ENERGY INSURANCE MUTUAL

ENERGY INSURANCE

MUTUAL

ENERGY INSURANCE

MUTUAL19th ANNUAL

RISK MANAGERSINFORMATION MEETING

The Westin Innisbrook Golf ResortTarpon Springs, Florida

February 27 - March 1, 2005

The Westin Innisbrook Golf ResortTarpon Springs, Florida

February 27 - March 1, 2005

Jill DominguezJill DominguezVice President - UnderwritingVice President - Underwriting

2004UNDERWRITING

OVERVIEW

2004IN REVIEW

2004IN REVIEW

NEW MEMBERSNEW MEMBERS88

MEMBERS AS OF 12/31/2004MEMBERS AS OF 12/31/2004172172

GROSS PREMIUM EARNEDGROSS PREMIUM EARNED $213,843,000$213,843,000

NEW MEMBERSNEW MEMBERS88

MEMBERS AS OF 12/31/2004MEMBERS AS OF 12/31/2004172172

GROSS PREMIUM EARNEDGROSS PREMIUM EARNED $213,843,000$213,843,000

2004 COMPAREDTO 2003

2004 COMPAREDTO 2003

2004 2003GROSS PREMIUM

EARNED $213,843,000 $179,010,000

CASUALTY $179,370,500 $ 135,814,000

PROPERTY $34,473,000 $ 43,196,000

WRITTEN/EARNED PREMIUM


10,000,00030,000,00050,000,00070,000,00090,000,000

110,000,000130,000,000150,000,000170,000,000190,000,000210,000,000230,000,000250,000,000

Written Earned

10,000,00030,000,00050,000,00070,000,00090,000,000

110,000,000130,000,000150,000,000170,000,000190,000,000210,000,000230,000,000250,000,000

Written Earned



10,000,00030,000,00050,000,00070,000,00090,000,000

110,000,000130,000,000150,000,000170,000,000190,000,000210,000,000230,000,000250,000,000

Written Earned

10,000,00030,000,00050,000,00070,000,00090,000,000

110,000,000130,000,000150,000,000170,000,000190,000,000210,000,000230,000,000250,000,000

Written Earned

Toronto Hydro Corporation 01/01/2004

Alabama Electric Cooperative, Inc. 04/01/2004

Massachusetts Water Resources Authority 06/28/2004

National Energy & Gas Transmission, Inc. 08/01/2004

Complete Energy Holdings, LLC 08/23/2004

Anadarko Petroleum Corporation 09/12/2004

Wolf Creek Nuclear Operating Corp. 12/10/2004

Texas Genco LLC 12/15/2004

NEW MEMBERS IN 2004

TOTAL MEMBERSHIP

110

120

130

140

150

160

170

180

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

RETENTIONRETENTION

2004 98.82%

2003 96.05%

2002 99.42%

2001 99.40%

2004 98.82%

2003 96.05%

2002 99.42%

2001 99.40%

EIM’S PRODUCTS - SUCCESSFUL IN MAINTAINING LARGE

AMOUNT OF CAPACITY

EIM’S PRODUCTS - SUCCESSFUL IN MAINTAINING LARGE

AMOUNT OF CAPACITYGENERAL LIABILITYCapacity $100M as of 01/01/04Availability Depends on Risk

D&O/GENERAL PARTNERCapacity $50M as of 01/01/04$10M to $50M Available Depending on Risk

EXCESS FIDUCIARY LIABILITY$25M Available Depending on Risk

PropertyPrimary and Excess Quota ShareCapacity $15M

GENERAL LIABILITYCapacity $100M as of 01/01/04Availability Depends on Risk

D&O/GENERAL PARTNERCapacity $50M as of 01/01/04$10M to $50M Available Depending on Risk

EXCESS FIDUCIARY LIABILITY$25M Available Depending on Risk

PropertyPrimary and Excess Quota ShareCapacity $15M

EIM MEMBERSHIP MIX33%

10%32%

22%

1%2%

ELECTRIC GASCOMBINED ISO/RTOWATER TELECOMMUNICATIONS

2004 CASUALTYPOLICY FORMS

2004 CASUALTYPOLICY FORMS

All Forms Have Been Updated to Include:

EIM’s Change of Address

10 Day Notice of Cancellation for Nonpay

One Year Discovery Period Wording

NO CHANGES TO COVERAGE

All Forms Have Been Updated to Include:

EIM’s Change of Address

10 Day Notice of Cancellation for Nonpay

One Year Discovery Period Wording

NO CHANGES TO COVERAGE

UPDATE BYLINE OF BUSINESS

EXCESSGENERAL LIABILITY

EXCESS GENERAL LIABILITY OVERVIEW


$90,301,000 Gross Premium Earned (2004)

$71,530, 000 Gross Premium Earned (2003)

171 EGL Policyholders

$73M Average Limit

$38M Average Attachment Point


$71,530, 000 Gross Premium Earned (2003)

