement. Name Amount Paid Insurance Service Office $ 09,46 4. Amount of payments for legal expenses, if any? $ 59, List the name of the firm and the amount paid if any such payment represented 5% or more of the total payments for legal expenses during the period covered by this statement. Name Amount Paid Johnson, Pope, Boker et al $ 5, Amount of payments for expenditures in connection with matters before legislative bodies, officers or departments of government, if any? $ 5. List the name of the firm and the amount paid if any such payment represented 5% or more of the total payment expenditures in connection with matters before legislative bodies, officers or departments of government during the period covered by this statement. Name $ $ $ Amount Paid 5.5

28 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc GENERAL INTERROGATORIES PART - PROPERTY & CASUALTY INTERROGATORIES. Does the reporting entity have any direct Medicare Supplement Insurance in force? Yes [ ] No [ X ]. If yes, indicate premium earned on U. S. business only. $ 0. What portion of Item (.) is not reported on the Medicare Supplement Insurance Experience Exhibit? $. Reason for excluding.4 Indicate amount of earned premium attributable to Canadian and/or Other Alien not included in Item (.) above. $.5 Indicate total incurred claims on all Medicare Supplement insurance. $ 0.6 Individual policies: Most current three years:.6 Total premium earned $ 0.6 Total incurred claims $ 0.6 Number of covered lives 0 All years prior to most current three years:.64 Total premium earned $ 0.65 Total incurred claims $ 0.66 Number of covered lives 0.7 Group policies: Most current three years:.7 Total premium earned $ 0.7 Total incurred claims $ 0.7 Number of covered lives 0 All years prior to most current three years:.74 Total premium earned $ 0.75 Total incurred claims $ 0.76 Number of covered lives 0. Health Test: Current Year Prior Year. Premium Numerator $ 0 $ 0. Premium Denominator $,04,4 $,864,644. Premium Ratio (./.) Reserve Numerator $ 0 $ 0.5 Reserve Denominator $ 5,05,594 $ 5,6,950.6 Reserve Ratio (.4/.5) Does the reporting entity issue both participating and non-participating policies? Yes [ ] No [ X ]. If yes, state the amount of calendar year premiums written on:. Participating policies $. Non-participating policies $ 4. For Mutual reporting entities and Reciprocal Exchanges only: 4. Does the reporting entity issue assessable policies? Yes [ ] No [ ] 4. Does the reporting entity issue non-assessable policies? Yes [ ] No [ ] 4. If assessable policies are issued, what is the extent of the contingent liability of the policyholders? % 4.4 Total amount of assessments paid or ordered to be paid during the year on deposit notes or contingent premiums. $ 5. For Reciprocal Exchanges Only: 5. Does the exchange appoint local agents? Yes [ ] No [ ] 5. If yes, is the commission paid: 5. Out of Attorney's-in-fact compensation Yes [ ] No [ ] N/A [ ] 5. As a direct expense of the exchange Yes [ ] No [ ] N/A [ ] 5. What expenses of the Exchange are not paid out of the compensation of the Attorney-in-fact? 5.4 Has any Attorney-in-fact compensation, contingent on fulfillment of certain conditions, been deferred? Yes [ ] No [ ] 5.5 If yes, give full information 6

29 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc GENERAL INTERROGATORIES PART - PROPERTY & CASUALTY INTERROGATORIES 6. What provision has this reporting entity made to protect itself from an excessive loss in the event of a catastrophe under a workers compensation contract issued without limit of loss: Company does not write this coverage. 6. Describe the method used to estimate this reporting entity s probable maximum insurance loss, and identify the type of insured exposures comprising that probable maximum loss, the locations of concentrations of those exposures and the external resources (such as consulting firms or computer software models), if any, used in the estimation process: The company purchases /00 year event coverage derived from the company's database of exposure by location, construction and value. 6. What provision has this reporting entity made (such as a catastrophic reinsurance program) to protect itself from an excessive loss arising from the types and concentrations of insured exposures comprising its probable maximum property insurance loss? The company maintains 00% CAT protection in excess and $ million each occurence by combination of reinsurance covers. 6.4 Does the reporting entity carry catastrophe reinsurance protection for at least one reinstatement, in an amount sufficient to cover its estimated probable maximum loss attributable to a single loss event or occurrence? Yes [ X ] No [ ] 6.5 If no, describe any arrangements or mechanisms employed by the reporting entity to supplement its catastrophe reinsurance program or to hedge its exposure to unreinsured catastrophic loss 7. Has the reporting entity reinsured any risk with any other entity under a quota share reinsurance contract that includes a provision that would limit the reinsurer's losses below the stated quota share percentage (e.g., a deductible, a loss ratio corridor, a loss cap, an aggregate limit or any similar provisions)? Yes [ ] No [ X ] 7. If yes, indicate the number of reinsurance contracts containing such provisions. 7. If yes, does the amount of reinsurance credit taken reflect the reduction in quota share coverage caused by any applicable limiting provision(s)? Yes [ ] No [ ] 8. Has this reporting entity reinsured any risk with any other entity and agreed to release such entity from liability, in whole or in part, from any loss that may occur on this risk, or portion thereof, reinsured? Yes [ ] No [ X ] 8. If yes, give full information 9. Has the reporting entity ceded any risk under any reinsurance contract (or under multiple contracts with the same reinsurer or its affiliates) for which during the period covered by the statement: (i) it recorded a positive or negative underwriting result greater than 5% of prior yearend surplus as regards policyholders or it reported calendar year written premium ceded or year-end loss and loss expense reserves ceded greater than 5% of prior year-end surplus as regards policyholders; (ii) it accounted for that contract as reinsurance and not as a deposit; and (iii) the contract(s) contain one or more of the following features or other features that would have similar results: (a) A contract term longer than two years and the contract is noncancellable by the reporting entity during the contract term; (b) A limited or conditional cancellation provision under which cancellation triggers an obligation by the reporting entity, or an affiliate of the reporting entity, to enter into a new reinsurance contract with the reinsurer, or an affiliate of the reinsurer; (c) Aggregate stop loss reinsurance coverage; (d) A unilateral right by either party (or both parties) to commute the reinsurance contract, whether conditional or not, except for such provisions which are only triggered by a decline in the credit status of the other party; (e) A provision permitting reporting of losses, or payment of losses, less frequently than on a quarterly basis (unless there is no activity during the period); or (f) Payment schedule, accumulating retentions from multiple years or any features inherently designed to delay timing of the reimbursement to the ceding entity. Yes [ X ] No [ ] 9. Has the reporting entity during the period covered by the statement ceded any risk under any reinsurance contract (or under multiple contracts with the same reinsurer or its affiliates), for which, during the period covered by the statement, it recorded a positive or negative underwriting result greater than 5% of prior year-end surplus as regards policyholders or it reported calendar year written premium ceded or year-end loss and loss expense reserves ceded greater than 5% of prior year-end surplus as regards policyholders; excluding cessions to approved pooling arrangements or to captive insurance companies that are directly or indirectly controlling, controlled by, or under common control with (i) one or more unaffiliated policyholders of the reporting entity, or (ii) an association of which one or more unaffiliated policyholders of the reporting entity is a member where: (a) The written premium ceded to the reinsurer by the reporting entity or its affiliates represents fifty percent (50%) or more of the entire direct and assumed premium written by the reinsurer based on its most recently available financial statement; or (b) Twenty five percent (5%) or more of the written premium ceded to the reinsurer has been retroceded back to the reporting entity or its affiliates in a separate reinsurance contract. Yes [ ] No [ X ] 9. If yes to 9. or 9., please provide the following information in the Reinsurance Summary Supplemental Filing for General Interrogatory 9: (a) The aggregate financial statement impact gross of all such ceded reinsurance contracts on the balance sheet and statement of income; (b) A summary of the reinsurance contract terms and indicate whether it applies to the contracts meeting the criteria in 9. or 9.; and (c) A brief discussion of management's principle objectives in entering into the reinsurance contract including the economic purpose to be achieved. 