171 EGL Policyholders

$73M Average Limit




BEHIND THE NUMBERSEight New MembersThree Members Placed Under ParentPricing AdjustmentsAdditional Premium for Additional LimitsAdditional Premium for Coverage Enhancements, e.g. EPLI, WC



EXCESS FORM CAN ALSO INCLUDE: Excess EPLI (53% of Membership) Excess Workers Comp. (20% of Membership) Excess Professional Liability* (12% of Membership)

$65M Max Sublimit Drop Down Over Specific Aggregates in Underlying

Policy (61% of Membership)

* Usually ISOs/RTOs

EXCESS FORM CAN ALSO INCLUDE: Excess EPLI (53% of Membership) Excess Workers Comp. (20% of Membership) Excess Professional Liability* (12% of Membership)

$65M Max Sublimit Drop Down Over Specific Aggregates in Underlying

Policy (61% of Membership)

* Usually ISOs/RTOs

EXCESS DIRECTORS AND OFFICERS LIABILITY

EXCESS DIRECTORS AND OFFICERS/FIDUCIARY OVERVIEW

EXCESS DIRECTORS AND OFFICERS/FIDUCIARY OVERVIEW

102 EDO Policies

$43M Average Limit




102 EDO Policies

$43M Average Limit




SOME GOOD NEWS IN 2004

SOME GOOD NEWS IN 2004

Top Three Industries with LARGEST Numbers of Securities Class Action Lawsuits*:

•Food and Beverage•Agricultural and Pharmaceutical•Technology and Communication

Top Three Industries with LEAST Exposure:

•Industrial•Basic Materials•UTILITIES

*Source: PLUS 2005 D&O Symposium, Cornerstone Research and Stanford Law School

D&OISSUES AND TRENDS


POSITIVESUtilities going “back to basics” seeing positive results.

UTILITIES’ CLAIMSUSCEPTIBILITY* FREQUENCY

2003 31% 2003 1.042004 30% 2004 .85

EIM CLAIMS FILED:2000 10 2003 242001 17 2004 222002 37

*Ten year periodSource: Tillinghast

POSITIVESUtilities going “back to basics” seeing positive results.

UTILITIES’ CLAIMSUSCEPTIBILITY* FREQUENCY

2003 31% 2003 1.042004 30% 2004 .85

EIM CLAIMS FILED:2000 10 2003 242001 17 2004 222002 37

*Ten year periodSource: Tillinghast

S&P UTILITIES(ELECTRIC, GAS, PIPELINE, WATER)

S&P UTILITIES(ELECTRIC, GAS, PIPELINE, WATER)

UPGRADES DOWNGRADES2004 18 332003 8 1392002 15 1822001 29 81

Outlook still predominantly negative but declined dramatically in 2004.

Average Rating - Mid-BBB (48%)*Source: Standard & Poor’s Research - “US Utility Downside Rating Actions Moderated Significantly in 2004”

NOW FOR SOME BAD NEWSNOW FOR SOME BAD NEWS

• More Institutional Investors Suing

• Suits Seeking Damages of More Than $100M Becoming Commonplace - EIM Coverage a “Working Layer”?

• Average Cost of Securities Class Action Settlements in 2004 up from $25M to $33M in 2003- in 2000, average settlement was $15M.*

*Sources: William Lerach, PLUS 2005 D&O Symposium, and Advisen

• More Institutional Investors Suing

• Suits Seeking Damages of More Than $100M Becoming Commonplace - EIM Coverage a “Working Layer”?

• Average Cost of Securities Class Action Settlements in 2004 up from $25M to $33M in 2003- in 2000, average settlement was $15M.*

*Sources: William Lerach, PLUS 2005 D&O Symposium, and Advisen

D&O ISSUES AND TRENDSD&O ISSUES AND TRENDS

STILL A LOT OF UNCERTAINTYTRENDS Merger/acquisition activity picking up

Three mergers involving six members announced

According to Tillinghast’s 2004 D&O liability survey, six percent of D&O shareholder claims allegations are from merger/acquisitions

EIM’s experience: $16,250,000 paid in merger/acquisition activity related claims

D&O ISSUES AND TRENDSD&O ISSUES AND TRENDSISSUES

SECTION 404 COMPLIANCEUnclear what implications are from regulatory enforcement or private action perspective

EFFECT OF SETTLEMENTSStill in pipeline - D&O claims estimated at $10B to settle minimum; probably $25B total

EIM $256M in case reserves as of 12/31/04

At the same time, more capacity, lower rates in market

Competition on difficult D&O renewals!