9.4 Except for transactions meeting the requirements of paragraph of SSAP No. 6R - Property and Casualty Reinsurance, has the reporting entity ceded any risk under any reinsurance contract (or multiple contracts with the same reinsurer or its affiliates) during the period covered by the financial statement, and either: (a) Accounted for that contract as reinsurance (either prospective or retroactive) under statutory accounting principles ( SAP ) and as a deposit under generally accepted accounting principles ( GAAP ); or (b) Accounted for that contract as reinsurance under GAAP and as a deposit under SAP? Yes [ ] No [ X ] 9.5 If yes to 9.4, explain in the Reinsurance Summary Supplemental Filing for General Interrogatory 9 (Section D) why the contract(s) is treated differently for GAAP and SAP. 9.6 The reporting entity is exempt from the Reinsurance Attestation Supplement under one or more of the following criteria: (a) The entity does not utilize reinsurance; or, Yes [ ] No [ X ] (b) The entity only engages in a 00% quota share contract with an affiliate and the affiliated or lead company has filed an attestation supplement; or Yes [ ] No [ X ] (c) The entity has no external cessions and only participates in an intercompany pool and the affiliated or lead company has filed an attestation supplement. Yes [ ] No [ X ] 0. If the reporting entity has assumed risks from another entity, there should be charged on account of such reinsurances a reserve equal to that which the original entity would have been required to charge had it retained the risks. Has this been done? Yes [X] No [ ] N/A [ ] 6.

30 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc GENERAL INTERROGATORIES PART - PROPERTY & CASUALTY INTERROGATORIES. Has the reporting entity guaranteed policies issued by any other entity and now in force: Yes [ ] No [ X ]. If yes, give full information. If the reporting entity recorded accrued retrospective premiums on insurance contracts on Line 5. of the asset schedule, Page, state the amount of corresponding liabilities recorded for:. Unpaid losses $. Unpaid underwriting expenses (including loss adjustment expenses) $. Of the amount on Line 5., Page, state the amount that is secured by letters of credit, collateral and other funds? $. If the reporting entity underwrites commercial insurance risks, such as workers compensation, are premium notes or promissory notes accepted from its insureds covering unpaid premiums and/or unpaid losses? Yes [ ] No [ ] N/A [X].4 If yes, provide the range of interest rates charged under such notes during the period covered by this statement:.4 From %.4 To %.5 Are letters of credit or collateral and other funds received from insureds being utilized by the reporting entity to secure premium notes or promissory notes taken by a reporting entity, or to secure any of the reporting entity s reported direct unpaid loss reserves, including unpaid losses under loss deductible features of commercial policies? Yes [ ] No [ X ].6 If yes, state the amount thereof at December of current year:.6 Letters of Credit $.6 Collateral and other funds $. Largest net aggregate amount insured in any one risk (excluding workers compensation): $ 50,000. Does any reinsurance contract considered in the calculation of this amount include an aggregate limit of recovery without also including a reinstatement provision? Yes [ ] No [ X ]. State the number of reinsurance contracts (excluding individual facultative risk certificates, but including facultative programs, automatic facilities or facultative obligatory contracts) considered in the calculation of the amount. 4. Is the reporting entity a cedant in a multiple cedant reinsurance contract? Yes [ ] No [ X ] 4. If yes, please describe the method of allocating and recording reinsurance among the cedants: 4. If the answer to 4. is yes, are the methods described in item 4. entirely contained in the respective multiple cedant reinsurance contracts? Yes [ ] No [ ] 4.4 If the answer to 4. is no, are all the methods described in 4. entirely contained in written agreements? Yes [ ] No [ ] 4.5 If the answer to 4.4 is no, please explain: 5. Has the reporting entity guaranteed any financed premium accounts? Yes [ ] No [ X ] 5. If yes, give full information 6. Does the reporting entity write any warranty business? Yes [ ] No [ X ] If yes, disclose the following information for each of the following types of warranty coverage: Direct Losses Incurred Direct Losses Unpaid Direct Written Premium 4 Direct Premium Unearned 6. Home $ $ $ $ $ 6. Products $ $ $ $ $ 6. Automobile $ $ $ $ $ 6.4 Other* $ $ $ $ $ * Disclose type of coverage: 5 Direct Premium Earned 6.

31 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc GENERAL INTERROGATORIES PART - PROPERTY & CASUALTY INTERROGATORIES 7. Does the reporting entity include amounts recoverable on unauthorized reinsurance in Schedule F Part that it excludes from Schedule F Part 5. Yes [ ] No [ X ] Incurred but not reported losses on contracts in force prior to July, 984, and not subsequently renewed are exempt from inclusion in Schedule F Part 5. Provide the following information for this exemption: 7. Gross amount of unauthorized reinsurance in Schedule F Part excluded from Schedule F Part 5 $ 7. Unfunded portion of Interrogatory 7. $ 7. Paid losses and loss adjustment expenses portion of Interrogatory 7. $ 7.4 Case reserves portion of Interrogatory 7. $ 7.5 Incurred but not reported portion of Interrogatory 7. $ 7.6 Unearned premium portion of Interrogatory 7. $ 7.7 Contingent commission portion of Interrogatory 7. $ Provide the following information for all other amounts included in Schedule F Part and excluded from Schedule F Part 5, not included above. 7.8 Gross amount of unauthorized reinsurance in Schedule F Part excluded from Schedule F Part 5 $ 7.9 Unfunded portion of Interrogatory 7.8 $ 7.0 Paid losses and loss adjustment expenses portion of Interrogatory 7.8 $ 7. Case reserves portion of Interrogatory 7.8 $ 7. Incurred but not reported portion of Interrogatory 7.8 $ 7. Unearned premium portion of Interrogatory 7.8 $ 7.4 Contingent commission portion of Interrogatory 7.8 $ 8. Do you act as a custodian for health savings accounts? Yes [ ] No [ X ] 8. If yes, please provide the amount of custodial funds held as of the reporting date. $ 8. Do you act as an administrator for health savings accounts? Yes [ ] No [ X ] 8.4 If yes, please provide the balance of the funds administered as of the reporting date. $ 6.

32 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc FIVE-YEAR HISTORICAL DATA Show amounts in whole dollars only, no cents; show percentages to one decimal place, i.e., Gross Premiums Written (Page 8, Part B, Cols., & ). Liability lines (Lines.,., 6, 7., 7., 7., 8., 8., 9., 9. & 9., 9.4) Property lines (Lines,, 9,, & 6) 8,997,085 9,40,6 9,65,997 9,56,589 9,947,07. Property and liability combined lines (Lines, 4, 5, 8, & 7) 45,060,48 45,,88 45,908,94 45,989,877 48,675,69 4. All other lines (Lines 6, 0,, 4, 5,, 4, 8, 9, 0 & 4) (47,59) 86,8 00,65 5,8 0,89 5. Nonproportional reinsurance lines (Lines, & ) Total (Line 5) 7,909,90 74,900,768 75,475,56 75,67,747 78,9,988 Net Premiums Written (Page 8, Part B, Col. 6) 7. Liability lines (Lines.,., 6, 7., 7., 7., 8., 8., 9., 9. & 9., 9.4) Property lines (Lines,, 9,, & 6) 4,947,447 4,77,649 4,70,5,5,769,444, Property and liability combined lines (Lines, 4, 5, 8, & 7) 8,44,887 8,05,60 7,94,85 4,97,56,5,50 0. All other lines (Lines 6, 0,, 4, 5,, 4, 8, 9, 0 & 4) (47,59) 86,8 00,65 5,8 0,89. Nonproportional reinsurance lines (Lines, & ) Total (Line 5),4,74,977,569,89,07 8,785,576 6,08,99 Statement of Income (Page 4). Net underwriting gain (loss) (Line 8) 90,9,709,808 4,466,4,80,75,70,57 4. Net investment gain (loss) (Line ) 556,07 586, ,0 55,794 56, Total other income (Line 5) 90,4 0,96 6,5 84,75, Dividends to policyholders (Line 7) Federal and foreign income taxes incurred (Line 9) 604,57,5,549,9 5,467,85 8. Net income (Line 0),78,50,84,5 5,09,57,49,794,4,977 Balance Sheet Lines (Pages and ) 9. Total admitted assets excluding protected cell business (Page, Line 6, Col. ) 58,8,709 54,798,487 47,574,48 7,90,46 44,6,84 0. Premiums and considerations (Page, Col. ) 0. In course of collection (Line 5.) 