Source: “The Buyers Perception of D&O Realities and Latest Trends” - Towers Perrin-Tillinghast



TREND?Capacity In Market Rebounding*Total Capacity In Market:

(Expressed in billions of dollars)

1999$1.55 2000$1.5752001$1.552002 $1.52003$1.352004 $1.5

*Tillinghast 2004 D&O Survey Report



Viable Utility Capacity

$325M - $500M

Source: Research by McGriff, Seibels and Williams

EXCESSFIDUCIARY LIABILITY



Maximum Limit of Liability Offered to Members: $25M

Member Must Have at Least $35M

in Underlying Limits

43 Members (25%) Purchase Excess Fiduciary Liability



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

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

PROPERTY

PROPERTYPROPERTYParticipation in Members’

Property Programs

12/31/2002 2512/31/2003 4012/31/2004 53

We are currently involved with 75 Programs.

Participation in Members’ Property Programs

12/31/2002 2512/31/2003 4012/31/2004 53

We are currently involved with 75 Programs.

PROPERTYPROPERTY

EIM $ 3,202,440

EIM and NEIL $29,129,409

NEIL FRONTS $ 3,321,764

EIM $ 3,202,440

EIM and NEIL $29,129,409

NEIL FRONTS $ 3,321,764

PROPERTYPROPERTYOPEN CLAIMS ACTIVITY

2001 12002 42003 92004 18

LOSS RATIO2001 1%2002 19%2003 23%2004 24%

2004 HURRICANE SEASON

2004 HURRICANE SEASON

EIM LOSSES

$600,000

EIM LOSSES

$600,000

PROPERTYPROPERTY

Please consider advising your broker to send EIM your property submission. If a large portion of your property coverage is with a direct writer or one carrier, we ask that you consider EIM’s involvement.

Please consider advising your broker to send EIM your property submission. If a large portion of your property coverage is with a direct writer or one carrier, we ask that you consider EIM’s involvement.

COVERAGE CAN BE CONSIDERED ON A PRIMARY BASIS IF:

COVERAGE CAN BE CONSIDERED ON A PRIMARY BASIS IF:

Account is a quality-engineered and maintained risk

Account is a quality-engineered and maintained risk

Deductibles meet minimum guidelines for equipment at risk and coverage requested

Rates contemplate the exposures presented by the risk, claims experience, and coverage form

CAPACITY AND SUBLIMITS

CAPACITY AND SUBLIMITS

Capacity Provided on a Quota Share Basis Only

Maximum Capacity is $15M

Earthquake, Flood, and Wind Exposures Will Be Monitored

Accounts with Zone A Flood and/or Catastrophe Exposures May Be Subject to Reduced Capacity and/or Limits and/or Higher Deductibles

Earthquake and Flood Must Be Written with Annual Aggregates

Capacity Provided on a Quota Share Basis Only

Maximum Capacity is $15M

Earthquake, Flood, and Wind Exposures Will Be Monitored

Accounts with Zone A Flood and/or Catastrophe Exposures May Be Subject to Reduced Capacity and/or Limits and/or Higher Deductibles

Earthquake and Flood Must Be Written with Annual Aggregates

TERRORISMPOSITION

TERRORISMPOSITION

CASUALTY PROPERTY

TRIA-Certified is offered. TRIA-Certified is offered.

Do not exclude noncertified, but cap GL to $25M per Member, $125M EIM-wide.

Non-certified is offered only for U.S. and Puerto Rico.

TERRORISMPOSITION

TERRORISMPOSITION

UPDATE ON TRIA MODELING

Currently evaluating EIM book to determine exposure

EIM may provide limits equal to policy limit, a sublimit, or decline to write

UPDATE ON TRIA MODELING

Currently evaluating EIM book to determine exposure

EIM may provide limits equal to policy limit, a sublimit, or decline to write

INSURANCE ADVISORY COMMITTEE

William R. Powell, ARM, CSP (Chairman)Manager, Risk Management Salt River Project Deborah S. GaffneyRisk and Insurance ManagerSouthern Company James O. Hess, Jr.Director Liability and Financial InsuranceDuke Energy Michael C. Hulsey, CPU, CLU, ARMRisk ManagerCity of Richmond, Dept. of Public Utilities John E. LuleyManager – Corporate InsurancePepco Holdings

Donna Pedersen McGinnisVice President, Risk Management and InsuranceDynegy Inc.

George Schuitema, ARMManager, Corporate Risk ManagementThe Peoples Gas Light and Coke Company

Robert J. Semet, CPCU, ARM, AReInsurance DirectorExelon Corporation

Michael G. Whelan, CPCURisk Services ManagerTXU Business Services

Michael L. WilsonDirector, Risk ManagementEntergy Services, Inc.

HOW ARE WE DOING?2004 RISK MANAGER SURVEY

EIM follows reasonable, prudent, and sound underwriting practices:

98%Agree/

Strongly Agree

98%Agree/

Strongly Agree

EIM provides added value in form of broad coverage, price stability, consistent limits, and financial strength:


94%Agree/

Strongly Agree

94%Agree/

Strongly Agree


Overall, EIM meets my expectations in level of service:

100%Agree/

Strongly Agree

100%Agree/

Strongly Agree

Documents

ENERGY INSURANCE MUTUAL