85,96 78, 507,08 48,48 58, Deferred and not yet due (Line 5.),999,0,980,08,85,48,774,45,848,40 0. Accrued retrospective premiums (Line 5.) Total liabilities excluding protected cell business (Page, Line 6),4,04 8,79,80 4,670,684 8,7,90 7,505,4. Losses (Page, Line ) 5,77,9 6,90, 5,49,75 4,88,678 5,75,696. Loss adjustment expenses (Page, Line ) 96,656 84,80 79,85 6,6 690,86 4. Unearned premiums (Page, Line 9) 8,00,745 8,90,47 8,77,5 5,559,00 4,754,0 5. Capital paid up (Page, Lines 0 & ),875,000,875,000,875,000,875,000,875, Surplus as regards policyholders (Page, Line 7) 7,004,685 6,058,657,90,744 9,6,45 6,656,4 Cash Flow (Page 5) 7. Net cash from operations (Line ),609,59 7,50,56,,5 (6,56,7) 4,570,005 Risk-Based Capital Analysis 8. Total adjusted capital 7,004,685 6,058,657,90,744 9,6,45 6,656,4 9. Authorized control level risk-based capital,479,05,5,9,44,8,084,547,,909 Percentage Distribution of Cash, Cash Equivalents and Invested Assets (Page, Col. )(Item divided by Page, Line, Col. ) x Bonds (Line ) Stocks (Lines. &.) Mortgage loans on real estate (Lines. and.) Real estate (Lines 4., 4. & 4.) Cash, cash equivalents and short-term investments (Line 5) Contract loans (Line 6) Derivatives (Line 7) Other invested assets (Line 8) Receivables for securities (Line 9) Securities lending reinvested collateral assets (Line 0) Aggregate write-ins for invested assets (Line ) Cash, cash equivalents and invested assets (Line ) Investments in Parent, Subsidiaries and Affiliates 4. Affiliated bonds, (Sch. D, Summary, Line, Col. ) Affiliated preferred stocks (Sch. D, Summary, Line 8, Col. ) Affiliated common stocks (Sch. D, Summary, Line 4, Col. ) Affiliated short-term investments (subtotals included in Schedule DA Verification, Col. 5, Line 0) Affiliated mortgage loans on real estate All other affiliated Total of above Lines 4 to Total Investment in parent included in Lines 4 to 47 above Percentage of investments in parent, subsidiaries and affiliates to surplus as regards policyholders (Line 48 above divided by Page, Col., Line 7 x 00.0)

33 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc Capital and Surplus Accounts (Page 4) FIVE-YEAR HISTORICAL DATA 06 (Continued) Net unrealized capital gains (losses) (Line 4) Dividends to stockholders (Line 5) Change in surplus as regards policyholders for the year (Line 8) 946,08,54,9,7,499,974,84,774,66 Gross Losses Paid (Page 9, Part, Cols. & ) 54. Liability lines (Lines.,., 6, 7., 7., 7., 8., 8., 9., 9. & 9., 9.4) Property lines (Lines,, 9,, & 6) 8,5,595 6,85,899 6,4,5 7,56,7 8,57, Property and liability combined lines (Lines, 4, 5, 8, & 7) 9,067,65,57,09 4,4,70 6,08,568 5,847, All other lines (Lines 6, 0,, 4, 5,, 4, 8, 9, 0 & 4) Nonproportional reinsurance lines (Lines, & ) Total (Line 5) 7,579,0 0,90,98 0,65,505,7,805 4,05,57 Net Losses Paid (Page 9, Part, Col. 4) 60. Liability lines (Lines.,., 6, 7., 7., 7., 8., 8., 9., 9. & 9., 9.4) Property lines (Lines,, 9,, & 6),790,60,46,950,06,8,570,5 4,90,49 6. Property and liability combined lines (Lines, 4, 5, 8, & 7) 8,005,47 6,7,684 7,0,067 8,06,758 7,9,97 6. All other lines (Lines 6, 0,, 4, 5,, 4, 8, 9, 0 & 4) Nonproportional reinsurance lines (Lines, & ) Total (Line 5),796,074 0,60,64 0,6,85,587,09,,466 Operating Percentages (Page 4) (Item divided by Page 4, Line ) x Premiums earned (Line ) Losses incurred (Line ) Loss expenses incurred (Line ) Other underwriting expenses incurred (Line 4) (8.6) (4.8) (76.) (9.4) (59.0) 70. Net underwriting gain (loss) (Line 8) Other Percentages 7. Other underwriting expenses to net premiums written (Page 4, Lines divided by Page 8, Part B, Col. 6, Line 5 x 00.0) (5.6) (4.) (60.9) (85.) (98.8) 7. Losses and loss expenses incurred to premiums earned (Page 4, Lines + divided by Page 4, Line x 00.0) Net premiums written to policyholders' surplus (Page 8, Part B, Col. 6, Line 5 divided by Page, Line 7, Col. x 00.0) One Year Loss Development (000 omitted) 74. Development in estimated losses and loss expenses incurred prior to current year (Schedule P, Part -Summary, Line, Col. ) (,005) (5) (97) (09) (,86) 75. Percent of development of losses and loss expenses incurred to policyholders' surplus of prior year end (Line 74 above divided by Page 4, Line, Col. x 00.0) (7.7) (0.7) (.5) (.9) (8.5) Two Year Loss Development (000 omitted) 76. Development in estimated losses and loss expenses incurred years before the current year and prior year (Schedule P, Part - Summary, Line, Col. ) (506) (,5) (78) 77. Percent of development of losses and loss expenses incurred to reported policyholders' surplus of second prior year end (Line 76 above divided by Page 4, Line, Col. x 00.0) (.).6. (8.8) (0.6) NOTE: If a party to a merger, have the two most recent years of this exhibit been restated due to a merger in compliance with the disclosure requirements of SSAP No. - Accounting Changes and Correction of Errors? Yes [ ] No [ ] If no, please explain 8

34 Years in Which Premiums Were Earned and Losses Were Incurred ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc SCHEDULE P - ANALYSIS OF LOSSES AND LOSS EXPENSES SCHEDULE P - PART - SUMMARY ($000 Omitted) Premiums Earned Loss and Loss Expense Payments Defense and Cost Adjusting and Other 0 Loss Payments Containment Payments Payments Number of Salvage Total Net Claims and Paid (Cols. Reported Direct and Net Direct and Direct and Direct and Subrogation Direct and Assumed Ceded (Cols. - ) Assumed Ceded Assumed Ceded Assumed Ceded Received ) Assumed. Prior XXX XXX XXX XXX ,660 47,68 5,979,79,08 0 0, ,88 XXX ,5 47,08,44 9,04 9,74 0 0,79 5,50 XXX ,064 4,04,00,47, , ,40 XXX ,99 5,875,44 6,4, 5 0, ,96 XXX ,8 5,0 0,780,484, 0 0, ,98 XXX ,70 66,70 0,000,709, , ,5 XXX ,5 70,7 7,980 0,090 0, , ,89 XXX ,65 64,54 0, 9,886 9, , ,07 XXX ,44 6,80,864 7,875 8,95 5 0,98 0,9 XXX ,875 6,57,04,9,6 0 0,80,9 58,67 XXX. Totals XXX XXX XXX 8,460, ,5, ,08 XXX Adjusting and Other 4 5 Losses Unpaid Defense and Cost Containment Unpaid Unpaid Case Basis Bulk + IBNR Case Basis Bulk + IBNR Total Number of Salvage and Subrogation Net Losses and Claims Outstanding Direct Direct and Assumed Ceded Direct and Assumed Ceded Direct and Assumed Ceded Direct and Assumed Ceded Direct and Assumed Ceded Anticipated Expenses Unpaid and Assumed XXX XXX XXX XXX XXX XXX XXX XXX XXX 0., ,49 XXX. 5,567,08,, ,60 XXX. 8,409 4,50 4,08, ,74 XXX Total Losses and Loss Expenses Incurred Direct and Assumed Ceded Net Loss and Loss Expense Percentage (Incurred/Premiums Earned) 9 0 Direct and Assumed Ceded Net Nontabular Discount Loss Loss Expense 4 Inter- Company Pooling Participation Percentage Net Balance Sheet Reserves After Discount 5 6 Loss Losses Expenses Unpaid Unpaid. XXX XXX XXX XXX XXX XXX 0 0 XXX ,046,08, ,997 9,747, ,86,785, ,0,77 5, ,485,4 4, ,58,50 5, ,655 0,408, ,75 0,, ,88 0,008, , ,96 9,99 5, , XXX XXX XXX XXX XXX XXX 0 0 XXX 5,77 96 Note: Parts and 4 are gross of all discounting, including tabular discounting. Part is gross of only nontabular discounting, which is reported in Columns and of Part. The tabular discount, if any, is reported in the Notes to Financial Statements, which will reconcile Part with Parts and 4.

35 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc Years in Which Losses Were Incurred 007 SCHEDULE P - PART - SUMMARY INCURRED NET LOSSES AND DEFENSE AND COST CONTAINMENT EXPENSES REPORTED AT YEAR END ($000 OMITTED) DEVELOPMENT One Year Two Year. Prior ,5,68,49,57,7,4,84, ,745,84,99,06,4,97,97,97,97, XXX 0,700 9,80 9,568 9,56 9,49 9,47 9,460 9,460 9, XXX XXX,58,,4,44,5,,78, XXX XXX XXX,09,677,0,8,,00,9 (7) (0) 6. 0 XXX XXX XXX XXX,585,,54,87,44, () (65) 7. 0 XXX XXX XXX XXX XXX,064,794,74,8, XXX XXX XXX XXX XXX XXX,08 0, 0,597 0, XXX XXX XXX XXX XXX XXX XXX,49 0,77 0,475 (6) (,08) XXX XXX XXX XXX XXX XXX XXX XXX,680 0,09 (,65) XXX. 06 XXX XXX XXX XXX XXX XXX XXX XXX XXX,4 XXX XXX. Totals (,005) (506) Years in Which Losses Were Incurred SCHEDULE P - PART - SUMMARY CUMULATIVE PAID NET LOSSES AND DEFENSE AND COST CONTAINMENT EXPENSES REPORTED AT YEAR END ($ OMITTED) Number of Number of Claims Claims Closed Closed With Without Loss Loss Payment Payment. Prior ,5,49,57,7,7,7,99 XXX XXX ,565,50,598,99,97,97,97,97,97,97 XXX XXX. 008 XXX 7,9 9,0 9,6 9,4 9,44 9,460 9,460 9,460 9,46 XXX XXX XXX XXX 7,55 0,786 0,965,5,76,96,78,78 XXX XXX XXX XXX XXX 7,96,,74,946,0,00,9 XXX XXX 6. 0 XXX XXX XXX XXX 7,686 0,4 0,80,064,0,6 XXX XXX 7. 0 XXX XXX XXX XXX XXX 8,08,06,794,075,56 XXX XXX 8. 0 XXX XXX XXX XXX XXX XXX 7,58 9,40 9,944 0, XXX XXX XXX XXX XXX XXX XXX XXX XXX 7,85 9,989 0,0 XXX XXX XXX XXX XXX XXX XXX XXX XXX XXX 6,985 8,948 XXX XXX. 06 XXX XXX XXX XXX XXX XXX XXX XXX XXX 9,78 XXX XXX Years in Which Losses Were Incurred SCHEDULE P - PART 4 - SUMMARY BULK AND IBNR RESERVES ON NET LOSSES AND DEFENSE AND COST CONTAINMENT EXPENSES REPORTED AT YEAR END ($000 OMITTED) Prior , XXX, XXX XXX, XXX XXX XXX, XXX XXX XXX XXX, XXX XXX XXX XXX XXX, () 8. 0 XXX XXX XXX XXX XXX XXX, XXX XXX XXX XXX XXX XXX XXX, XXX XXX XXX XXX XXX XXX XXX XXX, XXX XXX XXX XXX XXX XXX XXX XXX XXX,546 4

36 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc SCHEDULE T - EXHIBIT OF PREMIUMS WRITTEN Allocated By States And Territories Gross Premiums, Including Policy and Membership Fees Less Return Premiums and Premiums on Policies Not Taken 4 Dividends Paid Finance and or Credited to Direct Losses Service Direct Direct Policyholders Paid Charges Not Premiums Premiums on Direct (Deducting Direct Losses Direct Losses Included in Written Earned Business Salvage) Incurred Unpaid Premiums 9 Direct Premium Written for Federal Purchasing Groups (Included in Col. ) Active States, etc. Status. Alabama AL N Alaska AK N Arizona AZ N Arkansas AR N California CA N Colorado CO N Connecticut CT N Delaware DE N Dist. Columbia DC N Florida FL L 54,49,00 55,09, ,699,8 0,787,09 8,646,96 7,779. Georgia GA L 4,7, Hawaii HI N Idaho ID N Illinois IL N Indiana IN N Iowa IA N Kansas KS N Kentucky KY N Louisiana LA L 5,00,49 4,08, ,08 808,0 587,485 76, Maine ME N Maryland MD N Massachusetts MA N Michigan MI N Minnesota MN N Mississippi MS N Missouri MO N Montana MT N Nebraska NE N Nevada NV N New Hampshire NH N New Jersey NJ N New Mexico NM N New York NY N No.Carolina NC N No.Dakota ND N Ohio OH N Oklahoma OK N Oregon OR N Pennsylvania PA N Rhode Island RI N So. Carolina SC L,85,80 4,57,74 0 6,04,874 5,885,58,948,500 6, So. Dakota SD N Tennessee TN N Texas TX N Utah UT N Vermont VT N Virginia VA N Washington WA N West Virginia WV N Wisconsin WI N Wyoming WY N American Samoa AS N Guam GU N Puerto Rico PR N U.S. Virgin Islands VI N Northern Mariana Islands MP N Canada CAN N Aggregate other alien OT XXX Totals (a) 4 7,090,78 7,75,98 0 7,40,74 7,480,7,8,90 85,786 0 DETAILS OF WRITE-INS XXX XXX XXX Sum. of remaining write-ins for Line 58 from overflow page XXX Totals (Lines 5800 through ) (Line 58 above) XXX (L) Licensed or Chartered - Licensed Insurance Carrier or Domiciled RRG; (R) Registered - Non-domiciled RRGs; (Q) Qualified - Qualified or Accredited Reinsurer; (E) Eligible - Reporting Entities eligible or approved to write Surplus Lines in the state; (N) None of the above - Not allowed to write business in the state. Risk Location at inception of policy Explanation of basis of allocation of premiums by states, etc. (a) Insert the number of L responses except for Canada and Other Alien 94

37 ANNUAL STATEMENT FOR THE YEAR 06 OF THE Capitol Preferred Insurance Company, Inc SCHEDULE Y - INFORMATION CONCERNING ACTIVITIES OF INSURER MEMBERS OF A HOLDING COMPANY GROUP PART - ORGANIZATIONAL CHART James A. Graganella.0% Thomas Becnel 9.64% James Graganella 7.9% Other Investors 6.45% Common Management Southern Fidelity Managing Agency 7.4% Other Investors 80.8% 96 Southern Fidelity Holding LLC Thomas Becnel.5% JamesGraganella 0.8% James A. Graganella 6.0% SFPC Holding Company LLC Southern Fidelity Insurance Company NAIC 06 FL CPIC Holding Co LLC 68.58% Southern Fidelity Ins Co 0.99% Southern Fidelity P&C 4.4% Southern Fidelity Property & Casualty NAIC 466 FL Thomas Becnel 9.5% JamesGraganella 7.9% Other Investors 6.59% Capitol Preferred Insurance Company NAIC 0908 FL James A. Graganella.0% Other Investors 87.70% Southern Fidelity Managing Agency CPIC Holding Co LLC 65.% James A. Graganella 0% Southern Fidelity Risk Mangers LLC Preferred Managing Agency 0.47% %